Apple's iPhone 17 Pricing Strategy Aims for 5% Increase

As the upcoming Apple autumn product launch event approaches, investors are shifting their focus from the new products themselves to a more critical issue: pricing. Analysts predict that Apple may implement a series of subtle adjustments to its product lineup, resulting in a modest price increase for the iPhone, which has not occurred in seven years. This strategy could potentially drive up the average selling price of the iPhone by 5%, significantly exceeding market expectations of a 1% increase.

According to a report released on September 4, Apple is expected to cancel the 128GB entry-level storage configuration for the iPhone 17 Pro. This change would increase the starting storage capacity of the Pro series to 256GB, with the starting price rising to 1099 dollars, up from the previous 999 dollars for the 128GB version. Additionally, the highly anticipated new ultra-thin model, the iPhone 17 Air, is expected to have a starting price of 999 dollars for the 256GB version, which is 100 dollars more than its predecessor, the iPhone 16 Plus. The iPhone 17 Air will also introduce a 1TB version priced at 1399 dollars, while the prices for the same capacity in other models remain unchanged.

The rationale behind the price increase is twofold. Firstly, it aims to offset the cost pressures arising from import tariffs and rising component prices. Secondly, by adjusting the storage configurations, Apple can encourage users to opt for higher-priced models. This potential pricing strategy is a key reason why analysts are optimistic about Apple's performance outlook. The move is expected to drive the average selling price of the iPhone in the 2026 fiscal year to 939 dollars, a 5% year-over-year increase. In contrast, the market consensus expects only a 1% increase to 910 dollars, suggesting that Apple's revenue and profit potential may be underestimated.

Given the relatively subdued market expectations for iPhone sales and price growth, this launch event could potentially reverse the typical "sell the news" phenomenon, where stock prices decline after the event. Instead, it could serve as a positive catalyst, supporting Apple's stock performance for the remainder of the year. Analysts believe that the impact of these price increases will be manageable, as the increases are relatively modest and are spread over a 2-3 year upgrade cycle, making it unlikely to significantly deter consumer demand.

The upcoming launch event is not expected to feature any major surprises. The iPhone 17 series will include the standard iPhone 17, iPhone 17 Pro/Pro Max, and the new ultra-thin model, iPhone 17 Air, which features a single rear camera and Apple's proprietary C1 modem. Additionally, Apple will introduce the Apple Watch Series 11, Ultra 3, SE 3, and AirPods Pro 3.

Despite the anticipated price increases, both Morgan Stanley and market consensus currently hold conservative views on the sales growth of the iPhone 17, predicting that the shipment volume for the 2026 fiscal year will remain roughly the same as the previous year, at approximately 236 million units. This forecast suggests that the average upgrade cycle for users will extend to nearly 5 years. However, the report also notes that this conservative estimate may contain upside risks. According to a previous survey, as of March 2025, 51% of American iPhone users indicated that they were "very likely" to upgrade their devices within the next 12 months, setting a new historical high. Additionally, 30% of American iPhone users expressed "great interest" in the ultra-thin model.

However, price sensitivity remains a risk to be mindful of. A survey conducted in China in July 2025 showed that if the price of the iPhone 17 increased by 5%, 25% of Chinese consumers said they would be less likely to upgrade. Overall, analysts believe that the current shipment volume forecast is reasonable, but future risks are more likely to be on the upside rather than the downside.

Historically, Apple's iPhone launch events have often been characterized by the "sell the news" phenomenon, where stock prices decline after the event. This typically occurs because market expectations are already fully priced in, or even overly optimistic, before the event. However, analysts believe that this year's situation may be different. The report notes that the current market consensus for Apple's iPhone revenue growth in the 2026 fiscal year is only 4%, significantly lower than the historical average of 9% from 2011 to 2020. If the pricing strategy is accurate, the results of the iPhone 17 launch event are likely to exceed the market's low expectations. In this scenario, the event would not act as a negative catalyst but could instead prompt analysts to raise their earnings estimates, providing support for Apple's stock performance for the remainder of the year and potentially breaking the recent "launch event curse."

The report concludes that if the pricing strategy exceeds expectations, the launch event could serve as a positive catalyst for the stock, driving valuation adjustments and earnings upgrades. Morgan Stanley maintains a "buy" rating on Apple stock with a target price of 240 dollars.