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Insiders "now confident" Apple will launch lower-priced, lightweight iPhone as early as June

post #1 of 104
Thread Starter 
After discovering several unreleased iPhone prototypes through its research back in December, analysts at the investment research firm Topeka Capital are raising their convictions this week that Apple is gearing up to introduce one of these models at a much lower price point around mid year.

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"In late December, our research uncovered iPhones in different screen sizes for potential launch in May/June, allowing Apple to better bifurcate the market and pave the way for a lower-priced iPhone," analyst Brian White told clients in a research note Monday.

The analyst went on to say that he believes June would serve as the earliest point of entry for the device, which could be brought to market under names such as "iPhone mini" or "iPhone Air" given the prototypes' lighter weight due them being wrapped in plastic enclosures.

"We believe a $250 to $300 price point for a lower-priced iPhone would make sense and 58% below the $649 price point for an unlocked 16GB iPhone 5," White said. "A $250-$300 price range would also be competitive with China-based Xiaomi that offers a high-end phone experience at a mid- range price of ~$320 in Chinas."

Even with a gross margin estimated at 10 to 15 percentage points lower than existing iPhone models, the analyst believes the device's expected $250-to-$300 price point will allow Apple to significantly expand its reach in the smartphone market and broaden inroads in China, while also opening up opportunities in other BRIC countries such as Brazil, Russia, and India, where growth potential stands at its highest.

For example, we estimate that Apple was unable to address at least 60% of the smartphone market in 2012 (not to mention the feature phone market) due to the high price point of the iPhone, while we believe a high percentage of the annual smartphone unit growth of 688 million between 2012 and 2016 units (i.e., from 717.5 million to 1.4 billion) as estimated by IDC, will be outside of the high end market.



As for how Apple plans to shave down the retail price of this so-called lower-cost iPhone, White believes the device will adopt a more cost affordable display, case, memory, wireless, camera and processor.

"The case would be an interesting area of cost savings with a lower priced material (e.g., plastic) versus the aluminum unibody casing on the iPhone 5, while adding colors to excite consumers," he said.
post #2 of 104
The success of the iPad mini could be pushing them in this direction.
post #3 of 104

Very interesting....but Apple has never really approached the lower end of the market. This would be a huge change of strategy for them. We will see......

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post #4 of 104
Quote:
Originally Posted by AppleInsider View Post

As for how Apple plans to shave down the retail price of this so-called lower-cost iPhone, White believes the device will adopt a more cost affordable display, case, memory, wireless, camera and processor.

"The case would be an interesting area of cost savings with a lower priced material (e.g., plastic) versus the aluminum unibody casing on the iPhone 5, while adding colors to excite consumers," he said.

Is he talking about basically the iPhone 3Gs with updated internals and lighter weight?  I'd love to see the return of the more comfortable, ergonomic design.  The chamfered corners softens the previously hard/cold feel of the iP4, in the 5, but it's still feels cold and uncomfortable to hold for being one of the most personally intimate devices Apple sells.

post #5 of 104
Of course, anything is possible. But I just don't see Apple compromise on their high standards. A cheaper screen has been used on the iPod touch, but this line seems out of line:

As for how Apple plans to shave down the retail price of this so-called lower-cost iPhone, White believes the device will adopt a more cost affordable display, case, memory, wireless, camera and processor.

I really can't see Apple skim on the current 'iPhone experience'. And will they save $$ with a cheaper camera? The darn thing costs a mere $18. So now what, they're gonna save a buck - or 10 - on this item, another 5 there, another 10 there? It doesn't look like they could half the MSRP with cheaper parts.

But if they do, it might become:
iPhone S (3") $299
iPhone M (4") $499
iPhone L (5") $649

I'll just call the cheapest one the iPhone/s
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post #6 of 104
Quote:
Originally Posted by geekdad View Post

Very interesting....but Apple has never really approached the lower end of the market. This would be a huge change of strategy for them. We will see......

iPod Nano?  iPod Shuffle?  Mac Mini?  Those are all targeted at the lower end of the market.  Just Apple's take on the lower end.  and that's only looking at Current generation models that are for sale.

post #7 of 104
Quote:
Originally Posted by PhilBoogie View Post

I really can't see Apple skim on the current 'iPhone experience'. And will they save $$ with a cheaper camera? The darn thing costs a mere $18. So now what, they're gonna save a buck - or 10 - on this item, another 5 there, another 10 there? It doesn't look like they could half the MSRP with cheaper parts.

