Apple's iPhone 3GS expected to live on for under $300 in developing markets

Posted:
in iPhone edited January 2014
Instead of being discontinued later this year, the iPhone 3GS, first released in 2009, may stay in production for Apple to sell contract-free in developing markets, where prepaid smartphones are popular.

Analyst Peter Misek with Jefferies received word that Apple has inked an agreement with "a leading distribution and logistics company." That new partnership is intended to push the iPhone 3GS in prepaid markets around the world, and expand channels for the iPhone 3GS in developing countries.

Accordingly, Misek believes that Apple is in the process of repricing the iPhone 3GS, which currently costs $375 without a contract. He expects that the third-generation iPhone will be priced between $250 and $300, which would allow someone to buy it with no subsidy for around the cost of an on-contract iPhone 4S.

The iPhone 3GS can currently be had for free with a new two-year service contract in major markets like the U.S. It serves as Apple's entry-level smartphone, while the iPhone 4, first released in 2010, is available for $99 with a carrier subsidy.

Apple is expected to launch its new sixth-generation iPhone this fall. If the company were to continue its current strategy of discounting previous-generation hardware, the iPhone 4S lineup would be reduced to one capacity for $99, while the iPhone 4 would become free with a two-year contract.

iPhone


With the iPhone 4 replacing the iPhone 3GS as Apple's entry-level smartphone, some might expect that the iPhone 3GS would be an end-of-life product. But based on what Misek has heard, Apple may have other plans to expand iPhone sales in markets where Apple has not yet made a significant impact.

"Emerging markets" have been identified as a potential source of a huge number of untapped customers that present a long-term upside for Apple. One analysis conducted earlier this year found that emerging markets have 14 times as many people between the smartphone friendly ages of 25 and 34 than Western Europe and North America.

One report published earlier this year by The Wall Street Journal declared that cheap Android-based smartphones were "crushing the iPhone" in European countries that have been hit hardest by the debt crisis. In those markets, most consumers don't sign contracts and pay the full, unsubsidized price for smartphones.

Apple Chief Executive Tim Cook said last October that the prepaid market is "very, very important" to his company. He said that was one of the reasons the company continues to sell its entry-level iPhone 3GS, to reach lower price points in both prepaid and postpaid markets.
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Comments

  • Reply 1 of 33
    red oakred oak Posts: 903member
    This is a great strategy

    I wonder if Apple considered doing a minor spec bump - slightly faster processor, slightly better screen. To further extend the life and to make sure it can play wider assortment of games

    I bet the BOM is now > $125. Apple would make huge margin on this even at a $200 selling price
  • Reply 2 of 33
    galeforcegaleforce Posts: 67member


    Makes a lot of sense.


    There is a huge demand for secondhand 3GS's here in the UK

  • Reply 3 of 33
    gazoobeegazoobee Posts: 3,754member

    Quote:

    Originally Posted by Red Oak View Post



    This is a great strategy

    I wonder if Apple considered doing a minor spec bump - slightly faster processor, slightly better screen. To further extend the life and to make sure it can play wider assortment of games

    I bet the BOM is now > $125. Apple would make huge margin on this even at a $200 selling price


     


    Great strategy, but wrong phone. This makes no sense given the existence of the cheap, third-world manufactured 8GB iPhone 4 model they were talking about last year.  That's the cheap phone they should be pushing. The 3Gs is too old. It has a different screen amongst other things.  


     


    This only makes sense if the "cheap iPhone 4" strategy has already failed, and we haven't heard anything like that. 

  • Reply 4 of 33


    I'm going to take the opposite stance. I don't think this is happening. The 3GS is just too old. You can get better hardware on free crappy Android handsets these days for starters. And what happens when the 3GS DOESN'T get iOS 6 in a few months and begins losing app compatibility and support? Especially if the new iPhone does change screens and dimensions... Maybe it happens with 8GB 4.

