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Apple predicted to offer $200 unsubsidized iPhone in 2013

post #1 of 75
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Apple is predicted to drop the price of an existing iPhone to $200 unsubsidized in 2013, accelerating share gains for its smartphone platform in emerging markets.

Analyst Gene Munster with Piper Jaffray expects Apple will likely reduce the price of an existing iPhone to about $200 by September of next year, down considerably from the $375 unsubsidized price at which the company currently sells the 8-gigabyte iPhone 3GS. Such a move would be "important" for the company, he said, as Apple's smartphone market share is currently weakest in emerging markets where the company competes with less expensive Android-based handsets.

Aided by the launch of a cheaper contract-free handset, Munster sees Apple's global smartphone share growing from about 20 percent in calendar year 2012 to 32 percent in 2015.

But a $200 iPhone would also significantly reduce the average selling price of Apple's smartphone, which has maintained an average of $641 since the launch of the iPhone 3G in June of 2008.

If Apple were to begin offering a $200 iPhone in September of 2013, Munster believes that the device would account for as much as a quarter of all iPhone sales. That would result in a gradual decline in the handset's average selling price, projected to fall to $434 by the end of 2015.

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A cheaper iPhone could have gross margins closer to the iPad, which are between 23 and 32 percent, according to documents from the Samsung patent infringement trial. That's considerably lower than the iPhone, which has margins between 49 and 58 percent.

"We believe it is becoming increasingly possible for Apple to build the low end iPhone for $130-150, which would suggest a 25-35% gross margin," Munster wrote in a note to investors on Friday. "While some investors may not like the margin dilution from a cheaper iPhone, we believe that view misses the bigger market share picture."

Rumors have persisted for years that Apple could build a smaller, cheaper iPhone model to compete with Android in developing markets. But thus far, Apple has instead opted to continue selling previous-generation iPhone models at a lower cost, which is why the iPhone 3GS, first released in 2009, is still available for purchase today.

Earlier this year, another analyst, Peter Misek with Jefferies, said he was told that Apple had inked an agreement with "a leading distribution and logistics company" to push the iPhone 3GS in prepaid markets around the world. He was led to believe that Apple plans to keep the iPhone 3GS in production to sell contract-free in developing markets for under $300.

Munster, however, didn't go as far as to say that the iPhone 3GS would necessarily be the handset model that Apple would reach a sub-$200 price point with. Instead, he simply said that an "existing iPhone" would likely be available for about $200 unsubsidized in September of 2013.

By late 2013, it's possible that Apple could opt to finally retire the iPhone 3GS, which at that point would be a handset more than four years old. That would likely leave the iPhone 4, first launched in the summer of 2010, to reach the projected price point.
post #2 of 75
I would buy one - even if it's a 3GS. My daughter has been asking to get an iPhone to replace her POS Android phone. I'd pay $200, but not $400 or more.
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post #3 of 75

no way, apple only does premium products

post #4 of 75

Ugh, I hope this isn't more "iPhone 4 gets dropped, iPhone 3GS sticks around" nonsense.

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post #5 of 75
False
post #6 of 75

You mean Gene Munster....the "iPhone Nano will be out 3 years ago" dude? This guy is a toolbag.

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post #7 of 75
Quote:
Originally Posted by al_bundy View Post

no way, apple only does premium products

 

My thoughts exactly.

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post #8 of 75

Yeah, Mr. iPhone Nano.  What an idiot.  I don't know where Munster dreams up some of the stuff he says but I try to ignore him whenever possible.  Apple is still selling iPhones as fast as it can make them, so I'm not sure why Apple would suddenly decide to drop prices on the iPhone just to gain a bit more market share.  Consumers either want to iPhone or they don't.  Apple just has to keep building iPhones and adding in value so consumers keep wanting to buy them at the going rate.  There's no need for Apple to cheapen its product for the sake of market share.  As a shareholder, I'd be dead against that sort of reasoning.  Build a desirable product and keep the profit margins high.

post #9 of 75

Shut up, Gene.

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post #10 of 75

$%*# Uncle Gene "Apple TV!" Munster, speculative fiction writer (as Mac OS Ken would describe him).

post #11 of 75

Because Apple has a long history of choosing market share over margin. Mmmhmm.

post #12 of 75
Quote:
Originally Posted by Constable Odo View Post

Apple is still selling iPhones as fast as it can make them, so I'm not sure why Apple would suddenly decide to drop prices on the iPhone just to gain a bit more market share.

 

First it may not be about a "bit more market share" but, possibly, a lot more market share. Though I agree it isn't about market share per se, it is about selling more product to more people.

