iPhone SE’s $30 price hike feels like pure 5G tax

Apple’s new iPhone SE was an expected upgrade in almost every respect except for one: For the first time in SE history, Apple raised the price of its cheapest iPhone from $399 to $429, a $30 increase.

5G is almost certainly wrong.

Price increases for 5G phones are common, even for Apple. When the company jumped from the iPhone 11 to the iPhone 12, it raised the price of the “standard” model from $699 to $829. But an estimate from Counterpoint Research shows where most of that cost increase came from, and it’s not an expensive OLED screen: 5G added $34 to the bill of materials compared to just 4G iPhone 11. In fact, a report from Fomalhaut Techno Solutions and Nikkei estimates that Qualcomm’s 5G modem was The most expensive component of Apple’s iPhone 12 lineup, contributing about $90 of the roughly $400 that Apple cost to build the iPhone 12 Pro.

But let’s talk about the $30 number because it’s the number that keeps coming up. $30 is the extra you’ll have to pay for your 5G-equipped iPhone 12 or iPhone 13 if you he did not do Buy it from appropriate carriers in the United States. It’s also a price increase from the $399 non-5G iPhone SE in 2020 to the $429 iPhone SE in 2022, and Apple is estimated to be the premium Apple has to pay to put 5G in those phones. It’s as if Apple is simply passing on the extra cost of building a 5G phone directly to its customers.

It’s not like Apple has a lot of options either. When it comes to 5G modems, Qualcomm is one of the only real options out there, and everyone knows it.

There is a reason, after all, that Apple sued Qualcomm over patent fees for the modems it uses in its iPhones. And why was Apple willing to swallow its pride and pay more than $4 billion in a settlement a few years later. Apple tried to switch to Intel modems, but it soon became apparent that Intel would not be able to serve as a viable alternative — especially for the 5G modems that Apple needed.

Apple is trying to change that. It has paid an impressive billion dollars to Intel’s 5G modem business and has spent the past several years preparing to build its own cellular components — modems that may start popping up in new iPhones as soon as next year. Unfortunately, Apple-made modems aren’t ready yet, leaving the company stuck again with Qualcomm hardware instead.

There could be quite a few other reasons why Apple could charge an extra $30 this year: the ongoing shortage of semiconductors affecting various components or other economic factors, such as rising inflation or supply chain issues, could also affect pricing beyond 5G. Just. Or maybe Apple just looked at the fact that customers didn’t seem too bothered by the $30 price increase on the iPhone 12 and iPhone 13 and realized that an extra $30 could be charged for the SE, too.

But the facts remain: Historically, adding 5G to the iPhone has been an important cost factor for Apple, and adding 5G is the single biggest change between the 2020 and 2022 iPhone SE models.

There’s a potential upside here: As Apple looks to move away from Qualcomm’s modems and into its own modems, there’s a chance Apple can start taking on some of the cost of 5G components in its future phones. . That could mean that some future versions of the iPhone SE may eventually return to its original $399 price tag that Apple has maintained since 2016.

On the other hand, if Apple can get customers up to $429 for iPhones (with matching sales), it’s hard to imagine the company will cut the price in the future. After all, you don’t become a $3 trillion company by leaving money on the table.