Apple seen as 'unlikely' to introduce new, inexpensive iPhone model
With the iPhone 3GS discontinued as of the launch of the iPhone 5, one market watcher believes Apple has signaled that it does not intend to introduce a new, lower-priced iPhone model in the near future.
Charlie Wolf with Needham & Company said in a note to investors on Monday that he believes Apple should introduce an inexpensive iPhone model to address developing markets. But he doesn't think that will happen anytime soon.
Wolf believes Apple could have addressed prepaid markets by keeping the iPhone 3GS available at a lower price. Previously, the smartphone first released in 2009 was available for free with a two-year contract, but the iPhone 3GS was replaced by the iPhone 4 last month.
In the predominantly prepaid markets of developing countries, unlocked phones can start at prices as low as $150. Because prepaid markets are now growing faster than traditional postpaid markets like the U.S., Wolf said it's an "open question" whether the iPhone can continue to gain market share.
Earlier this year, China surpassed the U.S. and became the largest smartphone market in the world. Because China and other developing markets are predominantly prepaid, Wolf believes Apple has "little choice but to target prepaid markets in emerging regions."
Under a prepaid plan, the unsubsidized price of the iPhone 4, first released in 2010, is $450. At that price point, Wolf believes it will be difficult for Apple to gain considerable traction.
However, for the time being Apple can still increase its market share through greater carrier penetration, Wolf said. The biggest target is China Mobile, the largest carrier in the world with 688 million subscribers.
Apple has yet to ink a deal with China Mobile because the carrier's proprietary 3G network is not compatible with the iPhone. But China Mobile is in the process of building out a 4G LTE network that should be compatible with the 4G standard, which has led Wolf to believe "it's only a matter of time" before the iPhone debuts with China Mobile.
Charlie Wolf with Needham & Company said in a note to investors on Monday that he believes Apple should introduce an inexpensive iPhone model to address developing markets. But he doesn't think that will happen anytime soon.
Wolf believes Apple could have addressed prepaid markets by keeping the iPhone 3GS available at a lower price. Previously, the smartphone first released in 2009 was available for free with a two-year contract, but the iPhone 3GS was replaced by the iPhone 4 last month.
In the predominantly prepaid markets of developing countries, unlocked phones can start at prices as low as $150. Because prepaid markets are now growing faster than traditional postpaid markets like the U.S., Wolf said it's an "open question" whether the iPhone can continue to gain market share.
Earlier this year, China surpassed the U.S. and became the largest smartphone market in the world. Because China and other developing markets are predominantly prepaid, Wolf believes Apple has "little choice but to target prepaid markets in emerging regions."
Under a prepaid plan, the unsubsidized price of the iPhone 4, first released in 2010, is $450. At that price point, Wolf believes it will be difficult for Apple to gain considerable traction.
However, for the time being Apple can still increase its market share through greater carrier penetration, Wolf said. The biggest target is China Mobile, the largest carrier in the world with 688 million subscribers.
Apple has yet to ink a deal with China Mobile because the carrier's proprietary 3G network is not compatible with the iPhone. But China Mobile is in the process of building out a 4G LTE network that should be compatible with the 4G standard, which has led Wolf to believe "it's only a matter of time" before the iPhone debuts with China Mobile.
Comments
Originally Posted by PhilBoogie
That's good news then. We can finally put that iPhone Mini rumor to rest.
You mean iPhone nano. And that was dead in 2008. Why anyone ever thought they'd make a smaller or less capable "new" model of iPhone is beyond me.
Oh... really?
this deserves an article?
It is such a non-news worthy revelation it is crazy. Apple does have a budget phone- whatever the 2 previous models were. Why would they deviate from that strategy?
Apple doesn't produce budget/cheap versions of products. As soon as they start, you can bet that is a sign bad things are ahead for Apple. One reason I am convinced the iPad mini will be $299 or more, not the $199 that some believe. This is pure speculation based on previous history of Apple but for semi-proof...
Look at netbooks. Apple never produced a netbook during that craze and instead produced the Macbook Air. That kicked off the "ultrabook" craze that is now helping to revive PC sales, while netbooks are dead in the water.
Sticking to their guns and only producing high quality products is what keeps Apple customers loyal.
EDIT:
Besides, the way the lawsuits are going Apple can just make royalties on all the budget Android phones that are being produced and make money on budget phones without producing one themselves.
Quote:
Originally Posted by rednival
It is such a non-news worthy revelation it is crazy. Apple does have a budget phone- whatever the 2 previous models were. Why would they deviate from that strategy?
Apple doesn't produce budget/cheap versions of products. As soon as they start, you can bet that is a sign bad things are ahead for Apple. One reason I am convinced the iPad mini will be $299 or more, not the $199 that some believe. This is pure speculation based on previous history of Apple but for semi-proof...
Look at netbooks. Apple never produced a netbook during that craze and instead produced the Macbook Air. That kicked off the "ultrabook" craze that is now helping to revive PC sales, while netbooks are dead in the water.
Sticking to their guns and only producing high quality products is what keeps Apple customers loyal.
EDIT:
Besides, the way the lawsuits are going Apple can just make royalties on all the budget Android phones that are being produced and make money on budget phones without producing one themselves.
Apple makes insane profits on their products. They could still be very rich by selling their phones for less.
