Waiting for Apple's big reveal? Value of older iPhones may drop by 30 per cent in first 24 hrs

Apples, of the inedible kind, cost a pretty penny. Since 2012, Cupertino-based Apple has announced new models of its flagship iPhone every September - strategically bookended by the back-to-school period and the Christmas holiday. Invitations have been sent out for this year’s event, which will be held on September 10. The iPhone 11, the successor to the iPhone XS, is expected to be priced on par, if not higher than the incumbent. Prices for the iPhone XS and XS Max models range from USD 999-USD 1,349.

Successive iterations of the iconic smartphone have seen incremental updates, and also an upward revision in price - so much so that some customers in third-world countries have had to barter body parts to afford a bite of Apple Inc.’s take on the proverbial forbidden fruit. An iPhone might be worth its weight in gold, but unlike the yellow metal, the sophisticated hardware unit that is the gateway to Apple’s ecosystem, tends to lose its sheen quite fast.

The 2019 Phone Depreciation Study conducted by Decluttr, a seller of refurbished phones, has found that handsets could lose 30 per cent of their value within 24 hours of the annual Apple keynote in September. According to the study, the value of older generation iPhones depreciate by at least 40 per cent in the first month after the latest model is launched. The pricing trends observed by Decluttr reveal that the value of iPhones stabilize thereafter, losing one per cent of its original value every month.

Last year’s iPhone XR depreciated by 46 per cent in 11 months, with a resale price of USD 405, as opposed to USD 749 when it was released. Its elder sibling, the iPhone XS has lost nearly half its value, with a current resale price of USD 512. The depreciation of older models has been steeper – the iPhone 7, iPhone 8, and iPhone X have seen their valuations shaved by 81 per cent, 65 per cent, and 59 per cent respectively.

However, Apple remains one of the better options for those looking to barter their old smartphones to defray the cost of purchasing the latest models. Samsung phones depreciate faster than their Apple counterparts, a trend that is testament to the brand value of the latter. A relatively lower rate of depreciation, coupled with a longer product lifecycle, has, in turn led to lower sales for Apple, despite the buzz surrounding each new iPhone.

The Decluttr study found that Android phones depreciate much faster than their Apple equivalents. The Samsung Galaxy S10 range, which entered the market in March 2019, has depreciated 57 per cent from its USD 1,000 price tag. The value of the Galaxy S10+ has nearly halved (52 per cent) in six months. The price drops for older generation models of Samsung’s flagship Galaxy series are higher. The S7, S8, and S9 have lost 91 per cent, 82 per cent, and 77 per cent respectively of their value at the time of release.

Google’s Pixel range is no exception to the depreciation trend for Android phones. Within six months of its launch, the Google Pixel 3XL lost 58 per cent of its value, marginally less than the Pixel 2, which was worth only 39 per cent of its original value in the resale market, six months since its release. The Pixel range has won plaudits for its seamless integration of stock Android with high-end hardware.

The brand’s efforts at marketing the Pixel as an affordable alternative to the iPhone, seems to have resonated reasonably well with Android fans. However, like other Android devices, Pixels are vulnerable to the law of diminishing returns, with buyers getting lower valuations for their phones in the resale market, when compared to Apple’s wares.

Phones with better specifications and brand recall have typically held their own in the resale market, but recent launches are bucking this trend. A reason for this could be a lack of innovation and differentiating features between two generations of the same phone, causing potential buyers to opt for the cheaper device which offers similar performance. But with most device manufacturers dabbling with augmented reality cameras and other hardware upgrades, the next generation of smartphones could offer a credible reason for early adopters to fork out a premium.

Apple, in an earlier earnings call, said that it would discontinue reporting sales of its iPhone, iPad, and Mac devices – a move interpreted as being an implicit acknowledgement that sales have not grown at levels witnessed in the past. Despite the uncertainty surrounding the US-China trade war and the high costs associated with its upcoming streaming service, the Cupertino-based company continues to enjoy sound financial health, partly due to bigger margins on iPhone sales and greater revenue from its services division. However, when Apple releases its next flagship on September 10, it will be hopeful that it can once again convince people to buy an Apple a year.