Analyst calls for a cheap iPhone in two years

By , Nov 23, 2012

Piper Jaffray’s resident Apple analyst Gene Munster – you know, one of the iTV fame – is back at it predicting Apple’s gonna launch an inexpensive iPhone model in two years time. Recognizing Apple’s tiny market share in emerging markets like Russia, India, Brazil and China (collectively referred to as BRIC territories), he’s calling for an unsubsidized, sub-$200 iPhone around 2014. Currently, Apple’s handset is a high-end play, with older models selling at reduced price points.

As carriers pay big bucks to subsidy its high cost, users typically must sign on a dotted line. But not everyone is willing to accept contractual commitment in exchange for an iPhone. Meanwhile, competitors are successfully exploiting Apple’s price weaknesses, churning out Android cheapos that have pushed the platform in places like China to as much as an astounding 90 percent smartphone share

Business Insider first highlighted Munster’s observations.

According to independent analyst Horace Dediu, the iPhone is unavailable to half the world’s six billion mobile users because Apple only works with one-third of the world’s 816 mobile phone operators, as opposed to Android handsets selling across virtually every carrier.

The analyst summarizes the iPhone business model around the following question:

Can enough units be shipped in a sufficiently short time frame to allow a limited (but large) subset of operators to create competitive advantage which sustains a generous up-front subsidy.

He put together this list of unaddressed iPhone subscribers:

• India: 658 million
• China: 622 million
• Pakistan: 116 million
• Russia: 102 million
• Nigeria: 89 million
• Japan: 69 million

This is the current iPhone addressable market.

Costly iPhone subsidy is at the heart of the problem.

Carrier T-Mobile USA, for example, said it wouldn’t accept Apple’s terms of business because it didn’t want to jeopardize its margins by spending billions on iPhone subsidy.

Speaking at Morgan Stanley’s Technology, Media & Telecoms Conference this week, T-Mobile COO Jim Alling basically said his firm cannot afford the iPhone:

Make no mistake about it: We would love to carry the iPhone. However, we want the economies to be right for us.

Some people believe Apple will never address the low-end as the company is presumably content with its high-end status.

Quite the contrary.

When the original iPod launched everyone criticized its steep price. But over the years, Apple exploited economies of scale and released numerous iPod models. The iPod family now covers prices from as low as $49 and all the way up to $399.

Granted, MP3 players are hardly comparable to cell phones and it’s not clear whether Apple would ever trade some of the iPhone’s advanced features for low price, risking fragmentation.

But this way or another, the high-end segment will eventually dry up and the Cupertino firm will, in my opinion, feel compelled to work its way down to the mid and low-end.

I also happen to think Apple cannot effectively address the low-end just by heavily discounting older iPhone models. A totally new iPhone model is needed, something tailored for the sub-$200 category, sold contract-free.

Call it the iPhone mini if you like, but I think it’s inevitable despite late Steve Jobs insisting that “we can’t ship junk”.

What’s your take on the inexpensive iPhone meme?

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  • http://twitter.com/int3nsive Int3nsive

    Maybe he doesn’t know.. but Apple have already “cheaper” models.
    iPhone 4 anyone…? And it’s much better than most of €200 Androids out there…

    Just as a reminder: youtube /watch?v=eAo8gnUCWzE

    • http://twitter.com/nAcolz Acolz

      The iPhone 4 is like $450

    • http://www.facebook.com/joe.jonsen Joe Jonsen

      that phone is not cheap and is not manufactured anymore..

      • http://twitter.com/int3nsive Int3nsive

        Sorry but it’s still manufactured as a 8GB model. And it’s cheap, it all depends where you buy it. Unfortunately Apple doesn’t control all the sales and some stores around the world that ask more money then they should.

        And when I say it is cheap, compared to a $200 Android, it is. iPhone 4 will be supported for at least 2 more years, like the 3Gs was supported and it has the iOS6 running the latest API and Frameworks for the latest Apps updates. So, even the 3GS will have more lifespan, since even now, most of the Apps still require iOS4 or 5. In two years from now, with the iOS8, the Apps will require at least the iOS6…so even the old 3GS will be “alive”…. now imagine the iPhone 4 that wil keep getting OS updates.

        So now, compared a 200 dolares Android devices… in 2014… No updates, no Apps… people need to buy a new phone. At the end, will be more expensive than the iPhone 4 that only cost 100 dolares more and has, definetely, better quality hardware that wear much less than the crappy flexible plastic from $200 Android devices with crappy screen resolutions.

