Cheap Android phones 'crushing' Apple's iPhone in countries without subsidies

Posted:
in iPhone edited January 2014


A new report highlights a "rare weak spot" for Apple's iPhone: its heavy reliance on carrier subsidies to sell the iPhone to customers for much less than its true cost.



During Apple's last quarterly earnings conference call, company officials revealed that the average selling price of the iPhone is nearly $660. But consumers pay much less than that, with the difference subsidized by carriers in exchange for signing a new two-year service contract.



While that strategy has worked very well in countries like the U.S., U.K. and elsewhere, where carrier subsidies are the norm, it has presented problems for Apple in markets that are predominantly prepaid. Profiling this issue on Monday, The Wall Street Journal declared that cheaper Google Android phones are "crushing the iPhone" in European countries hit hardest by the ongoing debt crisis.



"Its performance in parts of southern Europe where most consumers don't sign contracts and have to pay full freight for phones suggests Apple's position could suffer if carriers tire of underwriting most of the cost of the devices, as some are in countries such as Denmark and Spain," the report said.



Data from IDC shows that Android took well more than half of the smartphone market in Greece and Portugal in 2011, while Apple had a very small presence both countries. It's a very different story in the U.K. and U.S., where Apple took roughly 25 percent of the entire smartphone market in 2011.



Greece's top-selling smartphone last year was the Samsung Galaxy Mini, which sells for just $188 without a contract. For comparison, an older model 8-gigabyte iPhone 4 sells new for $680 without a subsidy in Portugal.











Apple Chief Executive Tim Cook said last October that the prepaid market is "very, very important" to his company. He said that was one of the reasons the company continues to sell its entry-level iPhone 3GS, to reach lower price points in both prepaid and postpaid markets.



There have been rumors for years that Apple plans to introduce a so-called "iPhone nano" to increase its presence in prepaid markets, particularly China. But so far Apple has declined to build an entirely new model for emerging markets, opting instead to continue to sell previous-generation handsets at a lower price.



[ View article on AppleInsider ]

«13456

Comments

  • Quote:
    Originally Posted by AppleInsider View Post


    The Wall Street Journal declared that cheaper Google Android phones are "crushing the iPhone"



    That can't be correct.
  • mr. hmr. h Posts: 4,652member, moderator
    Quote:
    Originally Posted by AppleInsider View Post


    the average selling price of the iPhone is nearly $660. But consumers pay much less than that



    No. Consumers do not "pay much less than that". Consumers pay more than that if they go with a contract - they pay much less up front but essentially what they've done is taken out a high-interest loan from their carrier and used it to pay Apple for the phone.
  • tallest skiltallest skil Posts: 40,495member
    Apple, force all carriers to drop the forced data plans. Simple.
  • just_mejust_me Posts: 591member
    Quote:
    Originally Posted by Mr. H View Post


    No. Consumers do not "pay much less than that". Consumers pay more than that if they go with a contract - they pay much less up front but essentially what they've done is taken out a high-interest loan from their carrier and used it to pay Apple for the phone.



    Its not high interest when you have to pay the same to higher amounts to be in prepaid.
  • apple ][apple ][ Posts: 8,233member
    It's no surprise that in countries like Greece, people are opting for cheap Android phones.



    What matters most is to sell to people who actually have money and the iPhone is doing quite well in those places.



    Unless Apple decides to make some really cheap, low featured phone, which would go against their philosophy, then I'd say that this is not an issue to be concerned with. There is enough demand for Apple products as it is, we don't need a bunch of people with no money queuing up for Apple products also. Is the goal to sell an iPhone to every person on the planet? I sure hope not.



    Apple needs to remain a premium brand, selling premium products to customers who appreciate it.



    There's also a rumor going around today about the iPad 3 being priced at $579! Awesome! All that extra technology and the amazing screen comes at a price! Apple is not for cheapskates!
  • lkrupplkrupp Posts: 4,200member
    Quote:
    Originally Posted by I am a Zither Zather Zuzz View Post


    That can't be correct.



    If heading toward half a trillion dollars in market capitalization and gobbling up the majority of profits in the mobile market, Mac sales soaring, iPads becoming ubiquitous is being "crushed" then let's have some more "crushing" please. You trolls have never accepted the fact that Apple doesn't seem to notice or care that it is doomed.
  • xsamplexxsamplex Posts: 214member
    The way to attack Apple is obviously price. Their technology is too far out on the bleeding edge for anyone to catch right now on that front. For instance, I use Apple products at home, but Micro Center was selling completely capable Windows 7 laptops with 16" screens for $250! To a certain, significant segment of the market, Apple can't touch that. And actually, having purchased one of these on impluse (after swearing I never would buy a Win machine again) I gotta admit - the technology is pretty good, things have not been stagnant by other vendors. Same thing applies to phones.



    Apple can continue to dominate, no doubt, but it will need to be driven by great products, exquisitely executed, so that the bottom feeders are forced to play continuous catch-up. It should be interesting...
  • maestro64maestro64 Posts: 3,060member
    They are talking people who choose pre-pay for fix amount of service verses pay up front for a complete plan whether you use or not. We are talking about people who are living pay check to pay check and may not use their phone when the pre-pay runs out each month.



    Apple has been clear not, they are not interested in your business if you can not afford their product. This is why Apple has $100B in the bank an the company choosing to service the people who are barely making ends meet do not have the cash that Apple has.



    Again the article fails to understand how apple is operating, they think it better to sell more unit sales than adding 10X the profits on less units sales. It is just another option that Apple should join the race to the bottom.
  • jragostajragosta Posts: 10,473member
    Apple has never pretended to offer a product for everyone. They offer a quality, industry leading product. If you can't afford it, you're free to go elsewhere.