It seems they prefer to lose market share in developing countries and being overtaken by Android.
I think one of the reasons the 3GS was dropped was because it's using the original resolution and they released a new phone with a new resolution. Apple wants to minimize the number of resolutions it and 3rd-party devs support which will in turn make it a better experience for users. The 3GS has been off the shelves for less than a month and it has iOS 6. That's the end of it. Perhaps not for OS 7 since the newest sold 3GS's will only be just over a year old, but perhaps as early as iOS 8 Apple might remove the 480x360 support from Xcode for submitting to the App Store (I could still see it in there as some wonky internal usage for internal corporate apps and whatnot).
Some please send this guy back to Finance 101, selling something at higher margins is always better than selling at lower margins.
I really do not think apple will sell a low cost phone, too many players in the market and it totally cut throat. Plus this people buying phones in this space could care less what they are buying they just want a phone.
Quote:
Originally Posted by pfisher
Apple makes insane profits on their products. They could still be very rich by selling their phones for less.
It seems they prefer to lose market share in developing countries and being overtaken by Android.
Smart company's know their strength and weaknesses. Apple is the largest tech company in the world. Apple sells more (smart) phones than any ONE manufacturer, though all Androids combined add up to more total sales.
They are usually the #1 or #2 PC maker, though Windows PC sales add up to more than total Mac sales.
I am fairly sure the way Apple and Wall Street see it, because it is true, is that Apple is the number one phone maker and the a top PC maker. Both are true. They make more money than any of their competitors, so how they are being "overtaken"?
I think being #1 is pretty good. World domination isn't necessary. Their Apple. Not Pinky and Brain.
EDIT:
Amended comment to clarify I meant smart phones, not ALL phones...
It's easy to argue that Apple could turn a decent profit on a low product but you need to consider the man hours, the manufacturing, and the component sourcing, to name a few, that could affect other parts of their more profitable business. If it takes about the same time for a Foxconn assembly line to manufacturer a 3GS as it is to manufacture a 5 then does it do Apple any favours if it needs 10x as many for a greater world audience at a fraction of the iPhone 5 price and that production will have to replace iPhone 5 production which is already too low to meet current demand.
You should also consider brand dilution. Reaching a larger market with a cheaper product doesn't always work out favourably if your "quality" branding becomes synonymous with cheap.
Quote:
Originally Posted by pfisher
Apple makes insane profits on their products. They could still be very rich by selling their phones for less.
It seems they prefer to lose market share in developing countries and being overtaken by Android.
It has been working really well for apple and to a lesser extent samsung. All others are on the red. so?
Quote:
Originally Posted by rednival
Apple sells more phones than any ONE manufacturer, though all Androids combined add up to more total sales.
Where did you get that stat. Last I check in one year Samsung and Nokia still sell more "cell phones" than Apple, and they are not all smart phones.
Now Apple makes more money than those companies selling smart phones but that is a different statistic.
But our fine MBAs on Well Street measure success on unit volumes not margin dollars, thus the reason this idiot want apple to sell more phones even if they make less for the company.
Quote:
Originally Posted by Maestro64
Where did you get that stat. Last I check in one year Samsung and Nokia still sell more "cell phones" than Apple, and they are not all smart phones.
Now Apple makes more money than those companies selling smart phones but that is a different statistic.
But our fine MBAs on Well Street measure success on unit volumes not margin dollars, thus the reason this idiot want apple to sell more phones even if they make less for the company.
Whoops. I meant SMART phones. I was not considering feature phones. Amended my comment.
https://www.npd.com/wps/portal/npd/us/news/press-releases/pr_120808/
Lower cost that what? Than free? iPhone 4 is free and easily as good as other 'free' phones. In EMEA and other countries where there is actual network competition, even the 4S or 5 can be had for 'free' with certain contracts.
Always? No, not at all.
If you charge too high a margin, your volume can drop to the point that you don't make any money. If you sell at too low a margin, your volume can increase to the point where you can't handle it - and/or your profits may go to zero.
Balancing profits vs selling price is not a trivial exercise - and also has a time element. I believe that Apple's management team is better at it than you OR the person you're responding to.
That's not true, either. The 'free' phone is fairly expensive when you consider the excess amounts you are paying to your carrier. In the U.S., a 'free' phone costs over $1,000 when you figure the carrier subsidies.
Furthermore, in many countries, subsidized phones are not common, so the buyer has to pay for their phone - and no one is giving them away for free under that scenario.
IMO - while perhaps not an iphone nano(im not sure what it brings to the party except it will be sleek, elegent, well built etc), but yes different sizes... I for one like the 3.5 size. Make the 4S LTE and perhaps same thinkness (with no glass back) with a bigger battery and Id be a happy camper. While many poo-poo it here, there is also a definite market for 4.5 size phone... thumbs and 'retina' be damned, d'oh!
That was addressed in the article. In the US carrier subsidies are the norm but in most of the world they pay up front and at $450 (US price) it's a steep purchase which keeps a lot of buyers out.
There will be no iPhone Nano, but more likely an 5" iPhone Grade
http://www.engadget.com/2012/10/01/sharp-lcd-panel-type-5
Originally Posted by mercury99
There will be no iPhone Nano, but more likely an 5" iPhone Grade
What sense does that make at all?