 

On high volume products, a couple of dollars here and there can make a big difference to a company's margins. 

post #8 of 104
Quote:
Originally Posted by PhilBoogie View Post
 

Well, there's no doubt the memory would be the first to get slashed 8GB only.  They did put a lesser display in the iPod Touch, and it's fine...acceptable compromise.  I can also see previous gen chipsets too.  The real question is this...how much does that affect price??  I know display and battery usually rank up there with most costly items.  The case I really doubt affects cost all that much, however stamping out plastic bodies is probably a lot easier to produce than milling a billion-and-one aluminum cases from CNC machines.

 

My theory is, they will make the internal design much easier to assemble.  Keeping production costs down and production output up will be how they save money, not on components.  We have already seen the result of producing a finely crafted product.  Supply-chain issues and slower sales.  By producing a much simpler design that requires less tolerances, yet continues to hold a high level of quality, you will reduce production costs, speed output and produce higher profit at a lower margin.  If anyone can do it, Apple can.

post #9 of 104
Lower end doesn't have to mean low quality. Apple has a pretty huge margin on iPhone they could maintain a reasonable margin on a lower cost phone while maintaining quality. By the way lower cost doesn't dictate a plastic device, they could easily die cast a natal housing for example.
post #10 of 104
Apple can't really believe that a cheaper iphone is the way forward. The problem is the iphone is a premium product with a price tag to match which offers very little from its ios. You could buy a galaxy s3 mini get more from it than a 529 pound iphone 5. Apple talk a good story but not much else
post #11 of 104
Shareholders want more money! They'll do anything, including change Apple's core strategy! lol
post #12 of 104
Quote:
Originally Posted by antkm1 View Post

Well, there's no doubt the memory would be the first to get slashed 8GB only.  They did put a lesser display in the iPod Touch, and it's fine...acceptable compromise.  I can also see previous gen chipsets too.  The real question is this...how much does that affect price??  I know display and battery usually rank up there with most costly items.  The case I really doubt affects cost all that much, however stamping out plastic bodies is probably a lot easier to produce than milling a billion-and-one aluminum cases from CNC machines.

My theory is, they will make the internal design much easier to assemble.  Keeping production costs down and production output up will be how they save money, not on components.  We have already seen the result of producing a finely crafted product.  Supply-chain issues and slower sales.  By producing a much simpler design that requires less tolerances, yet continues to hold a high level of quality, you will reduce production costs, speed output and produce higher profit at a lower margin.  If anyone can do it, Apple can.

I hope you're right because I don't like how the article talks about them shrinking margins 10-15% for this rumored iPhone Mini.

Quote:
Originally Posted by scott1612 View Post

Apple can't really believe that a cheaper iphone is the way forward. The problem is the iphone is a premium product with a price tag to match which offers very little from its ios. You could buy a galaxy s3 mini get more from it than a 529 pound iphone 5. Apple talk a good story but not much else

The S3 Mini is probably the worst example you could have used. It barely compares with an iPhone 4.
post #13 of 104
Quote:
Originally Posted by PhilBoogie View Post

Of course, anything is possible. But I just don't see Apple compromise on their high standards. A cheaper screen has been used on the iPod touch, but this line seems out of line:

As for how Apple plans to shave down the retail price of this so-called lower-cost iPhone, White believes the device will adopt a more cost affordable display, case, memory, wireless, camera and processor.

I really can't see Apple skim on the current 'iPhone experience'. And will they save $$ with a cheaper camera? The darn thing costs a mere $18. So now what, they're gonna save a buck - or 10 - on this item, another 5 there, another 10 there? It doesn't look like they could half the MSRP with cheaper parts.

