Apple predicted to offer $200 unsubsidized iPhone in 2013

Posted:
in iPhone edited January 2014
Apple is predicted to drop the price of an existing iPhone to $200 unsubsidized in 2013, accelerating share gains for its smartphone platform in emerging markets.

Analyst Gene Munster with Piper Jaffray expects Apple will likely reduce the price of an existing iPhone to about $200 by September of next year, down considerably from the $375 unsubsidized price at which the company currently sells the 8-gigabyte iPhone 3GS. Such a move would be "important" for the company, he said, as Apple's smartphone market share is currently weakest in emerging markets where the company competes with less expensive Android-based handsets.

Aided by the launch of a cheaper contract-free handset, Munster sees Apple's global smartphone share growing from about 20 percent in calendar year 2012 to 32 percent in 2015.

But a $200 iPhone would also significantly reduce the average selling price of Apple's smartphone, which has maintained an average of $641 since the launch of the iPhone 3G in June of 2008.

If Apple were to begin offering a $200 iPhone in September of 2013, Munster believes that the device would account for as much as a quarter of all iPhone sales. That would result in a gradual decline in the handset's average selling price, projected to fall to $434 by the end of 2015.

iPhone


A cheaper iPhone could have gross margins closer to the iPad, which are between 23 and 32 percent, according to documents from the Samsung patent infringement trial. That's considerably lower than the iPhone, which has margins between 49 and 58 percent.

"We believe it is becoming increasingly possible for Apple to build the low end iPhone for $130-150, which would suggest a 25-35% gross margin," Munster wrote in a note to investors on Friday. "While some investors may not like the margin dilution from a cheaper iPhone, we believe that view misses the bigger market share picture."

Rumors have persisted for years that Apple could build a smaller, cheaper iPhone model to compete with Android in developing markets. But thus far, Apple has instead opted to continue selling previous-generation iPhone models at a lower cost, which is why the iPhone 3GS, first released in 2009, is still available for purchase today.

Earlier this year, another analyst, Peter Misek with Jefferies, said he was told that Apple had inked an agreement with "a leading distribution and logistics company" to push the iPhone 3GS in prepaid markets around the world. He was led to believe that Apple plans to keep the iPhone 3GS in production to sell contract-free in developing markets for under $300.

Munster, however, didn't go as far as to say that the iPhone 3GS would necessarily be the handset model that Apple would reach a sub-$200 price point with. Instead, he simply said that an "existing iPhone" would likely be available for about $200 unsubsidized in September of 2013.

By late 2013, it's possible that Apple could opt to finally retire the iPhone 3GS, which at that point would be a handset more than four years old. That would likely leave the iPhone 4, first launched in the summer of 2010, to reach the projected price point.
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Comments

  • Reply 1 of 75
    jragostajragosta Posts: 10,473member
    I would buy one - even if it's a 3GS. My daughter has been asking to get an iPhone to replace her POS Android phone. I'd pay $200, but not $400 or more.
  • Reply 2 of 75
    al_bundyal_bundy Posts: 1,525member


    no way, apple only does premium products

  • Reply 3 of 75
    tallest skiltallest skil Posts: 43,399member


    Ugh, I hope this isn't more "iPhone 4 gets dropped, iPhone 3GS sticks around" nonsense.

  • Reply 4 of 75
    cameronjcameronj Posts: 2,357member
    False
  • Reply 5 of 75
    dickprinterdickprinter Posts: 1,060member


    You mean Gene Munster....the "iPhone Nano will be out 3 years ago" dude? This guy is a toolbag.

  • Reply 6 of 75
    mj1970mj1970 Posts: 9,002member

    Quote:

    Originally Posted by al_bundy View Post


    no way, apple only does premium products



     


    My thoughts exactly.

  • Reply 7 of 75


    Yeah, Mr. iPhone Nano.  What an idiot.  I don't know where Munster dreams up some of the stuff he says but I try to ignore him whenever possible.  Apple is still selling iPhones as fast as it can make them, so I'm not sure why Apple would suddenly decide to drop prices on the iPhone just to gain a bit more market share.  Consumers either want to iPhone or they don't.  Apple just has to keep building iPhones and adding in value so consumers keep wanting to buy them at the going rate.  There's no need for Apple to cheapen its product for the sake of market share.  As a shareholder, I'd be dead against that sort of reasoning.  Build a desirable product and keep the profit margins high.

  • Reply 8 of 75
    irelandireland Posts: 17,491member


    Shut up, Gene.

