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Pegatron CEO: Apple's 'low-cost iPhone' will not be cheap - Page 2

post #41 of 71
Quote:
Originally Posted by iaeen View Post



But being free in the way you are proposing does not put pressure on the margins.

Not sure I follow you.  If the 5 has margins around 55% and the 4 has margins around 40% (just rounding with these %'s) and more people flock to the 4 becuase they do not have to upfront anything with the carrier than that is bringing down their avg margins. 

post #42 of 71
Quote:
Originally Posted by AirBubble View Post

What Apple will be doing is shifting most of internal parts of 4S to the new body containing new connector Lightning so
you get one whole happy family in connection, Bluetooth & maybe Wi-Fi. 

It looks designed. It's not an iPhone 4 in a new plastic shell.

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post #43 of 71
Quote:
Originally Posted by RadarTheKat View Post

I've been thinking that Apple, with about 275 carriers worldwide versus about 800 through which samsung sells its smartphones, should review the markets covered by the 500 carriers Apple does not sell through and select maybe 150 - 200 of those markets that would support a mid-priced iPhone and launch the new lower-cost iPhone into those markets along with select markets currently covered under Apple's existing carriers.  This would expand Apple's reach while not threatening Apple's premium product offering and pricing in most of its premium markets, such as the U.S. (where I would not introduce the mid-priced iPhone).  Any thoughts?

 

I think you are potentially confusing carriers and markets. Just because a carrier doesn't have the iPhone doesn't mean that the market that carrier serves doesn't have another carrier selling iPhones. For example, there are a lot of small "mom-and-pop" carriers even in the US that serve small regional areas (usually by buying capacity from the big players who also operate in the same area. So adding those smaller carries might just add administrative overhead for Apple while not really expanding their market reach much at all. I'm guessing that the customers of those mom-and-pops carriers in the US are the ones who want the cheapest possible cell plan and only want/need the most basic of phones. Not really the target audience for iPhones.
post #44 of 71
Who says it want still be 3.5 inch display, like the iPad mini keeping the old resolution, unless it turns to be non retina 4 inch
post #45 of 71
Quote:
Originally Posted by Wiggin View Post

All this talk about what the case is going to be made of...that alone isn't going to make much of a price difference. So beyond the external appearance, what else might change to get the price lower? Less RAM, cheaper flash storage, simpler CPU/GPU, smaller battery, less capable camera(s), or eliminate one camera like the low-end Touch (that alone would probably save more money than changing the case)? Where can Apple make cuts to lower the price while still preserving a high-quality user eperience? Will iOS 7 run differently, perhaps forgo some of the fancy UI effects so it can run better on a lower-end processor?


And perhaps most importantly (to me at least) will anything be "crippled" artificially in order to better differentiate between a regular iPhone and the "cheap" model and provide an "up-sell" path? For example, maybe not allow tethering?


All just speculation of course, but why limit the fun to just talking about if the case will be aluminum or plastic? 1smile.gif

The cost has little to do with the selling price. While you're correct that a plastic case would only be a few dollars less expensive than the existing case, it presents a much lower cost image and would undoubtedly be marketed at a lower price. The selling price is based on perceived value, not manufacturing cost.

Heck, I've even seen cases where a product that cost more to make was marketed as the 'budget' low cost item and sold at a lower cost than the 'premium' product which was actually less expensive to manufacture.
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post #46 of 71
Quote:
Originally Posted by Applehawk View Post

Not sure I follow you.  If the 5 has margins around 55% and the 4 has margins around 40% (just rounding with these %'s) and more people flock to the 4 becuase they do not have to upfront anything with the carrier than that is bringing down their avg margins. 

You claimed that the iPhone 4 was nearly free. Jungmark pointed out that it really wasn't. You claimed that free is subjective and that from your point of view the iPhone 4 is free. I pointed out that your subjective viewpoint doesn't affect the margins from apples viewpoint.
post #47 of 71
Quote:
Originally Posted by WestByfleet View Post

So with the advent of the new 5S, the 5 replaces the 4S in its current price point. Instead of the 4S replacing the 4 as the cheapest iPhone in the range, it is retired (along with the 4) and the new 'iPhone Lite' fills this price point. In this way Apple unifies the range to both 4 inch screen and Thunderbolt connection. But no change to their pricing strategy.

