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Apple's iPhone 3GS expected to live on for under $300 in developing markets

post #1 of 33
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Instead of being discontinued later this year, the iPhone 3GS, first released in 2009, may stay in production for Apple to sell contract-free in developing markets, where prepaid smartphones are popular.

Analyst Peter Misek with Jefferies received word that Apple has inked an agreement with "a leading distribution and logistics company." That new partnership is intended to push the iPhone 3GS in prepaid markets around the world, and expand channels for the iPhone 3GS in developing countries.

Accordingly, Misek believes that Apple is in the process of repricing the iPhone 3GS, which currently costs $375 without a contract. He expects that the third-generation iPhone will be priced between $250 and $300, which would allow someone to buy it with no subsidy for around the cost of an on-contract iPhone 4S.

The iPhone 3GS can currently be had for free with a new two-year service contract in major markets like the U.S. It serves as Apple's entry-level smartphone, while the iPhone 4, first released in 2010, is available for $99 with a carrier subsidy.

Apple is expected to launch its new sixth-generation iPhone this fall. If the company were to continue its current strategy of discounting previous-generation hardware, the iPhone 4S lineup would be reduced to one capacity for $99, while the iPhone 4 would become free with a two-year contract.

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With the iPhone 4 replacing the iPhone 3GS as Apple's entry-level smartphone, some might expect that the iPhone 3GS would be an end-of-life product. But based on what Misek has heard, Apple may have other plans to expand iPhone sales in markets where Apple has not yet made a significant impact.

"Emerging markets" have been identified as a potential source of a huge number of untapped customers that present a long-term upside for Apple. One analysis conducted earlier this year found that emerging markets have 14 times as many people between the smartphone friendly ages of 25 and 34 than Western Europe and North America.

One report published earlier this year by The Wall Street Journal declared that cheap Android-based smartphones were "crushing the iPhone" in European countries that have been hit hardest by the debt crisis. In those markets, most consumers don't sign contracts and pay the full, unsubsidized price for smartphones.

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.
post #2 of 33
This is a great strategy

I wonder if Apple considered doing a minor spec bump - slightly faster processor, slightly better screen. To further extend the life and to make sure it can play wider assortment of games

I bet the BOM is now > $125. Apple would make huge margin on this even at a $200 selling price

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post #3 of 33

Makes a lot of sense.

There is a huge demand for secondhand 3GS's here in the UK

post #4 of 33
Quote:
Originally Posted by Red Oak View Post

This is a great strategy
I wonder if Apple considered doing a minor spec bump - slightly faster processor, slightly better screen. To further extend the life and to make sure it can play wider assortment of games
I bet the BOM is now > $125. Apple would make huge margin on this even at a $200 selling price

 

Great strategy, but wrong phone. This makes no sense given the existence of the cheap, third-world manufactured 8GB iPhone 4 model they were talking about last year.  That's the cheap phone they should be pushing. The 3Gs is too old. It has a different screen amongst other things.  

 

This only makes sense if the "cheap iPhone 4" strategy has already failed, and we haven't heard anything like that. 

post #5 of 33

I'm going to take the opposite stance. I don't think this is happening. The 3GS is just too old. You can get better hardware on free crappy Android handsets these days for starters. And what happens when the 3GS DOESN'T get iOS 6 in a few months and begins losing app compatibility and support? Especially if the new iPhone does change screens and dimensions... Maybe it happens with 8GB 4.

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post #6 of 33

For the developed markets I've been to all around Asia, $250-$300 seems pretty expensive, especially for a phone that is that old. Everyone I see has cheapo Nokias with prepaid SIMS.

 

I'd be curious to see what their definition of developing markets is.

post #7 of 33
Quote:
Originally Posted by thataveragejoe View Post

I'm going to take the opposite stance. I don't think this is happening. The 3GS is just too old. You can get better hardware on free crappy Android handsets these days for starters. And what happens when the 3GS DOESN'T get iOS 6 in a few months and begins losing app compatibility and support? Especially if the new iPhone does change screens and dimensions... Maybe it happens with 8GB 4.

 

The story isn't discussing options for North America.  I have difficulty believing that anyone is giving away free smartphones for prepaid service (PAYG) in North America.  There is no guarantee of recouping the investment.  Even more difficult to believe is that "you can get better hardware of free crappy Android handsets" that are prepaid.  I wasn't able to find any free smartphones for prepaid service from AT&T; furthermore, the cheaper smartphones available for prepaid service are bottom of the barrel even for Android-based smartphones.

post #8 of 33
Quote:
Originally Posted by Soundvision View Post

For the developed markets I've been to all around Asia, $250-$300 seems pretty expensive, especially for a phone that is that old. Everyone I see has cheapo Nokias with prepaid SIMS.