 

 

Quote:
Originally Posted by Constable Odo View Post

Consumers either want to iPhone or they don't.

 

Want != afford.

 

 

Quote:
Originally Posted by Constable Odo View Post

There's no need for Apple to cheapen its product for the sake of market share.

 

I don't believe it's a matter of cheapening them as much as it is a matter of offering different options and price-points (as the do with computers and iPods, even iPads).

 

Anyone who thinks Apple isn't (and hasn't been) trying to figure out a way to offer a less expensive iPhone (and iPad) option (while still maintaining their margins) is nuts. Whether they will ever be able to do so, is a different question. But there's no doubt in my mind they are trying and experimenting to find a way. People forget that they really hit it out of the park with the iPod when the mini/nano came out.

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post #13 of 75
Quote:
Originally Posted by MJ1970 View Post

Quote:
Originally Posted by Constable Odo View Post

Apple is still selling iPhones as fast as it can make them, so I'm not sure why Apple would suddenly decide to drop prices on the iPhone just to gain a bit more market share.

 

First it may not be about a "bit more market share" but, possibly, a lot more market share. Though I agree it isn't about market share per se, it is about selling more product to more people.

 

 

Quote:
Originally Posted by Constable Odo View Post

Consumers either want to iPhone or they don't.

 

Want != afford.

 

 

Quote:
Originally Posted by Constable Odo View Post

There's no need for Apple to cheapen its product for the sake of market share.

 

I don't believe it's a matter of cheapening them as much as it is a matter of offering different options and price-points (as the do with computers and iPods, even iPads).

 

Anyone who thinks Apple isn't (and hasn't been) trying to figure out a way to offer a less expensive iPhone option (while still maintaining their margins) is nuts. Whether they will ever be able to do so, is a different question. But there's no doubt in my mind they are trying and experimenting to find a way.

 

Well said!  The issue isn't market share or cheapening its products -- rather it is opening up new markets where phones are not subsidized and price is a major factor.  It's analogous to introducing a Mac Mini or selling the iPhone into a new country -- both addressed new markets.

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post #14 of 75
Originally Posted by MJ1970 View Post

Want != afford.

 

I agree with both of you. I believe that Constable Odo in that people certainly want the iPhone and with MJ1970 in that a great deal more people want the iPhone than can afford one, thus making them Constable Odo's "don't" part.

 

I know I've wanted an iPhone since I won one five years ago. But it's not until just now that a plan has been created that allows my family and I to use iPhones for far cheaper monthly than the dumb phones we have now, plus with more content on the plan (∞/∞/6GB versus 1000/250/0GB, and that's voice/text/data, respectively).

 

BUT we will still have to buy unlocked iPhones at full price, which is a considerable cost for us. We don't plan to upgrade every two years like most, but we're not filthy stinking rich, hence our inability to swing the original $70 a month plans, and the previous $60 and $50 a month plans.

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post #15 of 75

There is a big market for a "messaging" Apple phone.  No data plan required.  The carriers here in the U.S. are colluding (I'm looking at you, AT&T and Verizon !!) to raise prices via these ridiculous "shared data" plans.  Have you seen their current offerings of messaging phones?  A bunch of crappy phones.  The selection used to be better.  The carriers want everyone, including kids on family plans, to move to smartphones, so they can increase what each family pays per month.  And, they have increased their upgrade fees substantially to discourage people from upgrading frequently.  They are also making a lot of noise about how much they would like to get rid of subsidies.

 

In two to three years, we just may see the end of subsidies.  I am sure Apple has considered that this might happen.  In fact, they might take steps to accelerate this turn of events.  One thing they can do is offer a messaging phone with Wi-Fi but no 3G/4G.  With iMessage, no texting plan required.  Children are the heavy texters.  If all their friends have an Apple phone, why would anybody need a texting plan?  This phone would also be perfect for emerging markets.  In the U.S., smaller carriers may have a shot at eroding the duopoly of AT&T and Verizon.

post #16 of 75

An unlocked and unsubsidized iPhone at $200 would accelerate carrier switching away from carriers (AT&T and well, AT&T and somewhat from Verizon) when those carriers fail to deliver what customer's want.

 

A $200 unlocked unit that would deliver FaceTime over 3G would would be a huge motivator to switch.   

 

Having carriers abuse Apple customers less often is a good goal for Apple.  

post #17 of 75
Quote:
Originally Posted by MJ1970 View Post

First it may not be about a "bit more market share" but, possibly, a lot more market share. Though I agree it isn't about market share per se, it is about selling more product to more people.

Want != afford.

