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The iPhone Is Once Again a Luxury Product

Apple’s most expensive iPhone ever shows just how much the company’s market power has grown over the last decade

iPhone illustration Getty Images/Ringer illustration

It was almost 10 years ago to the day that an iPhone price announcement first roiled the internet. On September 5, 2007, Apple slashed the price of the original iPhone from $599 to $399. The aggressive strategy, meant to catapult the device from a luxury gadget to a middle-class necessity, angered early adopters to the point that Steve Jobs had to issue an apology and refund them $100 each. “We need to do a better job taking care of our early iPhone customers as we aggressively go after new ones with a lower price,” he wrote. “Our early customers trusted us, and we must live up to that trust with our actions.”

Back then, Apple had yet to sell its millionth iPhone. Now, having sold more than 1.2 billion of the devices in the ensuing decade, the company has a bit more leverage. Instead of cutting prices, Apple is raising them. The iPhone 8, the incremental upgrade to last year’s iPhone 7, will cost $50 more than its predecessor, starting at $699. And the iPhone X, the company’s new high-end device that CEO Tim Cook called “the future of the smartphone,” will start at $999.

Apple CEO Tim Cook
Apple CEO Tim Cook
Photo by Justin Sullivan/Getty Images

The reveal of the huge price tag on Tuesday felt like a full-circle moment at an iPhone event already focused on echoing the past. Cook was unveiling new gadgets, but he was also christening the Steve Jobs Theater, a signature event space on Apple’s sparkling new spaceship campus. Instead of opening with the typical humorous video, the keynote began with a sound bite from Apple’s famed cofounder: “One of the ways that I believe people express their appreciation to the rest of humanity is to make something wonderful and put it out there. … That’s what’s going to keep Apple, Apple.” Like that first $599 device that Jobs showed off, the iPhone X will seem tantalizingly out of reach for the average consumer.

But unlike the original iPhone, it’s not clear the X (Apple is pronouncing it “iPhone Ten,” but you and I, reader, can begin the “iPhone Ex” movement here and now) will feel like an essential product to people who never knew they needed one. Its main selling point is a 5.8-inch screen that eliminates the home button and stretches all the way across the front of the device (the button’s functionality has been replaced with a swipe-up gesture). The other big exclusive feature is facial recognition technology that will be used to unlock the phone and create face-tracking animated emoji. There’s also the expected upgrades in camera, screen, and processor quality.

These features are great for technophiles. The Verge has already declared that the iPhone X’s high price tag is worth it. But those features don’t match some of the easily marketable innovations that Cook discussed as he detailed the iPhone’s history of innovation: touchscreens, the App Store, FaceTime, and Siri. The closest thing Apple might have to that world-changing lineage of products is augmented reality, a new obsession in Cupertino, but the iPhone 8, and not just the more expensive X, will support AR functionality.

More than anything else, the iPhone X seems to be offering luxury for its own sake. Apple will market it as the best phone in the world, a device from the future that channels the Jobsian creative spark of the past. It’s a phone for Apple’s most devoted fans, now a much larger group than it was in 2007. “I think it does have a sentimental value,” says mobile analyst Chetan Sharma. “Apple customers are die-hard. A large majority of them have been owning iPhones from the early days. … Having owned almost every version in the past, you’d want to own the 10th-anniversary one.”

There are other factors working in X’s favor. Apple’s previous effort to expand the screen size, the iPhone 6, was a smashing success. And last holiday, after several quarters of falling sales, the iPhone bounced back on the strength of the iPhone 7 Plus, its most expensive model. With more and more of our lives being organized through our phones rather than on desktops or tablets, a pricey smartphone is easier to rationalize. Even moreso when we’re upgrading our phones less often — according to Charma, the typical customer now upgrades their phone once every 35 months, compared to once every 18 months in 2010. He expects the device to outsell both the iPhone 8 and 8 Plus in Western markets, if there’s enough supply. “There’s a combination of pent-up demand, historic sentimental value … and being wedded to the Apple ecosystem,” he says. “This all plays very well into Apple’s hands.”

Even if Apple finds success with the X, its impact on the smartphone market won’t benefit all consumers. Unlike the gadgets of previous eras that skirted the line between “necessary” and “luxurious” (think desktop computers and television sets), smartphones have steadily been creeping up in price as their technology has improved. The Motorola Razr, arguably the first phone that doubled as a status symbol, debuted at $600 in 2004 but was selling for $99 by the end of 2005. (Apple simply stops manufacturing old phones, preventing them from falling to such prices.) The average worldwide retail price of a smartphone before the iPhone launched was $200; today it’s $310, according to data gathered by Sharma.

Apple is hellbent on keeping smartphones a high-margin business, and over the last decade it has trained customers to value its products for their prestige as well as their user-friendliness. While Steve Jobs had to beg forgiveness for a $200 price cut, Tim Cook tells people to be excited about a $250 price hike with a straight face. The company will continue to cram expensive tech into its devices, whether the average user wants it or not.