Selling a new phone at the same price point as years old models is a change in their pricing. And you meant Lightning.
Citing unnamed sources with limited but direct knowledge of the rumoured device - Comedy Insider (Feb 2014)
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Citing unnamed sources with limited but direct knowledge of the rumoured device - Comedy Insider (Feb 2014)
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post #48 of 71
Quote:
Originally Posted by zoffdino View Post

Just a thought: what if Apple release an iPhone Lite at $329, same price as the lowest end iPad Mini? You can then buy an iPhone Lite and an iPad Mini for the price of an iPhone 5X / 6.

The iPhone Lite must be priced below $400. The iPhone 4 already occupies that price point but it's not consider the less expensive phone that people are looking for. Maybe with upgraded hardware, the value proposition will be different. But clearly, the market has spoken: $400 is not "cheap" enough.

This cheap iPhone will cost either $429 or $399. Apple never listens to the market like people expect, but somehow they still managed to become the most profitable company on earth.
Citing unnamed sources with limited but direct knowledge of the rumoured device - Comedy Insider (Feb 2014)
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Citing unnamed sources with limited but direct knowledge of the rumoured device - Comedy Insider (Feb 2014)
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post #49 of 71
Quote:
Originally Posted by bdkennedy1 View Post

This makes no sense to me. The previous generation iPhones have been the cheaper models. I would rather have a high grade last generation model than a new, underpowered, plastic one.

And that pleases Apple. This phone isn't for you.
Citing unnamed sources with limited but direct knowledge of the rumoured device - Comedy Insider (Feb 2014)
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Citing unnamed sources with limited but direct knowledge of the rumoured device - Comedy Insider (Feb 2014)
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post #50 of 71
Quote:
Originally Posted by RadarTheKat View Post

I've been thinking that Apple, with about 275 carriers worldwide versus about 800 through which samsung sells its smartphones, should review the markets covered by the 500 carriers Apple does not sell through and select maybe 150 - 200 of those markets that would support a mid-priced iPhone and launch the new lower-cost iPhone into those markets along with select markets currently covered under Apple's existing carriers.  This would expand Apple's reach while not threatening Apple's premium product offering and pricing in most of its premium markets, such as the U.S. (where I would not introduce the mid-priced iPhone).  Any thoughts?

That's not how Apple operates.
Citing unnamed sources with limited but direct knowledge of the rumoured device - Comedy Insider (Feb 2014)
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Citing unnamed sources with limited but direct knowledge of the rumoured device - Comedy Insider (Feb 2014)
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post #51 of 71
Quote:
Originally Posted by Wiggin 
All this talk about what the case is going to be made of...that alone isn't going to make much of a price difference. So beyond the external appearance, what else might change to get the price lower? Less RAM, cheaper flash storage, simpler CPU/GPU, smaller battery, less capable camera(s), or eliminate one camera like the low-end Touch (that alone would probably save more money than changing the case)? Where can Apple make cuts to lower the price while still preserving a high-quality user eperience? Will iOS 7 run differently, perhaps forgo some of the fancy UI effects so it can run better on a lower-end processor?

You'd be surprised how much of a savings they would make implementing plastic cases. They would be much easier and cheaper to manufacture.

But yes, 8GB, a gen old processor, less of a cam and you're good to go.

The 5S could get 13MP cam, bigger storage, quad core A7, and a fingerprint sensor.
Citing unnamed sources with limited but direct knowledge of the rumoured device - Comedy Insider (Feb 2014)
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Citing unnamed sources with limited but direct knowledge of the rumoured device - Comedy Insider (Feb 2014)
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post #52 of 71
Quote:
Originally Posted by RadarTheKat View Post

I've been thinking that Apple, with about 275 carriers worldwide versus about 800 through which samsung sells its smartphones, should review the markets covered by the 500 carriers Apple does not sell through and select maybe 150 - 200 of those markets that would support a mid-priced iPhone and launch the new lower-cost iPhone into those markets along with select markets currently covered under Apple's existing carriers.  This would expand Apple's reach while not threatening Apple's premium product offering and pricing in most of its premium markets, such as the U.S. (where I would not introduce the mid-priced iPhone).  Any thoughts?