I don't believe it's a matter of cheapening them as much as it is a matter of offering different options and price-points (as the do with computers and iPods, even iPads).

Anyone who thinks Apple isn't (and hasn't been) trying to figure out a way to offer a less expensive iPhone (and iPad) option (while still maintaining their margins) is nuts. Whether they will ever be able to do so, is a different question. But there's no doubt in my mind they are trying and experimenting to find a way. People forget that they really hit it out of the park with the iPod when the mini/nano came out.

I agree completely.

Look at the iPhone 3GS. Even without changing a thing, they could probably offer this for $200. All of the tooling and design work is paid for many times over. Manufacturing should be a piece of cake because they've made millions. Bugs are all worked out so quality costs should be low. And so on. Yet a 3GS would easily compete with a $200 phone that the competitors are selling.
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post #18 of 75
Originally Posted by SailorPaul View Post

A $200 unlocked unit that would deliver FaceTime over 3G would would be a huge motivator to switch.   

 

Good luck getting the carriers to actually do that. Even on phones that physically support it, they refuse to allow it. And the government, supposed to be protecting us in this regard, refuses to do anything. 

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post #19 of 75

The carriers are trying to resist what is probably inevitable and that is them becoming largely undifferentiated* wireless data pipes.

 

*Or differentiated only on connection quality, throughput and pricing...but not locking people into their networks and plans.

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post #20 of 75
Quote:
Originally Posted by Constable Odo View Post

Yeah, Mr. iPhone Nano.  What an idiot.  I don't know where Munster dreams up some of the stuff he says but I try to ignore him whenever possible.  Apple is still selling iPhones as fast as it can make them, so I'm not sure why Apple would suddenly decide to drop prices on the iPhone just to gain a bit more market share.  Consumers either want to iPhone or they don't.  Apple just has to keep building iPhones and adding in value so consumers keep wanting to buy them at the going rate.  There's no need for Apple to cheapen its product for the sake of market share.  As a shareholder, I'd be dead against that sort of reasoning.  Build a desirable product and keep the profit margins high.

its not 5 years ago 

 

except for facebook google play apps are at about 90% or more parity with iOS. the vast majority of the most popular and most used apps are on both platforms. commoditization of the smartphone market is here or will be here very soon.

 

the 50% of people left who don't have a smartphone don't care about design, looks, elitism, snobbiness. they want a cheap smartphone. unless apple delivers they will go android

 

the fanboy population is a tiny percentage of the total user base 

post #21 of 75

It's been proven, financially, that the halo effect the iPhone brings to Apple's other products is real.  Get more consumers, those that have less to spend than traditional market consumers, to buy into the Apple eco-system and chances increase greatly that those consumers will then spend more on other Apple products.  The issue Apple grapples with is the fact that the consumer experience needs to be top-notch regardless of whether it's with the cheapest/oldest of iPhones being sold off-contract at $200 or the latest/greatest iPhone being sold by all the big telcos.  If you go cheap and it negatively effects the consumer experience, you can do more harm than pricing your products higher and maybe out of reach of more people would ever do - because having a product be aspirational can be a very good thing.

post #22 of 75
Gene Munster is like DigiTimes. Just throws things against the wall to see what sticks.
post #23 of 75
Quote:
Originally Posted by AppleInsider View Post

Apple is predicted to drop the price of an existing iPhone to $200 unsubsidized in 2013, accelerating share gains for its smartphone platform in emerging markets....

 

This is stupid.  Last year's iPhone for $200 is still $200 more than last year's Android phone.  

 

This news doesn't really change the value equation much at all and it's difficult to see how it will have any impact.

post #24 of 75
Quote:
Originally Posted by Gazoobee View Post

 

This is stupid.  Last year's iPhone for $200 is still $200 more than last year's Android phone.  

 

This news doesn't really change the value equation much at all and it's difficult to see how it will have any impact.

 

I suspect it is more likely for Apple to design a new phone, perhaps based on one of the previous phones as a base platform but working to squeeze every dollar they can out of it while also, perhaps, trying to add some new value.

 

Apple is working on a lower cost phone option. It's really a matter of when and how, not if.

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post #25 of 75

I have been messing with a 3GS that we still have since the wife got my iPhone 4 and I moved on to the 4S. It is surprisingly fast for the specs it has on it. Also most prepaid Android phones in that range do not have flash on the camera. That would be the only possible improvement I would hope they would add to the phone.

 

Otherwise keep it the same and ship it. It runs Asphalt 7 great as an example. It switches between apps faster than Android phones at double the processing power. Apple can sell a lot of phones at this price point and there will still be plenty to lust after in the iPhone 5.

