The mistake that I see most analysts make with regard to the iPhone launch events is that they make them right away, based on their initial gut reaction to the

The mistake that I see most analysts make with regard to the iPhone launch events is that they make them right away, based on their initial gut reaction to the keynote. While their analysis may make sense and be completely reasonable, there is a very big difference between the thought process one has when viewing the new models side-by-side at the keynote and viewing them side-by-side on the Apple site or in an Apple store with an intent to purchase. While it may seem completely irrational to pay more money for a smaller screen with the exact same processor (XS vs XR), the truth is that lots of people (the type of people who buy iPhones at launch) typically gain a lot of their identity from their phones. They want the best model and getting the cheaper model just won't do. There is a practical argument to be made here as well: most people use their phones more than any other device they own. What's an extra $150 over the course of 2-3 years to have a better screen, camera, and construction? If I were to buy a new iPhone right now, I would probably go for the XS over the XR. My reasoning would be that the XS+ is too big for my day-to-day use, but I would rather have a better camera and display. But even if I went for the XR, that's still a win for Apple. They want to remain top of the market in smartphones, but they also want to capture as much of the TAM as possible while doing so. What they have achieved and why I like the strategy they are using here, is that they are capturing max TAM at the top of the market. They aren't interested in competing with commodity phones at the lower ends. Normally one could make the case for this being the definition of the Innovator's Dilemma and they are ripe for disruption. However I don't believe this applies to Apple because they have tie-ins due to software and services that make switching to another device extremely painful. There are lots of phone manufacturers who have been able to compete with Apple on hardware for years. But without the software and ecosystem, Apple customers will not consider switching. So it's not really a question of whether customers will leave Apple for Samsung/Google/Other, it's a question of whether customers will switch from one iPhone to another. I believe that even if this ever happened, say a surprisingly large number of XR's sold compared to XS's and the ASP came down, Apple would have lots of levers to pull to correct this and they'd still be in pole position. They could cut features from future base models or axe a third base model all together in the next cycle, for example.