    If you look at the results over the past decade, there's nothing wrong with that strategy. Indeed, by attempting to become the leader in terms of volume, Apple would probably have to make so many sacrifices that their long term success would be in jeopardy.



    Choose what you're going to do, do it to the best of your ability, and ignore markets that don't interest you.
  • dagamer34dagamer34 Posts: 494member
    Considering Apple has already locked up a large percentage of profits in the mobile space, going after marketshare in these countries is foolish. Companies exist to make money, not to have everyone using their products (the former does not always mean the latter).



    The last time a company was in a position like this was Motorola and the original RAZR cost $500. It quickly became commoditized over the years and lost its luster.
  • originalgoriginalg Posts: 374member
    Quote:
    Originally Posted by AppleInsider View Post


    Greece's top-selling smartphone last year was the Samsung Galaxy Mini, which sells for just $188 without a contract.



    $188, as in dollars, or Euro? What margin is there in selling a $188 phone? Is it just to grab that share of the market? Looks like the strategy would be to get users using their devices, then hope they'll upgrade to a nicer device after saving for a while. But that could backfire if there's no brand loyalty or the cheap phone provides such a crappy experience that the users will jump ship to iOS when they have a chance.
  • solipsismxsolipsismx Posts: 19,566member
    No required data plan to create a subsidy and high import fees for iPhone comapred to local products is where the iPhone will lose out. I suspect that it's these low-end devices that will be predominately used as dumb-phones that can connect to WiFi that are giving Android its 850k/day activations (though that is slowing from a year prior). Bottom line: If it's not profitable then Apple doesn't care. There is no love loss for flooding a market with a loss-leader.
  • david dennisdavid dennis Posts: 47member
    Quote:
    Originally Posted by OriginalG View Post


    $188, as in dollars, or Euro? What margin is there in selling a $188 phone? Is it just to grab that share of the market? Looks like the strategy would be to get users using their devices, then hope they'll upgrade to a nicer device after saving for a while. But that could backfire if there's no brand loyalty or the cheap phone provides such a crappy experience that the users will jump ship to iOS when they have a chance.



    iPod Touch sells for not too much more than that, so it should be possible for Apple to field a competitive phone for, say, $250-odd. But it would probably cannibalize their more expensive phones by too much.



    I'm not sure why an iPod Touch is $200 and an iPhone 4 is $700, when I would think iPod Touch has about 90% of the components iPhone 4 does.



    D
  • kibitzerkibitzer Posts: 1,108member
    Quote:
    Originally Posted by Apple ][ View Post


    It's no surprise that in countries like Greece, people are opting for cheap Android phones.



    In Greece they'll be lucky to have the dough to buy empty tomato can phones with long pieces of string attached.
  • slurpyslurpy Posts: 4,559member
    So what? These phones are the equivalent of dirt cheap dumb phones now. These people would not have bought an iPhone, and Apple is not in a position to market to them. This is to be expected, and isn't a 'weak point' for APple since they're not going after that market (yet). Also, there's nothing to say these people won't eventually be in the market for an iPhone if/when their financial situation changes. Apple is not selling $100 phones. How is the fact that Apple is not catering to, and has never catered to all market segments 'news'? Is this a 'win' for Android? Sure, if you convince yourself hard enough that it is.
  • tumme-tottetumme-totte Posts: 147member
    Quote:
    Originally Posted by Apple ][ View Post


    ...Unless Apple decides to make some really cheap, low featured phone, which would go against their philosophy...



    Not entirely true I would say. iPods comes in all sorts of fashions - from lower entrance to high end touch. Cheap is probably just a unlucky choice of word. Apple could use it's knowledge to produce a simple but high quality entrance device.



    I know - it's been in the ruomor mill before, just pointing to a choice of words and ways that it could happen.
  • solipsismxsolipsismx Posts: 19,566member
    Quote:
    Originally Posted by David Dennis View Post


    iPod Touch sells for not too much more than that, so it should be possible for Apple to field a competitive phone for, say, $250-odd. But it would probably cannibalize their more expensive phones by too much.



    I'm not sure why an iPod Touch is $200 and an iPhone 4 is $700, when I would think iPod Touch has about 90% of the components iPhone 4 does.



    D



    The Touch has a lower margin than the iPhone but the Touch also has fewer and less expensive components.



    For instance, people think the Touch and iPhone have the same display because they both have 960x480 3.5" "Retina Displays" but we know that the iPhone uses an IPS panel and the Touch a TN panel. Then there is quality of the backlight, the speed of the NAND flash, the A4 CPU, RAM, speaker, mic, vibrator, battery, GPS, cellular HW, and on and on and on...
  • bdkennedy1bdkennedy1 Posts: 1,459member
    Apple doesn't care about any of this. They are sitting on $100 billion in profit for a reason.
  • santoandersonsantoanderson Posts: 98member
    When I first bought my iPhone 3GS three years ago, my brother-in-law chastised me for buying such an expensive phone. I spent $300, and that was the last phone I bought.



    Three years later that same brother-in-law has gone through 6, count'em SIX Android phones, totaling about $1,000.



    So with Apple, you may be spending more in the short term, but you're paying for life-span and quality.
  • macinthe408macinthe408 Posts: 1,050member
    Waiting for an analyst report calling Apple out for not producing a sub-$99 iPhone Lite. Why does Apple need to address every single market in which it has a "hole," regardless of the ridiculousness of said market?
Sign In or Register to comment.