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post #26 of 75
Quote:
Originally Posted by Gazoobee View Post

 

This is stupid.  Last year's iPhone for $200 is still $200 more than last year's Android phone.  

 

This news doesn't really change the value equation much at all and it's difficult to see how it will have any impact.

There is a $0 unsubsidized Android phone?

 

Leaving aside the fact that the price may be close to what it's truly worth, where can I get one?

post #27 of 75

I think it's possible.

 

In MP3 player market, Apple makes big, medium and small iPods. Although it started with the big, Apple put out medium, then small iPods eventually. As we all know, this strategy worked beautifully.

 

I think it makes sense that Apple makes medium iPhone at some point, and, even small iPhone eventually. It's just a matter of time. Apple will need to calculate its moves carefully. I think Cook can handle it. I think this strategy can work.

post #28 of 75
Quote:
Originally Posted by MJ1970 View Post

 

I suspect it is more likely for Apple to design a new phone, perhaps based on one of the previous phones as a base platform but working to squeeze every dollar they can out of it while also, perhaps, trying to add some new value.

 

Apple is working on a lower cost phone option. It's really a matter of when and how, not if.

Yep.  Anyone who thinks Apple needs to make trashy, throw--away phones to compete with the trashy throw-away Android phones has completely misunderstood who Apple is and what value they bring to the equation.

post #29 of 75

I would buy a $600 iPhone and use voice and Wifi and a small data plan, if a carrier would offer it.  I don't need lots of cellular data (simple map data, voicemail) and I do 95% of my browsing on WiFi.  

 

The carriers are simply not interested in that market.  Instead they are trying to move everyone to an expensive data plan and give away voice/sms.  

 

I just need good coverage from a decent provider.

post #30 of 75

If the rumors about the larger-screened iPhone 5 (or whatever we call it) are true, it may be that Apple is waiting for this as a way to differentiate the high-end iPhone.

 

Then I could see them re-designing and consolidating iPhone 4S, 4 and 3GS into one or two second tier, lower priced phones, all physically sharing many of the same parts (e.g., screens, batteries, CPUs, etc.) in order to get to the economies of scale on parts to help drive down their costs on those products.

 

So you could end up with something like:

 

iPhone 5 (high-end, larger screen, etc.)

 

iPhone 4x (mid price)

 

iPhone 3x (lowest price)

 

Where 4x and 3x are versions of the 4S/4 and 3GS redesigned for better consistency and economy of scale on components (plus leveraging everything they've learned since the original to make them less expensive.)

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post #31 of 75
Originally Posted by cwoloszynski View Post
I would buy a $600 iPhone and use voice and Wifi and a small data plan, if a carrier would offer it.

 

Straight Talk! It's what we're doing. Unlocked 6th gen iPhones on day one* and leaving Verizon forever. 

 

*Well, as soon as I learn how exactly to get them running on Straight Talk. It's a lot of money to drop on something I'm not certain will work.

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The only thing more insecure than Android’s OS is its userbase.
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post #32 of 75
Quote:
Originally Posted by MJ1970 View Post

 

I suspect it is more likely for Apple to design a new phone, perhaps based on one of the previous phones as a base platform but working to squeeze every dollar they can out of it while also, perhaps, trying to add some new value.

 

Apple is working on a lower cost phone option. It's really a matter of when and how, not if.

 

I agree, but I believe mr. "analyst" was talking about lower prices on last year's phones.  

 

Since the new lineup after October is going to be: 

 

- iPad, iPad mini

- iPod, iPod nano

- iPhone, ?

 

I think that despite the regular ridiculing it gets on this forum, that they might be trying to produce something like an "iPhone nano" in the near future.  It's pretty clear from the market stats and sales of Android handsets that the 4s is already much more phone than the average person needs.  

post #33 of 75
Quote:
Originally Posted by Tallest Skil View Post

Ugh, I hope this isn't more "iPhone 4 gets dropped, iPhone 3GS sticks around" nonsense.

Apple indicated a few months ago that it would be using the 3GS as an inexpensive (notice I didn't say cheaplol.gif) pre-paid phone in emerging markets, among others. I believe the article I read mentioned countries like India and China as particular targets. I linked the article here a few days ago and can probably dig it up again if you need it.

 

EDIT: That article could have originated with Peter Misek rather than Apple, making it just a tad less reliable than I thought.

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post #34 of 75
Quote:
Originally Posted by Gazoobee View Post

 

I agree, but I believe mr. "analyst" was talking about lower prices on last year's phones.  