  • Reply 9 of 75
    zarenzaren Posts: 49member


    $%*# Uncle Gene "Apple TV!" Munster, speculative fiction writer (as Mac OS Ken would describe him).

  • Reply 10 of 75
    magic_almagic_al Posts: 325member


    Because Apple has a long history of choosing market share over margin. Mmmhmm.

  • Reply 11 of 75
    mj1970mj1970 Posts: 9,002member

    Quote:

    Originally Posted by Constable Odo View Post


    Apple is still selling iPhones as fast as it can make them, so I'm not sure why Apple would suddenly decide to drop prices on the iPhone just to gain a bit more market share.



     


    First it may not be about a "bit more market share" but, possibly, a lot more market share. Though I agree it isn't about market share per se, it is about selling more product to more people.


     


     


    Quote:

    Originally Posted by Constable Odo View Post


    Consumers either want to iPhone or they don't.



     


    Want != afford.


     


     


    Quote:

    Originally Posted by Constable Odo View Post


    There's no need for Apple to cheapen its product for the sake of market share.



     


    I don't believe it's a matter of cheapening them as much as it is a matter of offering different options and price-points (as the do with computers and iPods, even iPads).


     


    Anyone who thinks Apple isn't (and hasn't been) trying to figure out a way to offer a less expensive iPhone (and iPad) option (while still maintaining their margins) is nuts. Whether they will ever be able to do so, is a different question. But there's no doubt in my mind they are trying and experimenting to find a way. People forget that they really hit it out of the park with the iPod when the mini/nano came out.

  • Reply 12 of 75

    Quote:

    Originally Posted by MJ1970 View Post




    Quote:

    Originally Posted by Constable Odo View Post


    Apple is still selling iPhones as fast as it can make them, so I'm not sure why Apple would suddenly decide to drop prices on the iPhone just to gain a bit more market share.



     


    First it may not be about a "bit more market share" but, possibly, a lot more market share. Though I agree it isn't about market share per se, it is about selling more product to more people.


     


     


    Quote:

    Originally Posted by Constable Odo View Post


    Consumers either want to iPhone or they don't.



     


    Want != afford.


     


     


    Quote:

    Originally Posted by Constable Odo View Post


    There's no need for Apple to cheapen its product for the sake of market share.



     


    I don't believe it's a matter of cheapening them as much as it is a matter of offering different options and price-points (as the do with computers and iPods, even iPads).


     


    Anyone who thinks Apple isn't (and hasn't been) trying to figure out a way to offer a less expensive iPhone option (while still maintaining their margins) is nuts. Whether they will ever be able to do so, is a different question. But there's no doubt in my mind they are trying and experimenting to find a way.



     


    Well said!  The issue isn't market share or cheapening its products -- rather it is opening up new markets where phones are not subsidized and price is a major factor.  It's analogous to introducing a Mac Mini or selling the iPhone into a new country -- both addressed new markets.

  • Reply 13 of 75
    tallest skiltallest skil Posts: 43,399member


    Originally Posted by MJ1970 View Post


    Want != afford.



     


    I agree with both of you. I believe that Constable Odo in that people certainly want the iPhone and with MJ1970 in that a great deal more people want the iPhone than can afford one, thus making them Constable Odo's "don't" part.


     


    I know I've wanted an iPhone since I won one five years ago. But it's not until just now that a plan has been created that allows my family and I to use iPhones for far cheaper monthly than the dumb phones we have now, plus with more content on the plan (?/?/6GB versus 1000/250/0GB, and that's voice/text/data, respectively).


     


    BUT we will still have to buy unlocked iPhones at full price, which is a considerable cost for us. We don't plan to upgrade every two years like most, but we're not filthy stinking rich, hence our inability to swing the original $70 a month plans, and the previous $60 and $50 a month plans.

  • Reply 14 of 75


    There is a big market for a "messaging" Apple phone.  No data plan required.  The carriers here in the U.S. are colluding (I'm looking at you, AT&T and Verizon !!) to raise prices via these ridiculous "shared data" plans.  Have you seen their current offerings of messaging phones?  A bunch of crappy phones.  The selection used to be better.  The carriers want everyone, including kids on family plans, to move to smartphones, so they can increase what each family pays per month.  And, they have increased their upgrade fees substantially to discourage people from upgrading frequently.  They are also making a lot of noise about how much they would like to get rid of subsidies.