 

This is what I think too. New low cost iphones production should go to new markets, well at least at first. If they have a strategy to discontinu the 4:3 ratio 3.5" phones, then buiding 4" phone around $400 for current markets makes sense too.

 

A low cost by high quality $400 phone will take off in current markets, and some new, but its still to high to reach large volume in India and China.

post #53 of 71
Quote:
Originally Posted by iaeen View Post

How does the 4/4s being old make that argument invalid? For that matter, how does putting 4/4s components in a different case make a new phone?

I can see an argument for apple redesigning the 4s to eliminate the smaller screen and 30 pin connector, but that's a one time deal. I simply cannot understand people who think apple should spend time and money redesigning and revamping production lines for products that they already have on shelves.

Quote:
Originally Posted by bdkennedy1 View Post

This makes no sense to me. The previous generation iPhones have been the cheaper models. I would rather have a high grade last generation model than a new, underpowered, plastic one.

I really hate these dull arguments. Selling last years model as the "cheaper" model is a stopgap and they don't do it anywhere else ( except perhaps the iPod). Macs aren't sold like that. No other company does it. Instead there are brands - expensive , mid and cheap.

Larking last years model was never the long term solution. They will eventually have 3 models.
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post #54 of 71
Quote:
Originally Posted by Wiggin View Post

All this talk about what the case is going to be made of...that alone isn't going to make much of a price difference. So beyond the external appearance, what else might change to get the price lower? Less RAM, cheaper flash storage, simpler CPU/GPU, smaller battery, less capable camera(s), or eliminate one camera like the low-end Touch (that alone would probably save more money than changing the case)? Where can Apple make cuts to lower the price while still preserving a high-quality user eperience? Will iOS 7 run differently, perhaps forgo some of the fancy UI effects so it can run better on a lower-end processor?

And perhaps most importantly (to me at least) will anything be "crippled" artificially in order to better differentiate between a regular iPhone and the "cheap" model and provide an "up-sell" path? For example, maybe not allow tethering?

All just speculation of course, but why limit the fun to just talking about if the case will be aluminum or plastic? :)

 

I don't see them releasing a "crippled" phone, ever. I also don't see them compromising on battery life, or cheaping out on components or RAM. Nor on anything else that would "make iOS 7 run differently" or have a different UX.

 

But, they could do something like put the iPhone 5 components into a case that's much cheaper to manufacture, and probably maintain margins. Plastics or carbon fiber would probably allow them to substantially reduce manufacturing costs, and completely drop the 4/4S. So, the lineup might be iPhone 5S (or whatever they name it), iPhone 5, iPhone 5x (where x differentiates it from the 5 based on body style). The 5 components have probably dropped substantially in price by now, which allows the to sell it for less (as they have done with previous last gen models) so that the case of the 5 becomes an even larger part of the cost, and a still quality but cheaper case would probably allow them to offer that at significantly less than the 5 and maintain margins.

 

That's why the main emphasis is on the case, because going to components of less quality than the 5 doesn't make sense for Apple.

post #55 of 71

Glad to see we might be past this cheap $99 phone concept. 

 

I'm sticking with Apple may introduce a new iPhone that is the same size as the 4 with specs more like the iPod Touch having 1 cameral, 16GB storage (perhaps 8GB), wireless n, probably 3G not 4G, older bluetooth, same retina screen (not 5s), A5 chip. 

 

If they do this, I see this as a feature phone upgrade and not being purchased by those wanting full smart phone hardware. Most of these Android phones are being sold to the feature phone client as a smart phone, and being used as a feature phone. 

post #56 of 71
Quote:
Originally Posted by asdasd View Post


I really hate these dull arguments. Selling last years model as the "cheaper" model is a stopgap and they don't do it anywhere else ( except perhaps the iPod). Macs aren't sold like that. No other company does it. Instead there are brands - expensive , mid and cheap.

Larking last years model was never the long term solution. They will eventually have 3 models.

Since when did Apple follow its competitors? I must have missed the iNetbook announcement.

Apple doesn't do it with Macs because you can build to order with select options.
post #57 of 71
Quote:
Originally Posted by asdasd View Post


I really hate these dull arguments. Selling last years model as the "cheaper" model is a stopgap and they don't do it anywhere else ( except perhaps the iPod). Macs aren't sold like that. No other company does it. Instead there are brands - expensive , mid and cheap.

