Originally Posted by Richard Getz
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.
This bears repeating. The iPad maxi to iPad mini strategy is wholly different. The iPad mini is cheaper for the cheaper components, yes, but margins do not suffer greatly. AAPL is not afraid of people buying the mini in lieu of the maxi. Camera and processor are good enough. Exact same OS. Screen is good enough.
Also, the iPod strategy is different as well. All the iPods have different OSs and user experiences. The Touch has (essentially) standard iOS. The Nano has a greatly bastardized iOS with no app store. The Classic has the click wheel (no apps). The shuffle has no screen.
But these analysts are saying Apple will sell a iPhone with the same iOS for ~$300 unlocked. And why wouldn't that greatly cannibalize the flagship iPhone? The iPad mini and iPad maxi are different form factors and the mini is, in fact, pretty costly with a price difference of only $170 at similar configs. Are people really thinking that a ~$300 off contract iPhone wouldn't deftly kill the flagship ~$650 model with a difference greater than $300? The differences would have to be immense which I don't see Apple doing. Put all the great components in the flagship you want. If it's still essentially the same iPhone user experience in the iPhone mini then people are getting unlocked phones for $300 instead of the on contract phones for $200 and taking the lower plan costs with it. Say goodbye to ~50% margins.
There would have to be a way to differentiate between the models enough so that the iPhone mini isn't a grand ASP and gross margin killer. That is the main question which no one has an answer to.To sell this effectively they'd have to do at least four things:
1. Limit the "cheaper" iPhone to certain markets.
2. Require AT&T et.al. to disallow a contract price to purchase the iPhone mini for, say ~$50 on contract in the American and Euro markets.
3. Create grand efficiencies on the price of components and build that are vastly below the flagship to keep up their margin.
4. Bastardize iOS on the lower end version. They'd have to remove Siri, remove Passbook, and maybe reserve other implementations for only the flagship model to make it more sought after.
If those steps aren't done why wouldn't I, as a consumer, get the cheaper (and newly released) model that looks the same, has the same OS, but just has a weaker processor and not-as-good-but-good-enough camera? These mini talks call for them release two new phones, at the same time, with one being cheaper to make and thus costing less, still keeping their margins, still keeping their "premium" status, while not having the mini cannibalize the flagship and greatly cannibalize their margins.
Just looking at the iPhone 4 they've limited the OS, use a "older" processor and not as good camera, and limit the space to 8GB. But that model is still $450 off contract. Where are the other $150 savings coming from on a newly-developed iPhone mini compared to a previous generation iPhone 4?
AND..is this phone supposed to be 3.5" or 5"? Thought we wanted developers to move off the 3.5" and on to the 4" resolution. If the iPhone mini proves to be a new 3.5" phone it'd be a new line of products for the forseeable future. Developers would have to plan to accept 3.5" for the next 5+ years?
For this to work it would have to become an iPhone Nano/Shuffle with limited features akin to the iPods of the same name. This would all seem like a grand proposition that I don't think Apple is willing to make. Unless someone can show how margins won't be dropped from ~50% to ~25% without doing the aforementioned steps I just don't see it.