WSJ: Apple to build cheaper iPhone as smartphone dominance slips - Page 2

If there ever is a 5 inch iPhone it'll probably have a starting price of $300-400 with subsidy ($800-900 off contract)

 

The iPhone 5/5S will probably remain in the $199 ($649) slot and under that price I could see a smaller cheaper iPhone.

 

So leave the iPhone 4, free, with a Dock Connector, and replace the iPhone 4S, $99.

 

Has to be under $200 or it's a failure¡

Plastic is never going to happen.

 

If Apple does a cheaper iPhone, like the iPad Mini, it will be high quality, and although cheaper still more expensive than the competition.

Funny we've heard it's going to be a cheaper larger phone (because those Asians love their big phones) but now Bloomberg is saying it will be a smaller cheaper phone. Which is it (other than none of the above)?

I'm still trying to figure out how a bigger cheaper phone works out. If you can't afford a data plan what good is a big phone? Unless data plans are cheap in emerging markets?

i hope you're right. I can't see Jony Ive doing cheap but who knows if he has the final say,

 

The first three iPhone models used plastic parts.

 

 

If 15% of iPhones sold are still 4/4Ss that equals millions of phones sold every quarter with obsolete docking ports.

 

 

 

I think smaller and cheaper is the only way to go. Maybe the larger iPhone and cheaper iPhone rumors got mixed. It was Digitimes that leaked that rumor after all.

 

The smaller cheaper rumor also had some traction at CNET and Forbes last week...

The iPhone 3G/3GS at least had the same polycarbonate material used in MacBooks. It was high end plastic not the Fisher Price toy plastic other manufacturers use.

 

 

Again, think about what you guys and the fake rumor mills are suggesting. That 1) Apple wants market share above profits/margins.  Apple has NEVER been about trawling in the mud with the other pigs. They want high margins/high quality.  2) That somehow, if they can't make their older iPhone models with old technology sell for $200 off contract that they can somehow design, source, produce a completely different line of high quality phones that can give them great margins AND beat their old phones for $200 or less.  THAT'S JUST CRAZY TALK.  Do you people ever think about what you're saying? Does 1 + 2 make sense to anyone who knows Apple and have a brain???

I'd expect them to re-pack 4s screen and hardware into 5 case (of course, shorter version of it). You know, aluminium, no rear-side glass, thinner than 4s. But outside of that, bigger screen - lower price makes no sense. Of course they could go for lower quality screen - they have been using some on iPod Touch (compared to same generation iPhones), but somehow I don't see that happening.

Re the question who would want 5" screen. I've seen iP5 adds (thumb-reachable screen) and it is smartly done, as usual. However, of all the people I know having SG3 and Note (and big HTCs as well) - and there are more than a few these days, all sizes and shapes - I'm yet to see one who feels his/her phone is too big. Smart marketing is smart marketing, but it is not necessarily reflection of reality.

Since I'm still on 3Gs (unspoiled with new gear), I don't really know what would be the right size for me. Since I had really long fingers, I'm pretty confident I would not suffer from 4.8"+ screen, but I cannot say it would bring any benefit over iP5 screen size, and portability would have to suffer a bit (but then again I cannot say if "suffering" would be significant at all).

At the end, when I finally replace my 3Gs, it will be based on desired features rather than on size - so size will just tag along, sort of.

That was Steve Jobs Apple. This is Tim's Apple. I wouldn't be surprised if we see some changes in company's business philosophy.

Steve hand picked Tim. Further more Tim has always said the same thing about building the best possible device. Your point is....well pointless

 

You'd think so, yeah. 

 

Tim, hand picked by Steve because he had the same philosophy in this regard, is going to do something totally different now? Tim has said things exactly how Steve said them multiple times… since Steve's passing. His business acumen is the same. 

 

The Galaxy S3 and S3 Mini both use polycarbonate bodies.   However, yes, the under $200 phones likely do not.

 

 

That's a good point about Apple liking high margins.

