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Phones

Apple's iPhone XS, XS Max, XR test the limits of your budget

You want to stay loyal to Apple? You're going to have to pay for the privilege.

Apple's Phil Schiller on stage to introduce the iPhone XR.

Apple marketing head, Phil Schiller, unveils the intriguing iPhone XR. 

James Martin/CNET

Apple's standout feature in its new lineup of iPhones isn't an upgraded camera or even new design. It's a higher price tag.

The company on Wednesday launched a trio of phones -- the iPhone XR, the iPhone XS and the iPhone XS Max -- in its most important product event of the year. But regardless of which iPhone you choose, you'll end up paying more than ever. The starting price for the iPhone XR, which uses cheaper parts like an aluminum body and LCD display, is $749. That's up $50 from last year's $699 for the iPhone 8, itself a bump from 2016. 

Likewise, the starting price of the Apple Watch jumped up to $399 for the new Series 4 version from last year's $329 price tag. 

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The pricier products, which once again set a precedent for Apple, are just the latest example of smartphone makers steadily asking more of their customers. Apple has led the charge in this area, making headlines last year after introducing the first $999 smartphone. Samsung matched that price with its Galaxy Note 9 last month, but even formerly budget-friendly players like OnePlus have increased their prices.

"They are certainly helping the tide rise for premium pricing," said Gartner analyst Tuong Nguyen, who noted that other phone makers will likely shift their prices up as well. 

The higher prices partly reflect the inclusion of more sophisticated materials and components in these premium phones, from advanced processors to sensors that enable face recognition. But there's also an element of competing manufacturers feeling they can get away with it, especially as these phones have become such a critical part of our lives.    

Apple, after all, boasts industry-leading profit margins for its iPhones. After years of keeping prices steady at $649 for the entry-level iPhone 7 in 2016, the cost has crept up and rose to as much as $1,149 for the larger-capacity, 256GB iPhone X last year. Starting at $999 for 64GB of storage, last year's iPhone X was the most expensive phone Apple ever sold.

This year's most expensive option, the iPhone XS Max with 512GB of storage, goes for $1,499.

Apple has the brand loyalty to make this move. But at some point, higher prices will hit a wall if consumers start agitating about the lack of real innovation, Nguyen warned. "They can continue to push this envelope, but they need to deliver commensurate value at the same time."

Pricing is a sensitive issue given the specter of tariffs that threaten to raise the cost to bring products into China. Apple took the rare step of warning that some of its products -- the Apple Watch and AirPods but, curiously, not the iPhone -- would be affected by the tariffs, part of an escalating trade war between the US and China. 

President Donald Trump responded in a tweet, urging Apple to make its products in the US. "Apple prices may increase because of the massive tariffs we may be imposing on China -- but there is an easy solution where there would be ZERO tax, and indeed a tax incentive," Trump said.

The tariffs didn't get a mention at Wednesday's presentation. 

The annual iPhone launch is Apple's biggest event of the year because so much is at stake. Apple, which became the US' first trillion-dollar company in August, has been soaring over the past few years, largely thanks to the success of the iPhone. It needs this splashy launch to keep the momentum going and to hook you into services like Apple Music and accessories like the AirPods. 

The iPhone 5C redux?

Of the three new iPhones, the iPhone XR is the most intriguing -- as evidenced by the fact that it served as the finale of the event. 

It's the cheapest of the new iPhones, but rocks a 6.1-inch LCD display and includes Apple's Face ID camera. It features the new A12 Bionic chip, the industry's first computer processing unit that runs on a 7-nanometer architecture, which means it packs in more transistors to run faster and more efficiently.

The phone comes in six colors -- black, white, red, yellow, coral and blue -- which brings to mind the iPhone 5C, the last time the company made a splash with colorful lower-cost models. 

The iPhone 5C, however, was a bust. The phone was clearly a cheap alternative with lower end specs and materials, and consumers shunned the option. 

apple-evento-2018-precios-viejos-iphones

This year's iPhone lineup. 

