How to Raise iPhone Prices Without Hurting Sales? JPMorgan Analyzes Apple's 'Installment Strategy'

TL;DR
· The starting prices for the iPhone 18 Pro and Pro Max have both increased by $100, in line with JPMorgan's expectations and lower than some investors' previous concerns about the extent of the price hike.
· Apple has placed greater price increase pressure on higher storage versions, with the 1TB and 2TB models seeing increases of up to $300 and $500 year-on-year, respectively, potentially leading to an overall ASP increase of over $100.
· Installment leasing, up to $1200 in carrier subsidies, and up to $885 in official trade-in credits are expected to keep the actual monthly payments for upgrade users roughly unchanged.
· The first foldable iPhone Duo is priced from $1999, only $100 more than the Samsung Z Fold8, which may attract high-end Android users into the Apple ecosystem.
· JPMorgan believes that the market's expectation for Duo to sell 10 million units in 2026 may still be revised upwards.
· The Apple Watch is moving closer to AI wearable devices through features like Siri Recap, while AirPods have reduced prices while enhancing noise cancellation.
· Siri AI features, new product pricing, and potential upgrade cycles are expected to drive iPhone revenue growth, with early orders and supply chain feedback becoming the next catalysts for Apple's stock price.

Apple's Fall 2026 launch event "Surprise and Shine" was the first major product launch since John Ternus took over as CEO. JPMorgan believes the event overall met expectations, but Apple's pricing strategy is more noteworthy than the simple price increases.

The starting prices for the iPhone 18 Pro and 18 Pro Max have been raised to $1199 and $1299, respectively, both increasing by $100 compared to the previous generation, with the base storage still at 256GB. This increase aligns with JPMorgan's previous baseline forecast and is lower than some investors' concerns about more aggressive pricing due to rising memory costs.

However, Apple has not completely absorbed the costs but has placed larger increases on higher storage versions.

The 1TB versions of the iPhone 18 Pro and Pro Max are priced at $1799 and $1899, respectively, up $300 year-on-year; the 2TB versions reach $2399 and $2499, with the Pro introducing a 2TB option for the first time and the Pro Max's highest capacity version increasing by $500 compared to the previous generation.

The price increments between different storage capacities have expanded from $200, $200, and $400 in the previous generation to $200, $400, and $600. JPMorgan believes this is the primary way Apple is directly passing on memory costs.

Considering that Pro Max users are generally more inclined to purchase higher capacity versions, Apple's current product mix may further tilt towards higher-priced models. Therefore, although the entry-level version only increased by $100, the overall average selling price increase for the Pro series may still exceed $100.

Hardware upgrades also support the price increases. The iPhone 18 Pro series is equipped with the A20 Pro chip using a 2nm process and introduces a new thermal plate, providing up to a 40% improvement in sustained performance; the video playback endurance for both models has increased from 33 hours and 39 hours to 36 hours and 45 hours, respectively, with the main camera upgraded to a 48-megapixel camera supporting a physically variable aperture.

Apple's self-developed C2 baseband also covers the entire fall product line for the first time. JPMorgan believes that self-developed chips and vertical integration can help Apple reduce some component costs, providing a buffer against rising material prices like memory.

Comparison of core parameters, storage capacities, and starting prices of past iPhones.

Apple is raising prices, but monthly payments remain almost unchanged

JPMorgan is optimistic about the key to this round of sales, which lies not in the $100 price increase itself, but in how Apple reduces consumers' perception of the price hike.

The iPhone 18 Pro is the first new product included in the Apple Upgrade program. This leasing service supported by Klarna offers two main options: the 256GB version can be paid at $34.99 per month for 24 months or $49.99 per month for 12 months.

Under the 24-month plan, the total amount paid by users during the lease period is approximately 70% of the retail price, and at the end of the term, they can choose to upgrade, buy out, or return the device. For consumers, the focus of decision-making shifts from the $1199 total price to monthly cash expenditures of a few dozen dollars.

Carriers are also offering substantial upgrade subsidies. AT&T and T-Mobile provide up to $1200 off for the iPhone 14 and newer models, while Apple's official trade-in credits can reach up to $885.

JPMorgan believes that leasing, carrier subsidies, and trade-ins can offset most of the price increase, keeping the actual monthly expenditure for upgrade users roughly at last year's level. This allows Apple to raise ASP while absorbing memory costs and controlling the impact of price increases on sales.