  • Reply 5 of 33
    soundvisionsoundvision Posts: 172member


    For the developed markets I've been to all around Asia, $250-$300 seems pretty expensive, especially for a phone that is that old. Everyone I see has cheapo Nokias with prepaid SIMS.


     


    I'd be curious to see what their definition of developing markets is.

  • Reply 6 of 33
    macbook promacbook pro Posts: 1,605member

    Quote:

    Originally Posted by thataveragejoe View Post


    I'm going to take the opposite stance. I don't think this is happening. The 3GS is just too old. You can get better hardware on free crappy Android handsets these days for starters. And what happens when the 3GS DOESN'T get iOS 6 in a few months and begins losing app compatibility and support? Especially if the new iPhone does change screens and dimensions... Maybe it happens with 8GB 4.



     


    The story isn't discussing options for North America.  I have difficulty believing that anyone is giving away free smartphones for prepaid service (PAYG) in North America.  There is no guarantee of recouping the investment.  Even more difficult to believe is that "you can get better hardware of free crappy Android handsets" that are prepaid.  I wasn't able to find any free smartphones for prepaid service from AT&T; furthermore, the cheaper smartphones available for prepaid service are bottom of the barrel even for Android-based smartphones.

  • Reply 7 of 33
    macbook promacbook pro Posts: 1,605member

    Quote:

    Originally Posted by Soundvision View Post


    For the developed markets I've been to all around Asia, $250-$300 seems pretty expensive, especially for a phone that is that old. Everyone I see has cheapo Nokias with prepaid SIMS.


     


    I'd be curious to see what their definition of developing markets is.



    Likely BRIC; Brazil, Russia, India and China.

  • Reply 8 of 33
    aaarrrggghaaarrrgggh Posts: 1,608member
    I don't see this one happening either. I think the most they can get for the 3GS is about $250. I also imagine it would be hard to compete if they can't leverage the brand effectively in the prospective markets; a 2009 phone competing against a lean 2011 phone would be at a severe disadvantage.

    But... I could see the 3GS being re-designed internally to make it work.

    I could also see Apple push for an e-SIM for these phones in developing markets if it is prepaid. It can be an advantage for the consumer, and if it can save money and licensing costs why not?
  • Reply 9 of 33
    allmypeopleallmypeople Posts: 420member


    As long as they don't update their software anymore... because the 3Gs is now barely usable speed-wise. It's terrible.

  • Reply 10 of 33
    stigsherostigshero Posts: 29member

    Quote:

    Originally Posted by Red Oak View Post



    This is a great strategy

    I wonder if Apple considered doing a minor spec bump - slightly faster processor, slightly better screen. To further extend the life and to make sure it can play wider assortment of games

    I bet the BOM is now > $125. Apple would make huge margin on this even at a $200 selling price


     


    Don't judge the performance potential of the 3GS based on its introduction date. I've been working on a game for the last few months and have been impressed by it. Although the iPhone 4 has a slightly faster CPU, it and the 3GS share the same GPU. Since the 3GS is pushing fewer pixels on-screen than the 4, it's on-par with it in gaming performance and even slightly faster when the CPU isn't being loaded heavily. It's still a great device, albeit with a low-res screen. That said, I'm rather surprised they're continuing to produce it unchanged. I'd expect them go after that market with something akin to an iPhone 4 with a plastic back and a low-res IPS or retina non-IPS panel (like the one in the iPod Touch). Of course, that would increase the number of SKUs they have in circulation and they loath to do that. 

  • Reply 11 of 33
    tallest skiltallest skil Posts: 43,399member


    Or just make the iPhone 4 free… 


     


    Why are we believing this? Last year they said the iPhone 4 would be DROPPED and the iPhone 3GS kept around. That's obviously not what Apple's going to do. 


     


    iPhone 4: $0.


    iPhone 4S: $99.


    iPhone: $199.

