On budget iPhone…

By , Jan 10, 2013

iPhone 5 presser (Phil Schiller, iPhone family prices)

Just a quick thought here on this less-pricey iPhone meme. Per reports, Apple’s marketing boss Phil Schiller uncharacteristically responded with a statement to Shanghai Evening News in order to poke holes in the rumor that was beginning to pick up considerable steam. He claims that “despite the popularity of cheap smartphones”, such a device “will never be the future of Apple’s products”.

But it’s an ambiguous dismissal (it’s translated from Japanese) and it does’t outright deny whispers of Apple internally exploring the idea. His words just don’t tell the whole truth. Plus, Apple has a history of lying to the media. The company often makes bold denials, only to refute its own rebuttal by doing exactly what it’s said won’t do. If Android is anything to go by, an affordable iPhone could easily make a huge difference…

Analyst Gene Munster thinks (via AppleInsider) that by focusing on the high-end only, “Apple is missing the other 65% of the market, or 580 million units, given its current product lineup without the lower priced phone”.

We believe the opportunity for Apple is too large to miss, as the low end market is growing significantly faster than the high end smartphone market.

But first, Schiller’s debunking:

At first, non-smartphones were popular in the Chinese market, now cheap smartphones are more popular and non-smartphones are out. Despite the popularity of cheap smartphones, this will never be the future of Apple’s products. In fact, although Apple’s market share of smartphones is just about 20%, we own the 75% of the profit.

Schiller is saying that Apple is focused on the profit, not market share.

iPhones (iPhone 5, iPhone 4S, iPhone 4)

But as EdibleApple explains, we shouldn’t confuse a cheap iPhone with a more affordable one.

The iPad Mini is by no means cheap, but it’s certainly more affordable than the flagship iPad 4th generation. Similarly, a more economical iPhone might be a boon for Apple to the extent that they make more money per device sold than they currently do selling older generation models at steep discounts.

The premise is simple: let’s diversify the iPhone brand to cover more people.

One model for the high-end, deep-pocketed consumer and sold with a long-term wireless contract. The other, a new model made from cheaper materials and recycled components to keep the costs down, for people who otherwise couldn’t afford an iPhone.

If Bloomberg is right, that new iPhone should cost between $99 and $149, paid upfront and contract-free. Apart from low price, its other appeal would be that it’s an iPhone, the world’s top smartphone brand. And a killer bonus would be compatibility with the 700,000+ apps available on the App Store.

 

Apple telling us officially the iPhone mini is vapourware means nothing. Ahead of the original iPhone introduction six years ago, the company was repeatedly saying it absolutely had no desire to enter the cell phone market.

Another case in point: late co-founder Steve Jobs’s comment from February 2009 in response to media pressure calling for an Apple netbook. He basically responded that Apple doesn’t know how to create a $500 computer that’s not “a piece of junk”:

There are some customers which we chose not to serve. We don’t know how to make a $500 computer that’s not a piece of junk, and our DNA will not let us ship that. But we can continue to deliver greater and greater value to those customers that we choose to serve. And there’s a lot of them.

We’ve seen great success by focusing on certain segments of the market and not trying to be everything to everybody. So I think you can expect us to stick with that winning strategy and continue to try to add more and more value to those products in those customer bases we choose to serve.

A year later Apple announced the iPad, a $500 computer that wasn’t a piece of junk. It would go on to absolutely destroy the netbook category and is now taking on the notebook. In fact, Apple now sells tablet computers starting at just $329.

iPad introduction (Netbook slide 001)

Apple pundit John Gruber nailed it on his Daring Fireball blog, writing “it just means they weren’t going to ship a $500 computer until they could make one that was both a good product and profitable for the company”.

So as soon as Apple figures out how to make a $99 iPhone that’s not a piece of junk and generates a nice profit, rest assured they will release it in a heartbeat, Phil Schiller be damned.

 

Schiller’s denial also strikes me as defensive and inconsistent with Apple’s strategy. For starters, he does acknowledge that most people pay attention to prices (the “popularity of cheap smartphones” part) and that’s especially true in this economy. But don’t blame Apple for wanting to kill off this rumor hastily.

A year ago, CEO Tim Cook in a conference call with investors blamed stagnant iPhone sales on rampant next-gen model rumors. Why would this be any different? This budget iPhone talk could hurt Apple’s sales just as much.

iPhone6-003

At least half a dozen people have already asked me whether they should hold off buying the full-blown iPhone because they heard a less-pricey model might soon become available. With the rumor-mill and big media increasingly blabbering about the iPhone mini (I’m guilty of this as well), no wonder ordinary folks are beginning to reassess their purchasing intentions.