But if they do, it might become:
iPhone S (3") $299
iPhone M (4") $499
iPhone L (5") $649

I'll just call the cheapest one the iPhone/s

 

They need a 4" device for $400 or less considering the Nexus 4 sells for $360 and is a much better phone than the 4s and the 4. A low price 5" would be nice but I guess the big screen iphone will be high end so expensive, unless they do one with the same resolution as the iphone 5.

post #14 of 104

first off, the iphone 5 is too light for some reviewers

2nd, for most investors, low cost means lower margin... and that means less profit

3rd, a couple weeks ago, it was a 5"diag iPhone that everyone felt apple 'must' make to make inroads against the Galaxy.

 

Well, I believe a larger iphone before a smaller one, unless the wristwatch device is a phone (and a iPod nano) (iphone nano)... but it won't be cheap.

squeezing the margins out of the iPhone 4 makes more sense for another year and fit the low end specs well (runs just about any 4s app, yet no Siri, no LTE, no large[r] screen, and will likely be even farther behind after iOS7 is out).  

 

Even with that, it makes no sense, unless apple sees a whole new factory capacity coming online, it makes no sense to take up production capacity with a phone with such a low ASP (meaning it would have to sell 2-3X the flagship to 'earn' it's production space).

 

unless there is a breakthrough in ITMS that makes it's the major profit center, or a major major risk from the Kindle space (a kindle phone), where Amazon makes a play to drive eyeballs away from the ITMS ecosystem, I can't seek Apple driving their ASP/gross margins down  for 'market share'

 

[Edit:  Finally read Asymco this morning.   If you read into this the fact that ITMS is now projected to be a larger profit center than Mac by year's end...  the play for uber cheap phone for the app/media/content play is rationalized....That said, I still stand on the premise that selling the iPhone 4 'at cost' is likely a better play than building a new phone from scratch.]


Edited by TheOtherGeoff - 2/11/13 at 6:04am
post #15 of 104
Quote:
Originally Posted by herbapou View Post

They need a 4" device for $400 or less considering the Nexus 4 sells for $360 and is a much better phone than the 4s and the 4. A low price 5" would be nice but I guess the big screen iphone will be high end so expensive, unless they do one with the same resolution as the iphone 5.

That's all never gonna happen.

Why in the world would Apple make a phone identical to the 5 or with a larger screen than the 5 and sell it for half the price?

That's a ridiculous assumption that they would do that to price match the Nexus of which is selling poorly.

The cheaper iPhone I would assume will either have a smaller screen or a crappier screen. I personally prefer smaller high quality over a 4 inch low quality screen.
post #16 of 104
Quote:
Originally Posted by ascii View Post

The success of the iPad mini could be pushing them in this direction.

Yeah and the mini isn't plastic. Not sure why all these "analysts" think a less expensive iPhone has to be plastic.  I'd love it if they took cues from the iPod touch in terms of design.  Maybe Apple is leaking this plastic nonsense to really throw people off.

post #17 of 104
iPhones are going to be bigger! No, wait, they're going to be smaller! Or cheaper! Or not!

:yawn:
post #18 of 104
A lower priced phone specifically designed for emerging markets like India/China makes sense. Just in China alone, this lower priced option would give you access to nearly half a billion more potential customers. What I would not do, is have it compete in the US, EU, etc... with the current full featured iPhone.
post #19 of 104
Quote:
Originally Posted by blackbook View Post


That's all never gonna happen.

Why in the world would Apple make a phone identical to the 5 or with a larger screen than the 5 and sell it for half the price?

That's a ridiculous assumption that they would do that to price match the Nexus of which is selling poorly.

The cheaper iPhone I would assume will either have a smaller screen or a crappier screen. I personally prefer smaller high quality over a 4 inch low quality screen.

 

They are already selling a cheaper phone with a smaller screen, its called the iphone 4...  