 

Since the new lineup after October is going to be: 

 

- iPad, iPad mini

- iPod, iPod nano

- iPhone, ?

 

I think that despite the regular ridiculing it gets on this forum, that they might be trying to produce something like an "iPhone nano" in the near future.  It's pretty clear from the market stats and sales of Android handsets that the 4s is already much more phone than the average person needs.  

 

Wondering if Apple would pull an iPod nano on the phone in the sense that they did with the latest iPod nano...that is...smaller, simpler touch screen (but no real iOS like the iPod touch)...greatly stripped down and simplified functionality with the veneer of being an iPhone. It's an approach anyway. Shoot even without going full-on smart phone Apple could bring a lot to the shitty usability of so-called "dumb" phones. That might be the first step to take. I don't know whether it's economically feasible. But maybe it is basically a "smarter than dumb but dumber than smart" phone. Address book, calendar, music, iMessages...no apps. Like that.

 

All of that said, Apple's clearly trying to establish an iOS hegmony and that type of phone would not help (short term or directly). Still it might pull millions of people into the Apple ecosystem and get them on the track to iOS devices in the future.


Edited by MJ1970 - 8/24/12 at 1:16pm

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post #35 of 75
Quote:
Originally Posted by Gatorguy View Post

Apple indicated a few months ago that it would be using the 3GS as an inexpensive (notice I didn't say cheaplol.gif) pre-paid phone in emerging markets, among others. I believe the article I read mentioned countries like India and China as particular targets. I linked the article here a few days ago and can probably dig it up again if you need it.

+1 this.  

 

Although I think the iPhone 4 would be the phone... I can't see the 3GS being kept supported under iOS beyond iOS 6.2 (if not 6.1).  That's a lot of code forks to maintain, if the iPad Air/Mini/Small/Nano/Little  comes to fruition. And you can't sell what you don't support.

 

You need to lower it in the US to avoid a back selling grey market (buy in india for ~$200-300, sell in US for < 375), lower the price to $200 here.   Driving to an iPhone 4 also drives Facetime as a critical minimum feature (the question will be if Siri ever gets 'allowed' on the 4).  And with Retina Display.

 

It's the emerging markets that Apple needs to lower the pricing umbrella, and Europe where pre-paids are the norm.

post #36 of 75
A company selling something at or below cost to gain market share? Apple or Amazon?
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post #37 of 75
The iPhone 5 means they will heavily promote 2 phones with the 4s reducing in price next year. A massive reduction in some market shares means reduced prices are a certainty. So it is not if, but when.
post #38 of 75
Quote:
Originally Posted by dasanman69 View Post

A company selling something at or below cost to gain market share? Apple or Amazon?

 

Apple won't do that.

 

To the extent that Amazon does it (e.g., with the Kindle) it's because they view their business model a bit differently. They're giving away the razors (Kindle devices) to sell the blades (books and other Kindle content).

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post #39 of 75
Quote:
Originally Posted by MJ1970 View Post

 

Wondering if Apple would pull an iPod nano on the phone in the sense that they did with the latest iPod nano...that is...smaller, simpler touch screen (but no real iOS like the iPod touch)...greatly stripped down and simplified functionality with the veneer of being an iPhone. It's an approach anyway. Shoot even without going full-on smart phone Apple could bring a lot to the shitty usability of so-called "dumb" phones. That might be the first step to take. I don't know whether it's economically feasible. But maybe it is basically a "smarter than dumb but dumber than smart" phone. Address book, calendar, music, iMessages...no apps. Like that.

 

All of that said, Apple's clearly trying to establish an iOS hegmony and that type of phone would not help (short term or directly). Still it might pull millions of people into the Apple ecosystem and get them on the track to iOS devices in the future.

 

I do not think you will see any iPhone product 'forks' with a subset of the current OS.  The iPod series save for the Touch is not iOS.  iOS is about driving capabilities to mobile apps.  A 'nano' phone would cause both OS and Apps to 'fork' their code, and mix their message.

 

Apple will not create a  iOS 'consumer' 'pro' and 'enterprise' version of the phone in a forward motion (ala Microsoft).  It's about increasing capability for same $$, not cutting existing capabilities to hit a new price point.

 

If anything, this is where Tim Cook just goes to the supply chain and tells them to cut their prices by 50% and increase shipments by 100% ['revenue neutral' to the supplier], because he knows how to do that.   

post #40 of 75
Quote:
Originally Posted by dasanman69 View Post

A company selling something at or below cost to gain market share? Apple or Amazon?

 

Apple will make a profit... if they cut prices.. they cut costs by a proportional amount.

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