      • http://www.facebook.com/joe.jonsen Joe Jonsen

        no.. the 4S comes in and 8gig model now.. the 4 is dead..

      • http://twitter.com/int3nsive Int3nsive

        Again bro, you’re wrong. The model that was discontinued was the 3GS. iPhone 4 is now 8GB, iPhone 4S 16GB and the iPhone 5 16, 32 and 64GB

        http://store.apple.com/us/browse/home/shop_iphone

      • http://twitter.com/int3nsive Int3nsive

        Again bro, you’re wrong. The model that was discontinued was the 3GS.
        iPhone 4 is now 8GB, iPhone 4S 16GB and the iPhone 5 16, 32 and 64GB

        You can also see that on Apple Store (website)

        store apple com / us / browse / home / shop_iphone

    • http://www.facebook.com/profile.php?id=100000514380051 John Sklikas

      The iPhone 4 costs 389€ (=504$) in the Netherlands.

      • http://twitter.com/int3nsive Int3nsive

        Here in my country, (with points earned on pre-charged sim cards) you can buy a iPhone 4 with just 270€. But Apple should make, at least, a worldwide recommended price, because that can be very different from country to country. In Brazil, for example… the taxes are very, very high in electronic products.

      • http://www.facebook.com/profile.php?id=100000514380051 John Sklikas

        That would be great but if you think about it the iPhone price is the same around the world. What is different is the tax and Apple can’t really do anything for that, because the taxes are the choice of the state not of the company.

  • Mohammad Ridwan

    Not likely…

  • http://www.facebook.com/xxLIUZHENYUxx Liu Zhenyu

    Very unlikely, uncharacteristically Apple. The ‘unaddressed’ peiple will not benefit from a cheaper iPhone, they can use an older version and must be made known to the people. Don’t get me wrong, the iPad mini was cheaper, but more of the reason Apple built it is because of its smaller size, not price.

    • Dan

      Sadly Apple has been uncharacteristic in its behavior as of late

    • http://www.facebook.com/joe.jonsen Joe Jonsen

      apple is a luxury brand like BMW it will not make something cheap … your only choice is to buy a used old model of one of their products and even those can be pricey since resale value of apple stuff stays high

    • @dongiuj

      “uncharacteristically”, like everybody said apple won’t make an ipad mini. Look what happened. Don’t try to sound like you know apple. I believe you made that mistake already about the ipad mini months before it was released.

      • http://www.facebook.com/xxLIUZHENYUxx Liu Zhenyu

        That’s what i already mentioned ignoramus, the iPad mini had less focus on price, more on smaller size.

  • HX7

    Pakistan :D <3

  • http://www.facebook.com/joe.jonsen Joe Jonsen

    when has apple ever made a cheap product???? that analyst is on crack..

  • http://twitter.com/aomia syler

    Will never happen. Apple = greed

    • http://twitter.com/int3nsive Int3nsive

      If Apple was greed they probably would make a cheaper iPhone with cheap materials. Because on that, there’s also profit mate… Where do you think that brands like samsung get the biggest profits?

  • SetMeStraight OrAmIRight

    I wouldn’t be surprised if Apple released a lower-end phone. They will just do what they’ve been doing lately, recycling parts from previous model and put it in a new shell. Wouldn’t be difficult to do

  • http://twitter.com/doubleaa25 Adham

    We already have cheaper iPhones. Buy an iPhone 4 or 4S.

  • Breathless

    I still can’t see them creating a whole new iPhone for lower end markets. I mean they would still just use previous chipsets to make the phone so might as well just sell the previous model for cheaper. Also the 4 and the 4s are still capable phones so just make those cheaper in the other markets.

  • http://www.facebook.com/1Reaks82 Rex Mas

    stay what you are and who you are because you might fall if you risk your company.

  • http://www.facebook.com/rhenderson0618 Rick Henderson

    There will never be a cheep iPhone in Brazil. I live here and we have the most expensive iPhone in the world R$ 2000,00 + $1000 USD for 4S 3GS is still $600 USD

  • VIP

    I would really like to see something totally different. We have the iPhones, big buddies with large screens and beast-like chip sets inside. What about non-screen small phones? Ones only for calling and SMS for example? Or.. idk. Say some ideas.. :)

  • http://twitter.com/So_Apropos Austin Lear

    This guy. I’m waiting for the day titles are everywhere saying “Munster fired for being so bad at his job” because there’s already a “cheaper iPhone” it’s called the iPhone 4 or 4s. Why does apple need to launch a new cheap one when they have the old model for 99$ or 0$ every year. #MunsterTheMoron