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.
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.
I would not be surprised if the rumored iPhone “mini” is accompanied in the market by a new iPhone “Pro” at a price higher than current.
— Horace Dediu (@asymco) January 9, 2013
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.
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.
Apple is making a $100 phone? The charging cable alone is $30.
— Fake Alexia (@alexia_tsotsis) January 10, 2013
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.
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 future of the iPhone is in being a better computer, not in being a better iPhone.
— Horace Dediu (@asymco) January 10, 2013
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.
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.