Apple

What the iPhone XR has going for it is its metal body (albeit aluminum) and the fact that it has a larger display than last year's iPhone X. Most the specs, such as the A12 chip, are the same as the flagship iPhone XS and XS Max. 

Its biggest drawback is the single-lens rear camera, although Apple touts the ability to take portrait mode photos. Apple also says you'll get 90 minutes more battery life on your iPhone XR than on the iPhone 8 Plus

Unlike the iPhone 5C, iPhone XR embraces the same experience as the rest of the flagship lineup

"The XR is a no compromise choice compared to any previous attempt like the 5C or SE," said Carolina Milanesi, an analyst at Creative Strategies.

The real flagship iPhones

The iPhone XS, meanwhile, is the true successor to the iPhone X, and is virtually indistinguishable from last year's model. It once again features a crisper OLED display. While the rear cameras remain the same, Apple walked through some of the software enhancements it added to improve the photo capabilities. 

It starts at $999, just like last year's iPhone X. 

The iPhone XS Max is the supersized version of the iPhone XS. And with a 6.5-inch OLED display, it will be among the biggest smartphones on the market. The Galaxy Note 9, the premier phablet out there, sports a slightly smaller 6.4-inch display. 

The phone will start at $1,099. At the high end, it'll set you back $1,499.

"As Apple has shown with the iPhone X, people are willing to pay more for phones if they offer a better experience," said Avi Greengart, an analyst at Global Data. 

Fittingly, Apple added a gold option to the XS and XS Max, too.

The iPhone XR and iPhone XS line represent a lift in the price range, suggesting that even as competition heats up among Android competitors on the low end, Apple plans to stay above the fray and largely target consumers who can afford to splurge.

Apple Watch gets facelift

The iPhones weren't the only products to get the spotlight on Wednesday. Apple kicked off its event with the Apple Watch Series 4, which is the first to get a significantly new design since the original came out in 2015.

Taking its cues from the iPhone X, Apple slimmed down the bezel around the display, allowing it to expand the screen while keep the body shape similar.

Apple is maintaining its health kick with a focus on heart rate monitoring with its electrocardiogram sensor, which has received clearance from the Food and Drug Administration. The company said that even with the new display and ECG support, it has the same battery life as the previous version, which it estimates at around 18 hours. 

apple-watch-series4-watch-front-training-09122018

The Apple Watch Series 4 offers a new design with a bigger screen. 

Apple

"The biggest feature add to Watch besides the larger viewable image area was its heart health features, in particular its ability to perform an ECG and also detect AFib [atrial fibrillation]," said Patrick Moorhead, an analyst at Moor Insights & Strategy. "Add that to fall detection and notification and I can see kids buying one for their parents and grandparents."

The Series 4 should further cement Apple's leadership position in the smartwatch market, which has failed to take off in a meaningful way. Apple doesn't reveal sales figures for the device, but market researcher IDC estimates that nearly half of the 43.5 million smartwatches shipped this year will come from Apple.

The new additions don't come cheap. Beyond the $399 starting price, the version with an LTE connection starts at $499. 

Increasingly, Apple is sending the signal that if you're looking to save a few bucks on your next Apple product purchase, you'll need to look to its older products. But even then, it's slimmer pickings. When the Apple website came back online after Wednesday's event ended, only the iPhone 8 and iPhone 7 remained available for purchase. Likewise, Apple killed off the original Apple Watch, leaving a discounted $279 Series 3 version available for purchase. 

If you want to stay in the Apple universe, it looks like you're going to have pay for the privilege. 

Originally published Sept. 12 at 12:08 p.m. PT. 
Updated at 1:12 p.m. PT: To include additional analyst comments.
Updated Sept. 13 at 6:10 a.m. PT: To include additional background and analyst comments. 

Everything Apple announced at its Sept. 12 event: Our exhaustive roundup.

iPhone XR, XS, XS Max: Apple's three new iPhones start at $749.