  • Reply 12 of 33
    macbook promacbook pro Posts: 1,605member

    Quote:

    Originally Posted by Tallest Skil View Post


    Or just make the iPhone 4 free… 


     


    Why are we believing this? Last year they said the iPhone 4 would be DROPPED and the iPhone 3GS kept around. That's obviously not what Apple's going to do. 


     


    iPhone 4: $0.


    iPhone 4S: $99.


    iPhone: $199.



    I think most of us agree with your statement as far as the postpaid (subscriber) market in North America is concerned.  Offering a prepaid (PAYG) iPhone 3GS in markets outside North America might be a good strategy though.

  • Reply 13 of 33
    maestro64maestro64 Posts: 5,022member
    This is a hand off approach for Apple, some distributor has agreed to buy a bunch of the old phones and will push them into markets which Apple has traditionally decided not to play in. It is a no work proposition for Apple, once sold to the Disty than all the work is on them to move them into people hands. It also does not devalue the products which Apple is selling which is the iPhone 4's and the coming next phone.
  • Reply 14 of 33
    tallest skiltallest skil Posts: 43,399member

    Quote:

    Originally Posted by MacBook Pro View Post

    I think most of us agree with your statement as far as the postpaid (subscriber) market in North America is concerned.  Offering a prepaid (PAYG) iPhone 3GS in markets outside North America might be a good strategy though.


     


    Well, what would be stopping Apple from doing the same with the iPhone 4 in those markets? What makes the iPhone 3GS special in this regard? It will be four years old by the time it's finally discontinued if this rumor comes to fruition. Where's the mileage in selling a four year old phone when the same can be done with the iPhone 4?

  • Reply 15 of 33
    macbook promacbook pro Posts: 1,605member

    Quote:

    Originally Posted by Tallest Skil View Post


     


    Well, what would be stopping Apple from doing the same with the iPhone 4 in those markets? What makes the iPhone 3GS special in this regard? It will be four years old by the time it's finally discontinued if this rumor comes to fruition. Where's the mileage in selling a four year old phone when the same can be done with the iPhone 4?



    Profit margin.  If any company can sell an amazing smartphone for under $300 it is Apple but I am not sure even Apple can make a reasonable profit with the iPhone 4 priced at $300 or lower.  Consider that even today the Apple iPhone 3GS is the third most popular smartphone in North America even though the design of the phone is almost three years old.  I am not saying Apple will or won't.  I simply wouldn't exclude the idea of a prepaid (PAYG) iPhone for under $300.

  • Reply 16 of 33

    Quote:

    Originally Posted by Tallest Skil View Post


    Or just make the iPhone 4 free… 


     


    Why are we believing this? Last year they said the iPhone 4 would be DROPPED and the iPhone 3GS kept around. That's obviously not what Apple's going to do. 


     


    iPhone 4: $0.


    iPhone 4S: $99.


    iPhone 5: $199.



     


    Fixed that for you. :D  In all seriousness, I see Apple dropping the version numbers and just calling it the new iPhone. 


     


    With regards to the 3GS it's not completely out of the question to keep it around for ultra low end markets, if they can still make a decent profit.  I can see iOS 6 for 3GS/ iOS 5 continuing to get security updates.

  • Reply 17 of 33
    bwikbwik Posts: 564member


    Uh... The 4S is hitting $300 on the Craigslist market momentarily...  why would anyone buy a 3GS...

  • Reply 18 of 33
    tallest skiltallest skil Posts: 43,399member

    Quote:

    Originally Posted by bwik View Post

    why would anyone buy a 3GS...


     


    Because it isn't an Android phone.

  • Reply 19 of 33


    But theres no reason to keep that ancient, slow phone around, just allow the iPhone 4 to be gotten cheap with prepaid phones.

  • Reply 20 of 33

    Quote:

    Originally Posted by bwik View Post


    Uh... The 4S is hitting $300 on the Craigslist market momentarily...  why would anyone buy a 3GS...



     


    Probably don't have vibrant Craigslist communities in those "developing" countries.

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