 

The most urgent need for a low cost phone is in emerging market. Apple is suppose to design the best hardware for the customers right?  Well those guys can only afford one device, so they need something with a very long battery life and a decent screen size (4"+) for $300 max unlock. Its a matter of putting the best possible specs without creating bottlenecks or speding too much on one particular component, so a well balance phone. If Apple is so "talented", they should be able to come out with something. I would aim for a 20% margin using old components already being mass produce for there other device, exept for the screen and casing. Spreading the ecosystem is key here.

 

The key elements of emerging markets situation is this:

* Unreliable electrical grid with frequent power outage or no connection to the power grid at home

* No telco land lines (cable or phone)

* Very low income.

* They can only afford one device ( computer,phone, tablet, ipod) so the obvious choice is almost always a phone.

 

I am sure people in the US would consider the Apple emerging market phone like garbage, but it could still be a premium product for billions of people, giving them acces to the Apple ecosystem.


Edited by herbapou - 2/11/13 at 6:52am
post #20 of 104

iPhone Nano, etc. 

 

Might make a lot of sense if they maintained the build quality and continued to make user experience the top priority. 

post #21 of 104
Quote:
Originally Posted by blackbook View Post

I hope you're right because I don't like how the article talks about them shrinking margins 10-15% for this rumored iPhone Mini.
The S3 Mini is probably the worst example you could have used. It barely compares with an iPhone 4.

It barely compares to the SGS 3.
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post #22 of 104
Quote:
Originally Posted by Rogifan View Post

Yeah and the mini isn't plastic. Not sure why all these "analysts" think a less expensive iPhone has to be plastic.  I'd love it if they took cues from the iPod touch in terms of design.  Maybe Apple is leaking this plastic nonsense to really throw people off.

What's wrong with plastic? Did you not buy the 3G/3GS because it had a plastic back?
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post #23 of 104
Quote:
Originally Posted by scott1612 View Post

Apple can't really believe that a cheaper iphone is the way forward. 

 

All this at the moment is analyst BS. Before the whole payment plan stuff in China and even in the US at places like Walmart I might have believed it. But now with those in the game, I'm not taking this as fact. Particularly since those prototypes could equally be rejected designs from before the 5 release.

 

Personally I hope Brian White keeps blabbing this stuff, ends up totally wrong and gets roasted by the media. Then perhaps folks will get the message to stop trusting analysts to know what they are talking about. And then we might not see this jerking around of the stock all the time

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post #24 of 104
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Originally Posted by herbapou View Post

 

They need a 4" device for $400 or less considering the Nexus 4 sells for $360 and is a much better phone than the 4s and the 4. A low price 5" would be nice but I guess the big screen iphone will be high end so expensive, unless they do one with the same resolution as the iphone 5.

 

No they don't. You, and perhaps others, want them to have one. But they don't NEED it. 

 

Apple's game is rarely to never to chase market share by selling cheap. They make what they make, to fit the markets they want and if it goes big, great. If not, so long as they are making money they are fine with it. They don't view this as a zero sum game is they aren't bothered by others making money. So long as there's no IP theft etc.

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post #25 of 104
Quote:
Originally Posted by herbapou View Post

 

They are already selling a cheaper phone with a smaller screen, its called the iphone 4...  

 

The most urgent need for a low cost phone is in emerging market. Apple is suppose to design the best hardware for the customers right?  Well those guys can only afford one device, so they need something with a very long battery life and a decent screen size (4"+) for $300 max unlock. Its a matter of putting the best possible specs without creating bottlenecks or speding too much on one particular component, so a well balance phone. If Apple is so "talented", they should be able to come out with something. I would aim for a 20% margin using old components already being mass produce for there other device, exept for the screen and casing. Spreading the ecosystem is key here.

 

The key elements of emerging markets situation is this:

* Unreliable electrical grid with frequent power outage or no connection to the power grid at home

* No telco land lines (cable or phone)

* Very low income.

* They can only afford one device ( computer,phone, tablet, ipod) so the obvious choice is almost always a phone.

 

I am sure people in the US would consider the Apple emerging market phone like garbage, but it could still be a premium product for billions of people, giving them acces to the Apple ecosystem.