Larking last years model was never the long term solution. They will eventually have 3 models.

Dullness is not the measure for validity of an argument. Apple has always kept their old products as cheaper alternatives for their mobile devices. Macs are a completely different class of device which are much more modular than mobile devices, but even so they have in a small way implemented this policy with their MacBook Pro (they did not discontinue the non retina model).

If you think this is a bad strategy, you need to come up with an explanation of why. Every person I have heard criticizing this strategy has done so by magisterial fiat.
Edited by iaeen - 6/20/13 at 12:40pm
post #58 of 71
Quote:
Originally Posted by jragosta View Post


The cost has little to do with the selling price. While you're correct that a plastic case would only be a few dollars less expensive than the existing case, it presents a much lower cost image and would undoubtedly be marketed at a lower price. The selling price is based on perceived value, not manufacturing cost.

Heck, I've even seen cases where a product that cost more to make was marketed as the 'budget' low cost item and sold at a lower cost than the 'premium' product which was actually less expensive to manufacture.

 

Sure, but this is Apple we are talking about. It's all about maximizing profit margin. Given the concerns both Apple and the market have expressed about the lower margin iPad mini taking away sales from the more profitable iPad, I expect that is something they will keep in mind if they release a lower priced iPhone. So while you are right that there's not necessarily a direct and linear relationship between cost and selling price, Apple would still seak to minimize the costs. It could be something as simple as a die shrunk CPU of the same performance as the 4 or 4S so they can get more chips/wafer. Somewhere they are going to change something to reduce as much as possible while still preserving the quality they have a reputation for.
post #59 of 71
Quote:
Originally Posted by Ireland View Post


You'd be surprised how much of a savings they would make implementing plastic cases. They would be much easier and cheaper to manufacture.

But yes, 8GB, a gen old processor, less of a cam and you're good to go.

The 5S could get 13MP cam, bigger storage, quad core A7, and a fingerprint sensor.

 

I had looked up the iSuppli teardown analysis of the 4S and the "mechanical and electrical/mechanical" (which I assume is the case, buttons, antenna, etc) was $33. The cost to manufacture was $8. So even if they cut both in half, which is overly generous I think, you are looking at around $24 in cost savings. Combine that with the other items you mention and you are getting there.
post #60 of 71
"... Tung said Apple's much rumored ... seemingly confirming speculation ..."

I know this is a rumour site to some degree but this sounds like trying to wrap smoke.
post #61 of 71
Quote:
Originally Posted by Wiggin View Post

Sure, but this is Apple we are talking about. It's all about maximizing profit margin.

You haven't been paying attention to anything Apple has said in recent years.

Apple is all about maximizing user experience. Profits follow. Profits are not the short term goal.
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post #62 of 71
Quote:
Originally Posted by jragosta View Post


You haven't been paying attention to anything Apple has said in recent years.

Apple is all about maximizing user experience. Profits follow. Profits are not the short term goal.

 

Point taken...your first point. I amend my statement to Apple will maintain it's incredibly high profit margins. I have been paying attention to Apple for quite some time. Yes, Apple said about a year ago that there might be slightly lower profit margins...a foreshadowing of the release of the iPad mini. But your previous past that price has nothing to do with cost, and an example of a lower priced item actually costing more, are quit irrelevant to Apple. They would simply never do that.

 

To your second point about maximizing user experience, yes Apple tries to do that. But THAT has very little to do with the price-cost ratio. I am not so naive to believe that Apple is still the altruist company they used to be, championing the user above all else. Profit is very much a goal of theirs, as it should be for any public company. But you are correct that Apple, unlike so many other companies, does not treat it as a short term goal. But it is a goal nonetheless.

post #63 of 71
What would differentiate the "lite" version and the 5S? The case alone? Would it really be a ~$400 case? I don't think they would take out LTE as 3G is unbearably slow on my iPhone 4. Reduced camera quality? No Siri?
I love having the newest gadget but the 5S will be expensive and if this "less expensive" version is still high quality with no real drawbacks then I would highly consider it over the 5S
post #64 of 71
Quote:
Originally Posted by Ireland View Post

They need to obliterate 3.5" displays ASAP.