 

Even so, they were willing to drop their profit margins (not percentage wise, but cash wise) pretty low with the iPad Mini, simply because they saw the 7" market stealing sales from the iPad.

 

Likewise, they're undoubtedly seeing large screens and low prices stealing sales from the iPhone.

 

In a 2009 earnings call, Tim Cook talked about third world rollouts and the future of iPhone sales and prices, saying there were " ... things I can’t talk about, we have a plan that we believe continues to make us the leader in the space, continues to keep us years ahead of others and one of the things that we will make sure is that we don’t leave a price umbrella for people."

 

Cook is saying that he doesn't want to leave an entire market open for others operating underneath Apple's normal price range.   He wants to capture buyers early on, and migrate them later to his higher priced devices.   Yet he also mentioned quality in that call as well.  How will they do this?   It'll be interesting to find out.   Heck, perhaps they used aluminum recently in order to convince people it was a premium material later on when it will be cheaply used for an inexpensive model.

Edited by KDarling - 1/8/13 at 7:43pm

 

I remember that quote, and I've wondered why Apple hasn't acted on a lower end iPhone sooner? It seems that Tim Cook was suggesting there would be a cheaper iPhone at some point.

 

I don't think it will be the 5 inch screen $200 iPhone analyst want, but I believe Tim has something in mind.

 

Because Apple has watched jealously while others have succeeded selling cheap knock-offs of the iPhone, so they finally decided to go downmarket and sell an iPhone knock-off themselves. Without expectations of high quality construction and design, Apple is free to make a knock-off with low-quality materials and an "embarrassingly large" screen. Hell, they'll probably even clone the iPhone's interface and call it CloneWiz. It's sure to find its way into the hearts of Consumer Reports.  /s

 

You're right... I remember all those times that Steve apologized to people for f*ck ups in the product line.

 

As a matter of fact I remember Steve's most heart felt apology, "You're holding it wrong.".

 

Did you mean for your sentences to pertain to the same topic? Because they don't at all. Might want to look to that.

assuming Apple wanted a $200 less expensive version of the iPhone, what would it take to upgrade the $300 iPod touch into a cellphone? antenna, chip, bigger case and more battery. we know Apple charges +$130 for 4G iPads vs. wifi only iPads with the chip and antenna added. add $20 for the bigger battery and case. so totals $450 unsubsidized. vs. $650 for an unsubsidized iPhone 5. it makes sense IF the iPod touch profit margins are as good as iPhone margins.

 

what Apple will never do is cut its profit margins to chase market share.

Same thing as earlier yet no bigger display promise.

The iPhone is only 20% of smartphones worldwide... and only 10% of ALL phones worldwide.

Where exactly is this "dominance" they speak of?

Apple already makes billions of dollars selling mid to high-end phones... do they really need to dip into lower markets?

"That was Steve Jobs Apple. This is Tim's Apple. I wouldn't be surprised if we see some changes in company's business philosophy."  - Nikon133

 

 

That was where Nikon 133 started and that was exactly the line I followed.

 

Steve did things differently. No doubt about it. Hard to say where Tim will go. He's the not the same guy as Steve at all.

 

You might want to follow the conversation a little better.

Edited by island hermit - 1/8/13 at 9:31pm

 

I know, right? Apple had 0% market share in 2007. Every point earned over the years has only increased Apple's net market share FROM ZERO.

Analyst are just mad because the iPhone is only growing in double digit percentages instead of triple digit like before...

The cheaper iPhone will probably have a smaller screen, but it will likely share a lot of specs and cues from the iPad Mini and iPod Touch.

I don't think Apple will ever make an iPhone below $400 and I'm sure they can make a pretty good profit at that range.

