iPhone X isn't selling very well so the company might, counter intuitively, raise the price when it launches the new version of the flagship phone later this year, according to UBS.

Once Apple establishes a price band, it doesn't leave it, sources tell analysts.

Apple might also make its low-end SE model even cheaper, giving consumers a wider range of prices.



When Apple launched its flagship iPhone X priced at around $1,000, it tempted an inevitable question: Is it worth it? On the last earnings call, CEO Tim Cook reported iPhone sales declined by 1%. That led many to conclude that the answer was "no."

iPhone X might be a very good phone, but it's not $1,000 good, in other words.

In the last few weeks, analysts at City and Wall Street investment banks have begun cutting forecasts for iPhone sales in the expectation that many consumers baulk at the four-figure price tag and think the cheaper iPhone 8 looks like a bargain by comparison.

But Apple may have a surprise in store. It could raise the price of the new 2018 flagship iPhone X to $1,100, according to an analysis of average sales prices (ASPs) by UBS analysts Steven Milunovich and Benjamin Wilson.

Their belief is that "once Apple establishes a price band it typically keeps it, consistent with what we've heard from former Apple employees," the UBS told clients in a note recently.

Over the last few years, Apple has successfully persuaded its customers to increase what they pay for phones from an average of somewhere around $600 to nearly $800. At the same time, Apple's three-pronged strategy is to persuade repeat customers to pay more for newer products while offering cheaper devices for first-time customers. Milunovich and Wilson outlined the strategy in a recent research note:

"Cascade top-of-the-line features down the price curve (screen size, camera, etc)"

"Move premium customers up the price curve with moderately higher prices"

"Establish higher price bands based on new features while tapping into lower-end markets with older devices"

So at the same time as offering an even-more-expensive iPhone X model, the price of the entry-level iPhone SE could fall as low as $300, they say.