 

I'd be curious to see what their definition of developing markets is.

Likely BRIC; Brazil, Russia, India and China.


Edited by MacBook Pro - 5/21/12 at 6:52am
post #9 of 33
I don't see this one happening either. I think the most they can get for the 3GS is about $250. I also imagine it would be hard to compete if they can't leverage the brand effectively in the prospective markets; a 2009 phone competing against a lean 2011 phone would be at a severe disadvantage.

But... I could see the 3GS being re-designed internally to make it work.

I could also see Apple push for an e-SIM for these phones in developing markets if it is prepaid. It can be an advantage for the consumer, and if it can save money and licensing costs why not?
post #10 of 33

As long as they don't update their software anymore... because the 3Gs is now barely usable speed-wise. It's terrible.

post #11 of 33
Quote:
Originally Posted by Red Oak View Post

This is a great strategy
I wonder if Apple considered doing a minor spec bump - slightly faster processor, slightly better screen. To further extend the life and to make sure it can play wider assortment of games
I bet the BOM is now > $125. Apple would make huge margin on this even at a $200 selling price

 

Don't judge the performance potential of the 3GS based on its introduction date. I've been working on a game for the last few months and have been impressed by it. Although the iPhone 4 has a slightly faster CPU, it and the 3GS share the same GPU. Since the 3GS is pushing fewer pixels on-screen than the 4, it's on-par with it in gaming performance and even slightly faster when the CPU isn't being loaded heavily. It's still a great device, albeit with a low-res screen. That said, I'm rather surprised they're continuing to produce it unchanged. I'd expect them go after that market with something akin to an iPhone 4 with a plastic back and a low-res IPS or retina non-IPS panel (like the one in the iPod Touch). Of course, that would increase the number of SKUs they have in circulation and they loath to do that. 

post #12 of 33

Or just make the iPhone 4 free… 

 

Why are we believing this? Last year they said the iPhone 4 would be DROPPED and the iPhone 3GS kept around. That's obviously not what Apple's going to do. 

 

iPhone 4: $0.

iPhone 4S: $99.

iPhone: $199.

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post #13 of 33
Quote:
Originally Posted by Tallest Skil View Post

Or just make the iPhone 4 free… 

 

Why are we believing this? Last year they said the iPhone 4 would be DROPPED and the iPhone 3GS kept around. That's obviously not what Apple's going to do. 

 

iPhone 4: $0.

iPhone 4S: $99.

iPhone: $199.

I think most of us agree with your statement as far as the postpaid (subscriber) market in North America is concerned.  Offering a prepaid (PAYG) iPhone 3GS in markets outside North America might be a good strategy though.

post #14 of 33
This is a hand off approach for Apple, some distributor has agreed to buy a bunch of the old phones and will push them into markets which Apple has traditionally decided not to play in. It is a no work proposition for Apple, once sold to the Disty than all the work is on them to move them into people hands. It also does not devalue the products which Apple is selling which is the iPhone 4's and the coming next phone.
post #15 of 33
Quote:
Originally Posted by MacBook Pro View Post
I think most of us agree with your statement as far as the postpaid (subscriber) market in North America is concerned.  Offering a prepaid (PAYG) iPhone 3GS in markets outside North America might be a good strategy though.

 

Well, what would be stopping Apple from doing the same with the iPhone 4 in those markets? What makes the iPhone 3GS special in this regard? It will be four years old by the time it's finally discontinued if this rumor comes to fruition. Where's the mileage in selling a four year old phone when the same can be done with the iPhone 4?

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post #16 of 33
Quote:
Originally Posted by Tallest Skil View Post

 

Well, what would be stopping Apple from doing the same with the iPhone 4 in those markets? What makes the iPhone 3GS special in this regard? It will be four years old by the time it's finally discontinued if this rumor comes to fruition. Where's the mileage in selling a four year old phone when the same can be done with the iPhone 4?

Profit margin.  If any company can sell an amazing smartphone for under $300 it is Apple but I am not sure even Apple can make a reasonable profit with the iPhone 4 priced at $300 or lower.  Consider that even today the Apple iPhone 3GS is the third most popular smartphone in North America even though the design of the phone is almost three years old.  I am not saying Apple will or won't.  I simply wouldn't exclude the idea of a prepaid (PAYG) iPhone for under $300.


