Apple’s upcoming iPhone launch may face headwinds if prices are increased, UBS analysts cautioned in a note.
Apple (NASDAQ:AAPL) is scheduled to host its “Awe Dropping” event on Tuesday, September 9, where the company is expected to reveal its latest devices, including the iPhone 17 lineup.
UBS highlighted that any implicit or explicit price hike could curb demand, particularly as smartphone price elasticity remains high. The team, led by David Vogt, pointed to Europe as a cautionary tale. In 2022, Apple raised prices due to higher component costs and a strong U.S. dollar, increasing costs by €100 in Germany and £70 in the U.K.
“iPhone price increases in Europe resulted in softer demand beginning late in 2022 lasting through late 2023 highlighting the risk of a price increase,” the analysts wrote. They noted that this subdued demand lasted almost a full year.
“Therefore, we flag the risk of demand destruction if iPhone prices are either implicitly or explicitly raised,” they added.
UBS also noted that some investors expect Apple to move the storage on the Pro variant to 256GB, similar to the launch of the Pro Max in September 2023. Such a move would effectively increase the starting price, which Vogt warned would create “downside risk to iPhone demand in our view given elasticity.”
The firm is forecasting a modest September quarter for iPhone shipments at 52 million units, up 8% quarter-on-quarter but only 1% year-on-year. June had benefited from heavier promotions, stronger upgrade cycles, and early purchases.
While new devices such as the anticipated iPhone Air may refresh the lineup, UBS sees little chance of a meaningful boost to demand without significant software updates or AI features. “Like the impact of new hardware, we do not anticipate a pick-up in iPhone demand given stand-alone AI applications are already available in the smartphone market,” the analysts said. They emphasized that pricing remains the main variable influencing demand.
UBS maintained its Neutral rating and a $220 price target on Apple shares.
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