 

And one of those emerging markets is China. Lets see an iPhone cheap enough that all tho poor slaves that build the iPhone can afford to buy one (and then cue the cries that its so cheap they should be given one for all their hard work). Under $200US full price, blah blah. That's all the Chinese can afford right?

 

and yet, those $700 and up full price iPhones are selling with as much as a 100% markup in China's black market. All those stories about Asian resellers in Los Angeles, New York, Hong Kong. 90% of those iPhones are going to said market and mark up. So apparently at least some Chinese can afford more than $200 and a pretty good number of them.

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post #26 of 104
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Originally Posted by antkm1 View Post

Well, there's no doubt the memory would be the first to get slashed 8GB only.  They did put a lesser display in the iPod Touch, and it's fine...acceptable compromise.  I can also see previous gen chipsets too.  The real question is this...how much does that affect price??  I know display and battery usually rank up there with most costly items.  The case I really doubt affects cost all that much, however stamping out plastic bodies is probably a lot easier to produce than milling a billion-and-one aluminum cases from CNC machines.

 

My theory is, they will make the internal design much easier to assemble.  Keeping production costs down and production output up will be how they save money, not on components.  We have already seen the result of producing a finely crafted product.  Supply-chain issues and slower sales.  By producing a much simpler design that requires less tolerances, yet continues to hold a high level of quality, you will reduce production costs, speed output and produce higher profit at a lower margin.  If anyone can do it, Apple can.

 

In reality it will likely have to come from all of these things...components...better assembly efficiency, etc.

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post #27 of 104
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Originally Posted by TheOtherGeoff View Post

2nd, for most investors, low cost means lower margin... and that means less profit

 

Some investors may think that, but it isn't necessarily true. Lower cost and lower gross margin might actually mean more profit.

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post #28 of 104
Quote:
Originally Posted by charlituna View Post

 

No they don't. You, and perhaps others, want them to have one. But they don't NEED it. 

 

Apple's game is rarely to never to chase market share by selling cheap. They make what they make, to fit the markets they want and if it goes big, great. If not, so long as they are making money they are fine with it. They don't view this as a zero sum game is they aren't bothered by others making money. So long as there's no IP theft etc.

I broadly agree, but Apple needs to have a long-term view here. Its a battle of ecosystems and one ecosystem could trump the other in the long run. If Android has more developer support, 4x the installed base, all the while offering cheaper products, it will be hard for apple to offer a premium phone. The hardware can be superior, but if the best ecosystem is not behind it, Apple might not offer the "premium" user experience. It may behoove Apple to go after marketshare in this case in order to strengthen its ecosystem and get a larger installed base. 

 

It nearly lost out to Windows in the past. I would prefer we not have a repeat of that in the new mobile age. 

post #29 of 104
Quote:
Originally Posted by BoxMacCary View Post

APPLE ALREADY HAS CHEAP PHONES!!

THEY'RE CALLED iPHONE 4 & iPhone 4S!!!!!!

Jesus ....

But they're made of glass, front and back. Not an appropriate material for people who lead tougher lives than you. We learned with the mini that the aluminum back cost as much as the display, so that sort of machined precision is probably out.

I envision a Volksfone should have a rugged plastic case, with a water-resistant case-to-screen seal, maybe with squared edges like the present aluminum cases rather than the slippery backs of the iPhone 3 and 3S. It wouldn't need a case because nothing would be any tougher that the phone itself.

Of course it's doubtful Apple would go in this direction, but who knows.
Edited by Flaneur - 2/11/13 at 7:45am
post #30 of 104
Quote:
Originally Posted by dasanman69 View Post


What's wrong with plastic? Did you not buy the 3G/3GS because it had a plastic back?

I prefer non plastic devices.   And no one has provided a specific reason why a lower cost iPhone needs to be plastic. 

post #31 of 104

Address the feature phone market? I can honestly say "Samsung can have at it".

post #32 of 104
Quote:
Originally Posted by Rogifan View Post

I prefer non plastic devices.   And no one has provided a specific reason why a lower cost iPhone needs to be plastic. 

 

Possibly because no one that's posting here really knows Apple's costs.