Edited by MacBook Pro - 5/21/12 at 8:22am
post #17 of 33
Quote:
Originally Posted by Tallest Skil View Post

Or just make the iPhone 4 free… 

 

Why are we believing this? Last year they said the iPhone 4 would be DROPPED and the iPhone 3GS kept around. That's obviously not what Apple's going to do. 

 

iPhone 4: $0.

iPhone 4S: $99.

iPhone 5: $199.

 

Fixed that for you. :D  In all seriousness, I see Apple dropping the version numbers and just calling it the new iPhone. 

 

With regards to the 3GS it's not completely out of the question to keep it around for ultra low end markets, if they can still make a decent profit.  I can see iOS 6 for 3GS/ iOS 5 continuing to get security updates.

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post #18 of 33

Uh... The 4S is hitting $300 on the Craigslist market momentarily...  why would anyone buy a 3GS...

post #19 of 33
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Originally Posted by bwik View Post
why would anyone buy a 3GS...

 

Because it isn't an Android phone.

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post #20 of 33

But theres no reason to keep that ancient, slow phone around, just allow the iPhone 4 to be gotten cheap with prepaid phones.

post #21 of 33
Quote:
Originally Posted by bwik View Post

Uh... The 4S is hitting $300 on the Craigslist market momentarily...  why would anyone buy a 3GS...

 

Probably don't have vibrant Craigslist communities in those "developing" countries.

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post #22 of 33
Quote:
Originally Posted by marcusj0015 View Post

But theres no reason to keep that ancient, slow phone around, just allow the iPhone 4 to be gotten cheap with prepaid phones.


That's actually great because 3GS will keep Apple iOS engineers and app developers in check to optimize their software, instead of blindly relying on faster hardware. Ever wonder why console games keep getting better and better on the same hardware years after the hardware debut, but the same cannot be said for your PC? Because the developers have a stable and unchanging hardware that they can (or rather, forced to) optimize for.

 

I have a 4S myself, but this is good news to me as I know my phone won't slow to a crawl when iOS 6 arrives (it's already happening a little with iOS 5).

post #23 of 33
Quote:
Originally Posted by JCE10 View Post
That's actually great because 3GS will keep Apple iOS engineers and app developers in check to optimize their software, instead of blindly relying on faster hardware.

 

No, it just gimps all software because it CAN'T take advantage of the new hardware.

 

Quote:
 Ever wonder why console games keep getting better and better on the same hardware years after the hardware debut, but the same cannot be said for your PC? Because the developers have a stable and unchanging hardware that they can (or rather, forced to) optimize for.

 

No, it's because games have to be made with five year old, archaic hardware on the consoles in mind. Consoles hold back PC games so much that it's beyond laughable.

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post #24 of 33

I recently lost my perfect condition 64GB iPhone 4S.

 

Things are a bit tight this month, so I couldn't afford a new 4S or even a 4.

 

I considered getting a "cheap" Android with the following requirement: It had to run Android 2.3.

 

I found that there was no such thing as a "cheap" non-contract Android that ran 2.3 in Hong Kong. The absolute cheapest were no-name Chinese made clones that still cost US$125.

 

I wouldn't have been happy with Android anyway.

 

I picked up a used 32GB 3GS in very good condition for US$200. An 8GB iPhone 4 would have cost me at least $300, which was out of my budget.

 

It was absolutely the right choice. Upgrade iOS, restore from backup, and I had 90% of the exact functionality of my lost phone, albeit MUCH slower. All the same apps and all the same connectivity with my heavily invested iTunes infrastructure. No Siri or WiFi tethering, crap camera (comparably, though I consider the 4S camera to still be crap). But it was my phone with my software and all my contacts and calendars and notes and everything else in the exact same place as before. Try that with a 3 year-old Android!

 

The slowness was bothering me a bit, but I was planning on holding out until the next iPhone came out in October.

 

Fortunately, my 4s was turned in to the Police and I got it back. Now I'm using the 3GS as a permanent iTunes remote and living room gadget.

 

But make no mistake. The iPhone 3GS is a WAY better phone for someone who already uses iTunes and has apps than any Android, much less a cheap Android.

 

By the way, has anyone tried a ZOMM or other bluetooth proximity alarm? I don't EVER want to lose my phone again.

 

Oh... and I believe the fact I got my $850 phone back was due to karma. I have found two phones within the last year that I've successfully gotten back to their rightful owner. Pay it forward, if you will.


Edited by tonton - 5/21/12 at 10:44am
post #25 of 33
Quote:
Originally Posted by Tallest Skil View Post

 

No, it just gimps all software because it CAN'T take advantage of the new hardware.