WSJ said... . Digitimes said... . Bwaaaahaaahaaa - - haahaaaa. Next week's, confirmed, rumors here: Apple is making a cheap iPhone half the size of the iPhone 5. An unnamed eye-witness has pictures showing the devise to look uncannily like the Kin.

i doubt that. the way to hold manufacturing costs down is change as few things as possible in a current product, notably the screen. and Apple would want to standardize its small device screens on the new 16:9 format the current iPod touch uses without fussing with resolutions at all. so for both reasons it would use exactly the same screen as the iPod touch does now. while the next iPhone 6 might get a new improved screen technology of some kind to differentiate it as the "premium" iPhone.

 

the current iPod touch in many ways - its internal components - is really a simplified iPhone 4S, which proves that point. to morph that now into an iPhone lite in some real sense would be merely a re-branding of the 4S. except the screen would be in the new 16:9 format the 4S lacks that Apple wants to push from now on anyway.

 

as with the iPad mini vs. full size, Apple would not care which you buy - as long as it makes its 40%+ profit margin either way. increasing the total gross sales of both the regular iPhone and an iPhone lite combined, more than total sales of just the regular iPhone alone would be, WHILE also continuing the same profit margin is obviously the best possible business outcome.

 

so actually, this rumor is making a lot of sense to me.

 

I said a couple of months ago that I believed that Tim Cook was concerned about market share. Not to the point where he will join the race to the bottom but that he is devising a plan to address the issue.

 

Two weeks ago I predicted that we will see that plan in the next 3 months.

 

I could be wrong but I'm with you on this one.

 

Your statements have nothing whatsoever to do with the conversation.

 

We're talking about the product lineup. You're talking about bugs with software.

Why does Apple want to push the 16:9 format from now on? Where is that goal published?

The 4S is likely going to be around for almost two more years, and so is its screen. If Apple were going to maintain a cheaper phone, wouldn't they use a cheaper screen? I have to imagine the iPhone 5 screen costs more than the 4/S. Along with a larger battery, those are two significant ways to reduce costs. Maybe in a year, they bump the 4S down to the free phone, and introduce the iPhone mini, a redesigned 4S with lighting port and 4G LTE. There's your distinct product lines.
Edited by Mac_128 - 1/8/13 at 9:51pm

Really? I have to explain this to you.

 

Nikon 133 said that Cook had a different philosophy. You said he didn't... same as Steve's.

 

Cook, even by making that apology has shown that his "philosophy" is different from Steve's. His approach to problems is different. I find it safe to say that his approach to the business overall will follow the same path. Different man. Different ideas. The iPad Mini is part of that approach in my mind and a different approach to market share, I believe, will be another [and I think it's safe to say that the iPad Mini was also an approach to increase market share].

Edited by island hermit - 1/8/13 at 10:01pm

This would be the worse decision ever.  Expect stock to tank (again) tomorrow because of this.  Apple's worth as a solid brand and strong rep is more important than selling cheap, low end stuff to get a bit more money.  True Apple loyalists will be ticked and the overall margins will then get clobbered because more will go the cheaper route or choose an alternative premium brand rather than stay with an Apple that does not care about brand quality anymore.

Err, they have just done that with the iPad mini...

"the iPad mini's gross profit margin is "significantly below" the company's average", according to Apple's Chief Financial Officer Peter Oppenheimer during Apple's Q4 2012 earnings call.

http://www.theverge.com/2012/10/25/3555664/apple-ipad-mini-margin-is-significantly-below-corporate-average

Apple kept around the 4th gen iPod touch and the iPhone 4/4S.

They have no stated goals of transitioning their products to 16:9. If they did they wouldn't still be selling millions of 3:2 devices every month.

Another fact. There are hundreds of millions of 3:2 iOS devices in the wild. It will take years before developers stop supporting the format.


Exactly right.

I expect the iPhone Mini out sooner than later. iPhone 4/4S internals. iPhone 5 externals. Extremely thin sexy design.

To be fair... the iPad mini is a product on its own... with its own prices and margins. And we don't know yet how the iPad mini has affected sales of the bigger iPads.

