• If there was an iPhone demand issue, it’s unlikely this $25-$100 trade-in promotion would have a measurable impact on sales. We are currently only seeing this promotion available in the US.
• It does show a new willingness of Apple to experiment with iPhone pricing, likely to test new segments of the iPhone demand curve to maximize revenue.
• We believe this unprecedented pricing strategy underscores Apple’s focus on making it easy for iPhone users to upgrade. The promotion will drive trade-in activity. From there, users are more likely to join the iPhone Upgrade Program – the fullest (current) expression of an iPhone “subscription” and Apple as a Service.
• Since we won’t be getting iPhone units and ASPs on the Dec-18 earnings report, the best read on iPhone sales will, of course, be overall revenue which we remain comfortable with (Street $91.9B). The hardware margin reporting metric will also be helpful in the context of past hardware gross margins. Apple will likely provide previously reported quarters hardware margins when they announce Dec-18 results late in January or February.

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