 

 

 

Since when did Apple hold back software on new hardware because they had to support old hardware? Apple excels at putting out new software features on latest hardware only. Try explaining to iPad 2 owners why they don't have voice dictation.

 

Optimizing software for older hardware is at a much lower level; it's things like memory management, file I/O, library routines, etc. It's not "gimping" the software.

post #26 of 33
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Originally Posted by JCE10 View Post
Since when did Apple hold back software on new hardware because they had to support old hardware?


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post #27 of 33
Quote:
Originally Posted by Tallest Skil View Post

No, it just gimps all software because it CAN'T take advantage of the new hardware.


No, it's because games have to be made with five year old, archaic hardware on the consoles in mind. Consoles hold back PC games so much that it's beyond laughable.

True. Without straying too far off topic, the state of the art stalled to be compatible with Xbox. Still, Epic produced a sweet tech demo for UE4 on the PC, but it'll be years before mainstream games look like that.

I don't buy the theory that older iOS hardware holds back games though. When iPad (3) shipped, a number of games were updated for retina display and the new graphics chip and ended up leaving iPad 2 owners complaining. Developers don't seem to be holding back.

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post #28 of 33
This is absolutely what Apple needs to do if they want to grow by 100 % for yet another year. A $299 iPhone 3GS (plus a $399 iPhone 4) will put immense pressure on the Android name brands. Their flagship phones already sell for $200 less than the latest iPhone. Now they'll have to go even lower.

Of course an iPhone 3GS is not perfect, but is the 11" MBA with a 64 GB SSD perfect, is the screenless iPod shuffle perfect? The point is that you still get most of the benefits of the Apple ecosystem for a more affordable price.

Even better for Apple would be introducing a fresh industrial design for their cheap phones instead of just using the old design from 2008/09. Sales would explode. It might hurt the desirability of their more expensive phones, though.
post #29 of 33

Why the lack of official prepaid iPhone options in the US?!  Why do you have to go through hoops to use a GoPhone SIM w/iPhone -- greedy phone companies and not enough alternative iPhone carriers yet (like T-Mobile)...  

 

So if 3GS continues, will anyone buy it if they end iOS updates for it?  I would not.  If it gets iOS 6.x then people may consider it...

post #30 of 33
Quote:
Originally Posted by thataveragejoe View Post

I'm going to take the opposite stance. I don't think this is happening. The 3GS is just too old. You can get better hardware on free crappy Android handsets these days for starters. And what happens when the 3GS DOESN'T get iOS 6 in a few months and begins losing app compatibility and support? Especially if the new iPhone does change screens and dimensions... Maybe it happens with 8GB 4.

Remember... we're talking about developing markets... and phones you pay full price for and then pay-as-you-go for service. Your point about getting a free handset does not apply here.

Anyway... there might be some people who want an iOS phone but who live in a developing market.

A $300 Android phone might not be better than a $300 iPhone 3GS to some people.

I don't really keep up with those kinds of phones... what is a good $300 Android phone in those kinds of markets?

And again... that is $300 to buy the phone outright... not a subsidy...
post #31 of 33
iPhone 4 should be the new entry level baseline for Apple, not the 3GS.

3GS is just too old and lacks the hardware needed. It will hurt iOS development and app development if anyone caters to the 3GS.
post #32 of 33
Quote:
Originally Posted by Red Oak View Post

This is a great strategy
I wonder if Apple considered doing a minor spec bump - slightly faster processor, slightly better screen. To further extend the life and to make sure it can play wider assortment of games

 

The iPad2 that is currently being sold has a new processor, which is a 28nm version of its original processor.  This was a technology test but gives a 16 hour battery life for playing videos.  I would think that revving the processor on the 3GS and doubling the DRAM would let the phone remain viable for a few more years, without adding significantly to the minimum profitable price.

post #33 of 33
Quote:
Originally Posted by Michael Scrip View Post


Remember... we're talking about developing markets... and phones you pay full price for and then pay-as-you-go for service. Your point about getting a free handset does not apply here.
Anyway... there might be some people who want an iOS phone but who live in a developing market.
A $300 Android phone might not be better than a $300 iPhone 3GS to some people.
I don't really keep up with those kinds of phones... what is a good $300 Android phone in those kinds of markets?
And again... that is $300 to buy the phone outright... not a subsidy...

 

Here is a link to the ZTE Nova 4.0 V8000 which is relatively impressive.  In fact, seeing this smartphone I can't understand why anyone would pay more money for virtually any Android smartphone.  While I don't believe this smartphone competes well with iPhone 4S, it isn't designed to compete with the iPhone 4S.


Edited by MacBook Pro - 5/22/12 at 6:54am
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