The big iPad still has well-padded margins... especially as you go up the line to the $829 iPad 64GB LTE

Conversely... what's the margin on the $50 iPod Shuffle? Did that ruin the margins on all other iPods? Is it really fair to compare one product to every product they make?

How about the cheap 11" Macbook Air? Hell... the original Macbook Air started at $1799.

are you kidding? the future of small device iOS is plainly 16:9. the 2012 iPhone 5 and iPod touch made that move already. it's a done deal. it's plainly irrevocable. all new apps are being optimized for that screen aspect, and old ones updated for it. (while the iPads remain at 4:3).

 

and the whole point of a new iPhone lite or whatever it's called would be Apple would cease selling the older iPhones entirely. instead it would always have a "brand new" product to offer at that lower price tier (but same profit margin). that obviously is a stronger market position than offering "last year's model at a discount"

Quite true but Android is gaining more market share (worldwide) year over year and and Apple needs to react.  You can already see it as they are speeding up their release cycle for their phones/tablets because they will not be able to keep up if they only release a new product ever 12 months.  They also realize that they are ignoring a pretty big (but not as profitable) segment of the market.  The mid-low end.  Granted, they take care of the mid range with their 4 and 4S offerings but those phones are quite small and while it appears there are quite a few people on this site that think the 3.5" screens are perfect (or were until they got their hands on a 4" screen), there are a lot of people who have been enjoying 4" + screens for over 3 years now.

 

Apple needs to go after the lower end market because someday, the people who are buying the lower end phones are going to graduate into something bigger and if that person likes the eco-system that they were brought up on, chances are they may not change.

 

I see a lot of purists on here who want Apple to remain the true to their roots in that they only make top notch products but I think that dream is over.  We've seen a pretty big decline in the quality of their hardware/software as the company has grown into the titan it is today and to think it will go back to the way it was before is a bit naive I think.  When you get that big, things falls through the cracks.  It is inevitable.  I'm not Apple's biggest fan but I think they are making a good move here from a long term business perspective albeit they are going to p*ss off their oldest and most supportive customers (a lot of you on this forum) with some of their decisions. 

a few % is "significant" to him. plus that is for the first cycle of a brand new product. product margins improve greatly over time.

yup. but it's just not about market share per se. "pundits" that focus on that are simpletons. everyone hung up on that just doesn't get business. it's about Apple generating as much revenue from its iOS phone line as it can. and keeping its high profit margin at the same time. that combination = the optimal "bottom line" profit total.

 

(and in most businesses, btw, market share is measured by total revenues generated, not by unit sales. because revenues are obviously more important. do movie studios report movie box office revenues, or tickets sold? how does the smartphone market stack up when measured by revenues? don't ask the "pundits," 'cause they can't figure that out.)

 

so chasing unit market share by reducing margins is dumb for Apple. that is the famous "race to the bottom" where you lose fatally if you win it.

 

but offering just one model (plus discounted older models) doesn't maximize revenues either. because there are other cell phone market segments Apple can target with different models while retaining its high margins. the "lite" iPhone makes sense that way. and maybe so does a 5"+ maxi too, we'll see.

 

the other incentive for Apple to offer several models of the iPhone is to expand its overall total iOS installed base - its ecosystem users. that is a solid long term strategy to "cross sell" new iPhone users with other Apple products, and it clearly is working in real life too.

I agree with both solipsismx and charlituna.

The larger form factor will definitely make the cost to produce less, especially considering the manufacturing difficulties I have read about with the iPhone 5.

I think it's right for Apple to increase the variations, they've kept their precious exclusive high end offering for as long as they can get away with it but because of the relatively vast amount of Android products available iOS dominance is a thing of the past. I firmly believe that most people that I know would definitely rather be able to say "I have an iPhone/iPad" so all Apple need to do is increase the product options so the Apple brand is accessible to more people.

It's all very well offering older models as the discount option but in people's minds they're still buying something old Vs. something new, regardless of how good it is or isn't.