In other words, Apple has not abandoned price increases but is trying to make consumers feel less of the price hike.

The $1999 Duo may be the biggest expectation gap in this round

Compared to the expected Pro series, the first foldable iPhone Duo is the true focus of this launch event.

The Duo features a 7.6-inch inner screen and a 5.4-inch outer screen, with the inner screen area approximately 50% larger than that of the iPhone 18 Pro Max. Apple uses a nano-textured surface to reduce the visibility of creases and employs a five-level titanium metal frame, making it the thinnest iPhone when unfolded.

Its 256GB version starts at $1999, with 512GB, 1TB, and 2TB versions priced at $2199, $2599, and $3199, respectively. Compared to the starting price of $1899 for the Samsung Galaxy Z Fold8, the Duo is only $100 more.

JPMorgan believes this price is more attractive than the market's previous expectations. For high-end users already accustomed to the Apple ecosystem, $1999 may not pose a significant barrier; for Android foldable users, the smaller price difference also leaves room for switching to Apple.

More importantly, Apple is trying to shift the competition focus from hardware specifications to software experience. The Duo's operating system can automatically adjust the interface based on the folding angle and half-folded posture, with applications like Zoom, Slack, and Netflix already adapted through the new API, and Apple Pencil support will be launched later this year.

This reflects Apple's core advantage over existing Android foldables: not simply adding a large foldable screen, but leveraging integrated hardware and software capabilities to redesign the interaction of applications in different screen states.

The Duo will begin pre-orders on October 16 and officially launch on October 23. The market currently expects its sales in 2026 to be around 10 million units, and JPMorgan believes actual performance may exceed this expectation.

Apple Watch Begins to Compete in AI Hardware

Apple also released the Apple Watch Series 12 and Ultra 4, priced at $399 and $799, respectively, without following the iPhone price increase.

Both products are equipped with the S11 chip and feature a redesigned health sensor system. The heart rate reading frequency has increased to once every five seconds, and heart rate variability data is updated at least every five minutes, supporting a new body status score.

However, JPMorgan is more focused on the new "Audio Intelligence" feature added to the Apple Watch.

Among them, Live Rewind can transcribe content that users have just heard; Siri Recap can record conversations according to user settings and generate summaries and highlights with AI. Apple states that these features use end-to-end encryption and do not save original audio.

JPMorgan believes that Siri Recap may officially push the Apple Watch into the category of AI wearable devices. In the face of competition from AI recording hardware and smart glasses, the Apple Watch is no longer just a health monitoring device but will also become a portable information recording and processing terminal.

AirPods Price Reduction Indicates Apple Still Has Cost Adjustment Space

The AirPods 5 is launched in two versions: the basic version with active noise cancellation priced at $129, the same as the previous generation without active noise cancellation; the $149 version adds a wireless charging case, longer battery life, and volume adjustment via the earbud stem, which is $30 cheaper than the previous generation ANC version.

While the iPhone has increased in price due to rising memory costs, the Apple Watch maintains its original price, and AirPods have actively reduced prices, indicating that Apple is not facing pressure for simultaneous price increases across all product lines.

JPMorgan believes that Apple can offset some of the rising material costs through component cost reductions, product redesigns, and self-developed chips. These savings can be used to maintain prices for some products, enhance functional configurations, or subsidize more strategically significant new products.

JPMorgan's Judgment: The New Round of Growth Relies Not Only on Price Increases

JPMorgan maintains an "overweight" rating on Apple. Its core judgment is not that Apple can achieve one-time revenue growth through price increases, but that the company is simultaneously opening up three growth paths.

The first path is the ASP growth brought by the price increase of the Pro series and the higher proportion of high-capacity models; the second path is the support for sales from leasing, subsidies, and trade-ins; the third path is the new high-end product category created by the Duo.

On this basis, the Siri AI features that entered the testing phase in mid-September are expected to further enhance the attractiveness of new devices for upgrades. If sales growth, ASP increases, and AI functionality are realized simultaneously, Apple may usher in a more complete iPhone revenue growth cycle than simple price increases.

Moving forward, the market needs to observe not the event itself but the first batch of pre-order data and changes in supply chain orders. JPMorgan expects early sales feedback to be positive and become the next catalyst for Apple's stock price.