Bear in mind that The Wall Street Journal and Bloomberg are Apple’s unofficial mouthpieces. These publications are very accurate and rarely throw their credibility behind such a high-profile Apple rumor unless they’re privy on the matter.

 

The Wall Street Journal in particular has made very similar claims in the past. In February 2011, WSJ reported that Apple was working “on the first of a new line of less-expensive iPhones”, with one of the people who saw a prototype saying it was “intended for sale alongside Apple’s existing line”.

That both publications have now resurrected the budget iPhone rumor is no coincidence. To me, it’s telling that the plan has advanced. Just because Schiller says the rumor is stupid doesn’t mean the project isn’t underway.

iPhone mini (teaser 001)

Apple branched out the original iPod music player into several form factors that now cover a wide range of price points, tightening its choke-hold of the music market. I’m not saying we need half a dozen different iPhone form factors, but two distinct iPhone models catering to different price categories makes a whole lot of business sense, if you ask me.

with that in mind, I’d very much appreciate your take on the less-pricey iPhone.

Has Apple been researching it?

Does the world need it?

Would it help them tap a much greater percentage of the market and earn more $$$?

Sound off with your thoughts down in the comments.

Before signing off, let me remind you for the discussion’s sake how haters used to bash the mini iPad idea ahead of the announcement, saying it would never happen.

Keep that in mind and let’s keep the conversation civil.

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  • http://www.facebook.com/niels.zomer Niels Zomer

    It really doesn’t make any sense? Why create a specific low end phone? They could also create a lineup with the iPhone 4, iPhone 4S, iPhone 5 and iPhone 5S and they are done. Apple stands for premium, not low budget stuff. Wasn’t that the precise reason that they almost went bankrupt?

  • http://twitter.com/rydogg23 Ryan

    You finally wrote a post without linking to your own twitter feed! Bravo!!

    • http://twitter.com/Cesuva Matthew

      As usual, however, every paragraph he writes seems to be accompanied by a tweet from one of his followers

      • http://twitter.com/rydogg23 Ryan

        Naturally. It’s quite annoying. Yeah, yeah everyone..”then don’t read it”.

        Uh huh

    • http://www.idownloadblog.com/author/dujkan Christian Zibreg

      I listened to your feedback :)

      • http://twitter.com/rydogg23 Ryan

        I happen to feel like you have decent insight. But in all seriousness, you could easily do away with the twitter quotes in the posts. Just give me your thoughts, not anyone else’s. And not in twitter form either.

      • JamesR624

        I like the twitter posts. While reading, it not only gives you a break in the wall of text, but it works with the text to give readers a glimpse into the minds of the people the text is talking about. Anyone could make up a tweet and say someone said it, that would be BAD article writing. I much prefer to see the ACTUAL tweets so I know I’m not being fed bullshit.

  • http://www.facebook.com/profile.php?id=604885391 Richard Borkovec

    Look at Android phones. You can NOT get a decent Android phone for $100 (bought outright), and Apple would be no different. Until processor and RAM prices get way lower, you won’t see a decent phone for under $100 for a few years.

    • http://www.idownloadblog.com/author/dujkan Christian Zibreg

      $149 iPhone mini contract-free could be more than decent given Apple’s economies of scale, manufacturing expertise and engineering prowess

      • http://twitter.com/nAcolz Acolz

        +1! Even $199 would still be acceptable.

      • http://twitter.com/burlow burlow

        The cheapest ipad with LTE (ie, off-contract iPhone) is $450. Say apple forgoes LTE, a good camera, and latest processor, you could maybe drop the price down to $300. Maybe. I think the bigger issue for people is the monthly price. $300 for a phone without the huge monthly bills would be very doable for alot of the world.

        I have a relative in africa with an unlocked iPhone and they spend less than $10/month on all the minutes/text/data they need.

      • http://www.facebook.com/profile.php?id=604885391 Richard Borkovec

        $149 can get you a “decent” phone (read: it’s still laggy), but there’s no way Apple could do it for $100 off contract, not for a few years.

  • http://twitter.com/oneBurge Burge

    If it looks like the one above I’ll have one cause it looks cute..
    but apple don’t do cheap they do wow I want that one and cheap doesn’t get a wow…

    • http://www.idownloadblog.com/author/dujkan Christian Zibreg

      Disagree. Case in point: the $49 iPod Shuffle, $149 nano etc…

      • Blake

        Yeah but you dont see an A6 processor in a nano. Nor do you see a retina screen etc..

      • http://twitter.com/oneBurge Burge

        Show me a 49$ MP3 player that looks as good as the shuffle..

    • Matthew

      Better not look like to one above. That looks just plain terrible.

  • http://twitter.com/MCaudebec Maxim∑

    This will not be happening. Quality comes at a price.