     


    In two to three years, we just may see the end of subsidies.  I am sure Apple has considered that this might happen.  In fact, they might take steps to accelerate this turn of events.  One thing they can do is offer a messaging phone with Wi-Fi but no 3G/4G.  With iMessage, no texting plan required.  Children are the heavy texters.  If all their friends have an Apple phone, why would anybody need a texting plan?  This phone would also be perfect for emerging markets.  In the U.S., smaller carriers may have a shot at eroding the duopoly of AT&T and Verizon.

  • Reply 15 of 75


    An unlocked and unsubsidized iPhone at $200 would accelerate carrier switching away from carriers (AT&T and well, AT&T and somewhat from Verizon) when those carriers fail to deliver what customer's want.


     


    A $200 unlocked unit that would deliver FaceTime over 3G would would be a huge motivator to switch.   


     


    Having carriers abuse Apple customers less often is a good goal for Apple.  

  • Reply 16 of 75
    jragostajragosta Posts: 10,473member
    mj1970 wrote: »
    First it may not be about a "bit more market share" but, possibly, a lot more market share. Though I agree it isn't about market share per se, it is about selling more product to more people.

    Want != afford.

    I don't believe it's a matter of cheapening them as much as it is a matter of offering different options and price-points (as the do with computers and iPods, even iPads).

    Anyone who thinks Apple isn't (and hasn't been) trying to figure out a way to offer a less expensive iPhone (and iPad) option (while still maintaining their margins) is nuts. Whether they will ever be able to do so, is a different question. But there's no doubt in my mind they are trying and experimenting to find a way. People forget that they really hit it out of the park with the iPod when the mini/nano came out.

    I agree completely.

    Look at the iPhone 3GS. Even without changing a thing, they could probably offer this for $200. All of the tooling and design work is paid for many times over. Manufacturing should be a piece of cake because they've made millions. Bugs are all worked out so quality costs should be low. And so on. Yet a 3GS would easily compete with a $200 phone that the competitors are selling.
  • Reply 17 of 75
    tallest skiltallest skil Posts: 43,399member


    Originally Posted by SailorPaul View Post


    A $200 unlocked unit that would deliver FaceTime over 3G would would be a huge motivator to switch.   



     


    Good luck getting the carriers to actually do that. Even on phones that physically support it, they refuse to allow it. And the government, supposed to be protecting us in this regard, refuses to do anything. 

  • Reply 18 of 75
    mj1970mj1970 Posts: 9,002member


    The carriers are trying to resist what is probably inevitable and that is them becoming largely undifferentiated* wireless data pipes.


     


    *Or differentiated only on connection quality, throughput and pricing...but not locking people into their networks and plans.

  • Reply 19 of 75
    al_bundyal_bundy Posts: 1,525member

    Quote:

    Originally Posted by Constable Odo View Post


    Yeah, Mr. iPhone Nano.  What an idiot.  I don't know where Munster dreams up some of the stuff he says but I try to ignore him whenever possible.  Apple is still selling iPhones as fast as it can make them, so I'm not sure why Apple would suddenly decide to drop prices on the iPhone just to gain a bit more market share.  Consumers either want to iPhone or they don't.  Apple just has to keep building iPhones and adding in value so consumers keep wanting to buy them at the going rate.  There's no need for Apple to cheapen its product for the sake of market share.  As a shareholder, I'd be dead against that sort of reasoning.  Build a desirable product and keep the profit margins high.



    its not 5 years ago 


     


    except for facebook google play apps are at about 90% or more parity with iOS. the vast majority of the most popular and most used apps are on both platforms. commoditization of the smartphone market is here or will be here very soon.


     


    the 50% of people left who don't have a smartphone don't care about design, looks, elitism, snobbiness. they want a cheap smartphone. unless apple delivers they will go android


     


    the fanboy population is a tiny percentage of the total user base 

  • Reply 20 of 75


    It's been proven, financially, that the halo effect the iPhone brings to Apple's other products is real.  Get more consumers, those that have less to spend than traditional market consumers, to buy into the Apple eco-system and chances increase greatly that those consumers will then spend more on other Apple products.  The issue Apple grapples with is the fact that the consumer experience needs to be top-notch regardless of whether it's with the cheapest/oldest of iPhones being sold off-contract at $200 or the latest/greatest iPhone being sold by all the big telcos.  If you go cheap and it negatively effects the consumer experience, you can do more harm than pricing your products higher and maybe out of reach of more people would ever do - because having a product be aspirational can be a very good thing.

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