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post #33 of 104
Quote:
Originally Posted by ifij775 View Post

Address the feature phone market? I can honestly say "Samsung can have at it".

 

First, it's not about addressing the feature phone market as much as it might be about trying to create a lower cost pathway for more people to get into the smart phone market.

 

Second, ignoring this could prove to be incredibly short-sighted.

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post #34 of 104

i just don't understand a new "low-end" model. If they want to save costs, then use the 4/4S and replace the back glass with metal. I can't see them going to a plastic phone again.

post #35 of 104
Originally Posted by Flaneur View Post
But they're made of glass, front and back. Not an appropriate material for people who lead tougher lives than you.

 

Why is this a consideration?

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post #36 of 104
Quote:
Originally Posted by jungmark View Post

I can't see them going to a plastic phone again.

 

Why not?

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post #37 of 104
Quote:
Originally Posted by dasanman69 View Post

Quote:
Originally Posted by Rogifan View Post

Yeah and the mini isn't plastic. Not sure why all these "analysts" think a less expensive iPhone has to be plastic.  I'd love it if they took cues from the iPod touch in terms of design.  Maybe Apple is leaking this plastic nonsense to really throw people off.

What's wrong with plastic? Did you not buy the 3G/3GS because it had a plastic back?

Yes, that is one of the reasons I did not buy a 3G/3GS.  Plastic feels lower quality, and the weight savings is not that much in these devices.  In a miniatures game, sure where the whole model is changed over it makes a big deal.  However Apple knows what they are doing with aluminum, look at the Unibody Macbooks, the aluminum one was lighter than the plastic one, and had almost the exact same components.

post #38 of 104
This is bs. And this is how the greed in Wall Street destroys companies like apple.
Apple is bringing in the cash like nobody else yet these analyst insist Apple must target the low end market. Please!
And if Apple does do a low end IPhone it'll only go so far because some wont buy Apple no matter what. Next Apple will be accused of cannibolizing their high end stuff with low margin watered down sh** just to suffice some goddamn corner office , Wall Street schmucks.
Then when Apple has a conference call call,on their earnings and it is below what they had before due to selling lowend iPhones the analyst will bitch.
Give me an effing break.
post #39 of 104
I still don't see this happening as they claim. Sure, a cheaper version of a staple phone that is FREE with contract I can see. But a "lower end phone", no, Apple would die first!

Example 1: iPhone 4s with some plastic instead of glass.

Example 2: If you produce Ax chips with 4-cores and you have a 10% defective yield (only 2 cores work, or some cache is bad), then those chips can go into the Apple TV (which they are) and into the iPhone 4x. (BTW, Intel does this all the time).

Much of the savings comes from volume. Having the same processor in all their phones allows you to ramp up just one assembly line. They can easily do for the iPhone 4x (probably be given a new name) what they are doing for the Apple TV which is to use the most current process being fabed, but use only the dies that are not suitable for the iPhone 5x.

You can combine example 1 and 2 and you have a nice entry phone (think Macbook vs. Macbook Pro) that has some cheaper components while also using dies that are not capable of being put into their higher end phones.

You also have yield problems with SSDs so you can use these in the 4x also. Again, using perfectly good components that are not up to par for the higher end performance. Anand over at AnandTech would be able to give a much better explanation.

This saves waste and increases margin, while providing a phone that is not 'cheap', but more entry level.

iPad mini is not a cheaper to market version of the iPad but a form factor change to fill out the product family.
Edited by Richard Getz - 2/11/13 at 8:02am
post #40 of 104
Quote:
Originally Posted by jungmark View Post

i just don't understand a new "low-end" model. If they want to save costs, then use the 4/4S and replace the back glass with metal. I can't see them going to a plastic phone again.

Like I said above, the machined aluminum back is said to cost as much as the display on the iPad mini. Whether it's a stamped metal back like on the older iPod touch or a machined back like the present ones, they need to have radio transparent elements fitted in—more expense.

I'm sure Apple could pull off something really nice in plastic, like Nokia did, only more tactile.
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