  • http://twitter.com/sahand119 Sahand Houshmand

    Steve Jobs once said that there’s no reason for them to change their values as they get bigger and bigger, and if their motto is to charge high for a premium product they make, then that’s what they’ll stick to. I think they won’t go making a cheap iPhone because it’s going to damage the name of Apple as purely a ‘premium’ manufacturing company who excels at producing the “best products in the world” (~Steve Jobs)

    • http://www.idownloadblog.com/author/dujkan Christian Zibreg

      But iPad mini proves premium quality and affordable price don’t exclude each other, no?

      • JamesR624

        *smirk* iPad mini, affordable to low end markets? Is that a joke? You want an affordable mini tablet and be smart with your money? You get a nexus 7 and kindle fire HD. The ONLY ones that need a mini are the ones like us already entwined in Apple’s ecosystem. That is NOT what most of the country is like.

      • Jairo

        wait until the ipad mini with retina display releases and the current gen’s price will drop between $200-$230 and will not only be affordable but wil butcher the competition too

    • Pepeloso

      Exactly

  • http://twitter.com/rcnino Ryan C

    Apple’s budget products are their products of yesteryear. The first image explains this whole thing. Why create something new and low budget when you can drop the prices on products that were the pinnacle of technology at the time?

  • http://twitter.com/jaayspeaks Jake Padilla

    pointless, old generation iphones are already cheap as is. if you cannot afford an iphone 4 or even a 3gs for that matter, thats too fucking bad for others. the ip4 is already free. we dont need another downgrade like the ipad mini w/o retina display.

    • bartuus

      Maybe in US ip4 and att iphone 4 is free. Nor it europe.

      • jilex

        neither in Mexico

      • JamesR624

        Well, then Apple should be working to fix that. Not make cheap crap just to gain more market share. I go with Apple because they WORK better. I had a Galaxy Note II on T-Mobile. Big screen, fast phone, great network coverage (for where I needed it). I returned it for an iPhone. Android is great but there’s no denying that between the manufacturer services and google’s services constantly fighting for your attention on your phone, it’s still a huge clusterfuck.

    • http://twitter.com/nAcolz Acolz

      A lot of people think the phones sell the way they sell in US all around the world. Well the iPhone 4 8GB is 500$ with tax in Czech Republic.
      That isn’t really so free right? An iPhone that would cost 200$ here would mean much more people getting the iPhone. I hear so many friends that want the iPhone but can’t have it because it’s so damn expensive.

      • bartuus

        I have ip4 gsm 32gb its about 1100 PLN it is something 300USD+

      • Hyr3m

        They should know better…

  • albertvilla

    I would not call the ipad a computer

    • http://twitter.com/burlow burlow

      I would

    • Blake

      Well what is it then? It can do just about everything a regular computer can. It runs a plethora of apps that complete all of the functions a computer does. Like web browsing, word processing, video editing, picture editing, games, and more!

      • EpicFacepalm

        “you” can but “I” can’t. MS Office, XCode, Photoshop, AutoCAD, productivity apps, freedom to run MacOSX, Windows or Linux programs. Steam, Dota, LoL, BF3, GTA, Uncharted… Idon’t have those, do you?

      • Blake

        Is the ability to install those applications the requirement to be considered a computer? I have a computer through my school and it only is allowed to run certain apps. None of which are the ones you listed. Does that make it not a computer? Or…?

      • EpicFacepalm

        Having those gives the true power of home-computers (hence the name is “compute”r), while having just some entertainment apps, games and some other OK apps makes it a tablet, or a smart-device with big screen. While in your condition, you can install Windows, Linux (or in some rare conditions Mac OSX) to the computer in your school, so you have limited-freedom to do those. And the apps I listed were just random examples. There are many things that you can’t do with tablets while you can do those on computers. Vice versa is true too.

  • 4p0c4lyps3

    Apple, love their products. But what a bunch of ROYAL assholes.

  • http://www.facebook.com/marlon.skatta Marly Marl

    Boy u guys just cant face the facts. Even when the guy said there wont be any cheaper iPhone u guys are still in denial. smh

    • http://www.iDownloadBlog.com Sebastien

      Yeah exactly. Just like when Steve Jobs said Apple would never make a phone. Or when he said Apple would never make a tablet. Or even when he said Apple would never make a 7inch tablet. Boy were we right to believe him…

