Does the World Need a Cheap iPhone?
January 10th, 2013There are Apple rumors and there are Apple rumors, and when two key players in the business media, Bloomberg and the Wall Street Journal, report essentially the same thing, you might be inclined to assume it’s something to take very seriously. So when the stories emerged this week that, yes, Apple is seriously developing a cheap iPhone for release some time later this year, primarily for the third world, you might stand up and take notice.
Now if true, and obviously I won’t assume it’s wrong, it would represent a sea change in Apple’s approach to building mobile gear. Yes, there are cheap iPods, but there are no cheap Macs, unless you regard the Mac mini as cheap, and Apple has said they don’t make junk. When the iPad mini came out, some suggested its $329 entry-level price was too high compared to the 7-inch tablets selling for $200 or thereabouts by the competition. Sales figures, however, are expected to show nothing of the sort, that the iPad mini is poised to become Apple’s mainstream tablet. In fact, it’s still in short supply.
When it comes to smartphones, the iPhone 5 is priced in the same range as premium product from Samsung and other companies with and without the carrier subsidies. Apple also kept the previous two versions of the iPhone available to keep the prices as low as possible for customers who want to save some money, just don’t care about being at the cutting edge, or a combination of both.
Well, if the stories about an iPhone mini, or whatever it is, are true, Apple will somehow build it cheaply enough to charge $199, unlocked. That would mean free for those who accept a carrier contract, of course. It would also be competitive in the third world, and as an option for prepaid carriers (the ones where you pay before it plays).
Now it’s not a question of whether Apple can build the thing for between $99 and $149, which is what it would cost to meet a $199 retail price with a decent profit. The real issue is how Apple cheapens the product without, of course, making it seem cheap.
Some suggest the iPhone mini will earn its name with a 3-inch screen, which seems rather tiny to actually manage your stuff, even if the pixels were small enough to provide the same level of content. Others suggest lightweight parts, possibly plastics, and maybe using slower, cheaper chips. Perhaps there will be cost-cutting in other respects, so you won’t get LTE.
How this feat of economy will be accomplished, however, still doesn’t stand up to scrutiny. After all, an unlocked iPhone 4, the 8GB model, traditionally sells for $350-$400, and that’s the low end of the price spectrum. How does Apple halve the price? What do they remove, or have they developed new manufacturing techniques, and found the right components to allow them to deliver a quality product for a lot less money?
Yes, the media is delivering some unconfirmed figures suggesting that Apple would accept a lower profit margin in the quest for volume. But, once again, this is the very opposite of what Apple has been known to do. Sure, maybe they don’t want to leave sales on the table, but they’ve done that with Macs. And, as I said earlier, the iPad mini is $129 above somewhat smaller tablets from such companies as Amazon, Barnes & Noble and Google.
Then again, the media was dead wrong when they estimated iPad mini pricing. Their estimates were in the range of $249 to $299. That being the case, I suppose an argument could be made for a basic iPhone in the $299 range, unlocked. That wouldn’t be so far below the price of current offerings as to challenge belief. Sure, Apple may still lose sales to the bottom line gear available from Samsung, LG, HTC and other handset makers, but that shouldn’t make a difference. It doesn’t in the PC market, where even the Mac mini, at $599, is considered expensive.
I don’t want any of this to suggest that I do not believe Apple is trying to find a way to build a lower cost iPhone and garner volume sales they aren’t getting now. But it would have to be something very different from current offerings, which is the Apple way. If it was nothing more than a slimmer, trimmer, cheaper iPhone with lower cost guts, Apple would be succumbing to the “volume at any cost’ mentality of other tech companies. That would be a sure indication the company has lost its way.
Yes, there are $49 iPods, but they are still smart, cute little gadgets that work well, support Apple’s ecosystem, and do not in any way convey the impression of being cheap. So regardless of the price of this alleged iPhone mini, it would have to deliver the same elegant experience as the regular iPhones, and have its own snazzy appeal. Sure, Apple may be able to deliver the goods, though the impression the media is conveying is all about cheap, and that impression clearly fails the logic test.
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Brilliant, thoughtful piece! Nice going!
Apple has always demonstrated that they are not in the least afraid of cannibalizing their own products. Having said that, they will not build a “cheap” iPhone. If they do make a less expensive iPhone, it will be a compelling product unto itself. It will be well-designed, solidly constructed, and beautiful to behold. And they can make a nice profit on a $300 unlocked phone. At that cost, if carriers are willing to subsidize it, it could be offered at $99, $49, or even $0.
Personally, I think it’s entirely plausible. And if I had to guess, I’d say it would in many ways emulate the look and feel of the latest iPod touch–multiple colors, impossibly thin form factor, 3.5-inch non-retina screen, and possibly no GPS. There would still be a fair number of shoppers coming into the Apple store to check out the new iPhone and walk away with the more expensive (current) iPhone.
It’s a win-win for Apple.