They already have; they only allow apps with 1136*640 px now.
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post #65 of 71
Quote:
Originally Posted by Ireland View Post

They need to obliterate 3.5" displays ASAP.

They already have; they only allow apps with 1136*640 px now.
Quote:
Originally Posted by Curtis Hannah View Post

Who says it want still be 3.5 inch display, like the iPad mini keeping the old resolution, unless it turns to be non retina 4 inch

Apple does ^
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post #66 of 71
Quote:
Originally Posted by PhilBoogie View Post

They already have; they only allow apps with 1136*640 px now.

I must have missed that memo. Apple requires updates to support the 5 but they didn't end support for the 3.5" models, Considering the vast majority of active iPhones have a 3.5" screen.
post #67 of 71
Quote:
Originally Posted by jungmark View Post

Quote:
Originally Posted by PhilBoogie View Post

They already have; they only allow apps with 1136*640 px now.

I must have missed that memo. Apple requires updates to support the 5 but they didn't end support for the 3.5" models, Considering the vast majority of active iPhones have a 3.5" screen.

Stupid me! Of course they can't have discontinued the 3.5" screen. I'm searching for the article I read, can't find it, but it must have been that they discontinue apps written for 640*320 resolution. My bad.

While looking for the article, I saw this:
List of iOS devices (wiki) which has a table with supported and discontinued models.
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post #68 of 71
Quote:
Originally Posted by jungmark View Post


Since when did Apple follow its competitors? I must have missed the iNetbook announcement.

Apple doesn't do it with Macs because you can build to order with select options.

Apple doesn't do it with Macs because you can build to order? Ridiculous. They don't do it with Macs because thats not how you compete in the PC space. If they did and they kept the High Premium tab all you guys want to keep they would have

 

1) One Mac - a Pro

2) Updated once per year

3) last years model is the middle version. The year's before is the cheap version.

 

They don't do that because that would be nuts.

 

And I said 3 models, they don't have to compete in all categories in the Phone market no more than they do in the PC market. So the iNetBook argument also fails.

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post #69 of 71
Quote:
Originally Posted by Wiggin View Post

 

Point taken...your first point. I amend my statement to Apple will maintain it's incredibly high profit margins. I have been paying attention to Apple for quite some time. Yes, Apple said about a year ago that there might be slightly lower profit margins...a foreshadowing of the release of the iPad mini. But your previous past that price has nothing to do with cost, and an example of a lower priced item actually costing more, are quit irrelevant to Apple. They would simply never do that.

 

To your second point about maximizing user experience, yes Apple tries to do that. But THAT has very little to do with the price-cost ratio. I am not so naive to believe that Apple is still the altruist company they used to be, championing the user above all else. Profit is very much a goal of theirs, as it should be for any public company. But you are correct that Apple, unlike so many other companies, does not treat it as a short term goal. But it is a goal nonetheless.

Profit is not the same as margins. Apple in fact never ever guaranteed margins in any conference call, nor make any statements about being a high margin company.  People assume Apple want high margins, but they keep high margins until they can't, and then they don't. See the margins on the iPod. On release the only model cost $399, and the next year prices went up not down, to $499 for a higher specced model. Ignoring the shuffle etc, the "standard" iPod is the touch and this years model is $229. ( Another confusing point for people who think it is all about profits, or margin. I don't think that removing the camera saved $70, ergo margins decreased).

 

What they do say is that they are prepared to cannibalize themselves. Which means that if the market for phones is being commoditised they will have to cannibalize themselves, or somebody else will. Saying "we are prepared to cannibalize ourselves" is code for "we are prepared for lower margins".

 

As for the market it has already priced in lower margins, and Apple can maintain stock with buybacks, so it is safe there. In fact all of its actions seem to indicate they are going to reduce margins, or expect to have to.

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post #70 of 71
Quote:
Originally Posted by PhilBoogie View Post


They already have; they only allow apps with 1136*640 px now.

 

Untrue.

 

All new and updated apps must support the new 4" screen but they can still support 3.5" as well.

post #71 of 71
Quote:
Originally Posted by KiltedGreen View Post

Quote:
Originally Posted by PhilBoogie View Post

They already have; they only allow apps with 1136*640 px now.

Untrue.

All new and updated apps must support the new 4" screen but they can still support 3.5" as well.

Tell me about it: it was my dumbest post ever!
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