      • http://www.facebook.com/marlon.skatta Marly Marl

        True… or a phone doesnt need a 4 inch screen >.<

  • http://twitter.com/MichaelJDelaney Michael Jay Delaney

    Obviously it would be a smart business decision to put out a “low end” iPhone. Since the split from AT&T and the introduction of CDMA, there’s nothing stopping them from offering a version on MetroPCS or Cricket. An iPhone “mini” however? After putting a 4″ display in the 5, I think 3.5″ has to be the minimum standard if they were to enter the market, otherwise we’d have the issue again where developers need to make some adjustments for their apps to fit the screen properly (and as was mentioned in another article, Apple’s own UI guidelines would be thrown out the window). The way I see it, they can absolutely use recycled parts/older parts such as old chips or cameras. Honestly I don’t see any issues with them putting out the 3GS with a VGA FaceTime camera and the A4. And if not that of the 4/4S, an updated form factor. Actually now that I think about it, that might cause issues with iOS. iOS 5 doesn’t seem to run as smoothly on the 4 or 3GS. I noticed the same thing with iOS 6 on my 4S. They may have to make some changes, or worse yet rewrite it to run on whatever this magical new device is, limiting features like Siri or location based Reminders as they did with the 4S and iOS 5.

  • wi77iam

    (spoiler: it’s called sarcasm – before you begin to wonder)

    Oh man, so much wishful thinking going on here….
    And when we are at it – let’s call Ferrari, Porsche and Lamborghini to produce some much cheaper versions of their cars. Because we all “know” that they’re TOTALLY missing out the other 90% of the market, right?
    Aaaah, and while we’re already on the roll….. I would like Sony to build me one of those 4K/OLED 56 inch thingies for jus’ under a 1.000,- dollars – so we can all have them….. that would be nice. *drool*
    Because, hey – how much money do they really make with them, if they only sell a few thousands. Just stuff it in some cheapo/recycled materials and roll with it. These would sell in millions….

    -> reality check: fact IS that Apple could ALREADY sell the iPhone at a cheaper price point (just look at the HUGE profit margin they’re making on the iPhone).
    But they choose NOT to – because they can.
    You can call them greedy/evil whatever…. (btw. most people funnily don’t bash on other “luxury” makers for asking premium money for their luxury goods – good luck finding a Tom Ford suit for 99,-$).

    There might be a reason why those guys are called Anal’ysts… ;-)
    Everybody and their Grandma are getting much more greedier than Apple ever could be. Because now somehow it’s not anymore about the products – it’s about the marketshare, it’s about stock prices – more, more, faster, quicker….
    As if Apple wouldn’t make already a huge pile of money (the moviescene in Blow comes to mind, where they don’t know where to stack all the money).
    I don’t say that they might never do a iPhone light or anything like that – but I doubt it highly that it will be cheap on materials, etc. – and from a price point still above the competition (just like the iPad mini – the didn’t go for “cheap” rather than “small” – thus a lower the price)

    And even though we’re in the mass-media/mass-market disposable electronics and instant gratification era – a premium smartphone (be it apple, sony, samsung or nokia) will cost premium money.
    If you can’t “afford” it – then start saving your money until you can.
    I couldn’t – but saved money on other stuff, until I could buy it – so can YOU.
    (everyone complaining that companies are greedy – when in fact consumers are just stingy).
    If you want cheap – I have good news for all of you!
    There’s already a market for that – and a huge selection of smart phones out there. (but don’t be too disappointed with their performance, build quality, etc. – at least they where cheap, right?) ;-)

    Now, somehow this old classic song from Timex Social Club keeps spinning in my head…. “Look at all these rumors – running me everyday….” ;-)

  • Travis

    “But it’s an ambiguous dismissal (it’s translated from Japanese) and it does’t outright deny whispers of Apple internally exploring the idea.”

    doesn’t*

  • Jairo

    Does this mean a new retina displayless iPhone?

  • http://twitter.com/burlow burlow

    two things:

    1) the iPhone 4 is free, just sell that in emerging markets.

    2) current pricing shows how apple completely took advantage of carrier subsidies: the ipad mini, with LTE, is $450. This is basically an iPhone, only $200 cheaper (iPhone 5 starts at $650). This means they could easily drop the price on iPhones even further, and if at&t/vzw follow tmobile in dropping subsidies, Apple will do just this. Apple doesn’t need to create a new iPhone, they just need to update their pricing structure.

    • http://www.eraser.org B. Braun

      No, the iPad Mini is an iPhone 4 with only one Mic and no flash for the Cam.

      • http://twitter.com/burlow burlow

        iPhone 4 doesn’t have LTE. and the ipad mini has the A5, like the iPhone 4S. the mini is a mix of the 4S and 5.

  • http://www.eraser.org B. Braun

    Just stop the rumors, there will be no cheaper iPhone only older iPhones with a lower price

  • http://www.facebook.com/oria.maymon Oria Maymon

    great artical!
    i think that the iPhone mini is in mind of apple.
    remember how much time the rumor of the mini ipan was OTA (hhhh…(-;)
    and then because off the kindle and nexus 7 thay have to do somthing.

    i think it will be good idea only if the price will be realy chep like nexus 4 smartphone.