Why Apple Is Playing Defense on Price and A.I.

0:00Welcome back to Market on Closed. I'm Sam Vardas, alongside Marley Kaden over in Chicago. So on a lighter note, Apple today announced its latest offering in its iPhone lineup. The iPhone 17E, along with a new iPad Air. So let's talk about it with Daniel Rubino, who's the Editor-in-Chief at Windows Central. Daniel, thank you so much for joining us. Just talk us through how important this product is for Apple. So this phone, I would say, is really important because right now the market is starting to collapse a little bit when it comes to smartphone sales. So actually Apple did a really, it had a really great quarter of last quarter. The iPhone 17 sold higher than expected. But things are trying to come back down to reality right now. NAND, memory, RAM, all this is starting to increase. Apple is absorbing that cost. So it's real important that they had this phone come out because it does hit a price point, which is going to be super important for what is becoming a struggling market for a lot of consumers and for 2026 in general. This isn't an Apple issue per se. Everyone is going to be facing this. But, you know, hitting that price point and

1:01having a good offering for $5.99 is important. It's also, I would say critical because this is the step ladder for their Apple intelligence, which is going to be, it's out now, but the real stuff is supposed to be coming later on. This phone has the better hardware for that going forward at a price point for most consumers to kind of get in their foot into the door with it. So I would say it's pretty critical for that. That said, you know, there's a lot here to say that people could go buy an iPhone 15 pro for slightly less and still kind of get more phone. So it depends where your market is, what's available to you, because that is an older phone, but that hardware is technically a little bit better than what's being offered today with this new device. And Daniel, what is this push into this lower price point offering at this $5.99 level signaling to investors? And from your view point, is it offensive or is it defensive? Yeah, I see it as defensive, you know, Android devices have always played into the low end category. You can go on Amazon and buy an Android phone

2:04for $200 if you wanted to. It's not going to be the best experience, but there it exists, right? And we see now that the Chinese market lots of lower end, but so higher quality Android devices. So Apple has always been the upper tier and they do very well there. Like I said, the iPhone 17 sold exceptionally well, even at that price point, but bringing these prices down to where the market is, especially in 2026, right? People are coming back on discretionary spending, people are unsure about the economy, as well as the internal prices for these devices are going up. And so the question of course is, you know, who pays for that? Right now, Apple seems to be leveraging its excellent supply chain to leverage and buy a lot of memory and not pass those costs on to consumers. Though we'll have to see later on this year with the iPhone 18, it'll jack up prices by $100 or $200 to, you know, match that. How does this phone allow Apple to continue to compete in China? Because I heard you mentioned that market, and I'm just wondering because it was the iPhone 17 model that really helped turn things around for Apple and put it back in that top spot

3:08against some of the cheaper local competitors, I'm just wondering with the 17 years we've seen other iPhone models actually have to drop their prices in China to compete with those domestic rivals where this one then stacks up against the rest. Yeah, that's a good question. You know, in China, Apple has always been seen as a prestige brand. You know, it's the outside, it's the luxury brand and that's where they competed was in that high end market. But yeah, Chinese smartphones are really blowing past Samsung past Apple and all sorts of technology, whether it's their new batteries, of course, folding screens. They have triple folding screens now. So, you know, I'm not sure the 17 E will do great there at May, but I would say the 17 E right now is pre-paid carriers, especially United States. They can buy these in bulk and that's a really good offering for that because they could even knock that price down even lower. So it seems to be more replay there for your MVNOs, your pre-paid, your big carriers there. And China, it

4:09remains to be seen because yeah, you have a lot of not only Android devices, but a lot of these, you know, companies now are building their own operating systems and getting away even from Android and going all domestic internal. And that's just going to kind of beat up on everyone whether it's Android or Apple. So that market's becoming increasingly challenged. But Apple, I would still say, has a good advantage here when it comes to some high-end stuff, but it is being challenged due to everything else that's going on. And Daniel, they're keeping this 599 price target here, but they've upgraded the storage here. There's more base storage. They've got boosted RAM here. We know memory prices are rising. How much margin pressure does this type of model create? Yeah, that's just it, right? So they do always experience very good margins. Apple, such a massive company that when it does go buying memory, puts these orders in for chips and everything that it does leverage that scale. And so that's going to eat into their cost here. It's great that they keep you in at 599 because they don't want to tell the story, especially in that this kind of market where even $50 makes a huge difference on the success of a device,

5:11right? So I think they would rather bump the cost for their high-end stuff later this year, knowing that those customers are a lot more forgiving than eating that at the, you know, go ahead and eating the cost at 599. So it's going to cut into their bill of sales and it's going to eat into their profits here a little bit or at least reduce those margins. I still think they're in a good position, but they do definitely have to be safe here and play the market well in order to make sure that they don't eat up too much of their profits. Daniel, we've almost gone an entire segment without really talking about AI. And I guess that's because Apple doesn't have a strong story here. And that really is the narrative for Apple. Just talk to us about when do you anticipate, you know, we start to see something more meaningful because the markets should be credited with just how patient they have been very much on that. So the good news here is AI when it comes to the consumer space is still a story of, you know, what could be, right? I cover especially AI

6:13PCs with Windows devices. And while they're super cool, the consumer market has not responded super strongly to it. And it's still because the argument for this AI and this technology is still a little bit weak on phones, it's getting a little bit better. So, you know, Apple here, I think actually does have some time and they're lucky because no one has really knocked this out of the market with such a must-have feature on AI. Sure. Okay, you can edit your photos with AI, but everybody's doing that. Oh, you got smart replies for your messages where you used to that stuff. So they do have time. Now, the benefit here for Apple, especially with this new device and everything else that's coming out, is that they have lock-in with their customers. So if you buy an iPhone, you're more likely to own a Mac, you're more likely to buy an iPad. And when you get this Apple intelligence, when it finally, you know, the full version, the super smart Siri comes along, what we call the agentified operating system. When that actually happens, Apple is still in a really good position, I think, to leverage that and make a big deal. So yeah, you know, I wish they

7:13had more of a story here, but compared to whatever else is doing, who's supposedly ahead, it hasn't really resulted in a bottom line, massive push for new hardware, whether it's Windows or Android. Daniel, we appreciate you taking the time to take a look at Apple. Give us a little bit of a lighter topic on a very heavy day. Otherwise, and take a look at this new iPhone 17E, that's Daniel Rubino, Editor and Chief at Windows Central.