Apple predicted to build cheaper 'iPhone for the masses'

Posted:
in iPhone edited January 2014
With the overall smartphone market now outgrowing the iPhone, one prominent analyst believes Apple will be pushed to release a lower-priced device.

Gene Munster with Piper Jaffray believes a so-called "iPhone for the masses" is likely an inevitable device from the company. He noted that the smartphone market grew 45 percent year over year in the third quarter of 2012, while his current iPhone estimates for the holiday quarter call for around 45 million iPhones sales, which would be 23 percent year over year growth.

"We believe the delta between smartphone market growth and iPhone growth will push Apple to release a lower priced device despite comments to the contrary," Munster wrote in a note to investors on Monday. "Looking back historically, Apple always priced Macs as the higher end of the market and ultimately the iPad, and now the iPad mini, became the 'Mac for the masses.'"

In his view, Apple "needs" to develop a low-cost iPhone for the masses that will compete with inexpensive Android devices that are currently finding success in the market.

For Apple to do this, Munster said the company could reduce the price of an existing phone, representing a more aggressive continuation of the company's current strategy. Or, he said, Apple could make small changes, such as a handset without a Retina display and moderate components sold for a $200 price point contract-free.

iPhones


Munster's sentiment expressed on Monday echoes those of another analyst, Ben A. Reitzes of Barclays Capital, who said earlier this month that he too believes Apple will expand its iPhone lineup with a new entry-level model. Reitzes noted that outside of the top six smartphone makers are a plethora of low-end handset makers, many of them from China, which already account for 28 percent of the total industry.

Retizes believes that smaller companies with low-cost handsets will see their sales grow by 70 percent next year, and another 27 percent in 2014. These sales will largely be driven by China, where customers want less expensive smartphones that can be purchased without a contract subsidy.

Apple already continues to sell its two previous-generation handsets alongside the latest flagship model to reach lower price points. Currently, an 8-gigabyte iPhone 4 is available for free with a new two-year service contract, while an unlocked and contract-free iPhone 4 is sold by Apple for $450.

Expectations of a low-price, contract-free iPhone are not new and have lingered for years. Apple has gradually expanded its lineup to offer previous-generation models at lower prices, but market watchers are still dissatisfied with the $450 unsubsidized price of the cheapest iPhone 4.
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Comments

  • Reply 1 of 122


    In his view, Apple "needs"


     


    Stopped reading.


     


    Wanted to stop reading right here:






    the iPad, and now the iPad mini, became the 'Mac for the masses.'"



     


    Because he apparently has no idea what a Mac is, but the beginning of the next paragraph clinched it.


     


    Apple sells a free iPhone. They have zero control over how much plans cost. They have literally done everything that they can possibly do. The ball is in the telecoms' court, both domestically and internationally.


     


    The only possible thing that Apple can do in the future is to further lower manufacturing costs to absurd levels, which could potentially (though is not guaranteed to) lower the off-contract purchase price.

  • Reply 2 of 122
    Yes, because the fact that the iPhone 4 is out selling the 5 is all the proof that... Oh, wait.
  • Reply 3 of 122
    blackbookblackbook Posts: 1,361member


    I could be wrong but next year, I think we'll see a 5S with evolutionary upgrades, and the continued sell of the iPhone 4 primarily to pre-paid carriers for $349.


     


    But I wouldn't be surprised if we see the introduction of a new iPhone Nano with a 3.5 inch screen, smaller bezels, colors, and an iPod Nano-ish form factor. Add in non-retina display and a $249 price point and we'll have iPhones for everyone ranging from $249-$849.

  • Reply 4 of 122


    They ALREADY make a cheaper iPhone.  The 4s is $99.  The 4 is .99 or free.  How can you get cheaper than that?  Most people are fine with last year's phone, especially if they're new to iOS anyway. 


     


    This guy is a fool.

  • Reply 5 of 122


    Originally Posted by blackbook View Post

    But I wouldn't be surprised if we see the introduction of a new iPhone Nano with a 3.5 inch screen, smaller bezels, colors, and an iPod Nano-ish form factor.


     


    Wh… 

  • Reply 6 of 122
    gatorguygatorguy Posts: 23,511member

    Quote:

    Originally Posted by starbird73 View Post



    Yes, because the fact that the iPhone 4 is out selling the 5 is all the proof that... Oh, wait.


    I've not seen a breakdown of iPhone sales by model. I've seen guesses, and surveys and analyst estimates. Nothing official tho.

  • Reply 7 of 122
    blackbookblackbook Posts: 1,361member

    Quote:

    Originally Posted by starbird73 View Post



    Yes, because the fact that the iPhone 4 is out selling the 5 is all the proof that... Oh, wait.


    The problem with the current approach of selling outdated handsets for "free" is that the handsets are obviously outdated. A better example would be the fact that the iPad Mini outsells the iPad 2.


     


    A new iPhone at a low end price point would outsell the current old iPhones and likely wouldn't cannibalize the premium top tier iPhone.

  • Reply 8 of 122
    blackbookblackbook Posts: 1,361member

    Quote:

    Originally Posted by allenbf View Post


    They ALREADY make a cheaper iPhone.  The 4s is $99.  The 4 is .99 or free.  How can you get cheaper than that?  Most people are fine with last year's phone, especially if they're new to iOS anyway. 


     


    This guy is a fool.



    People that don't live in the US or buy their phone outright don't want to pay $450+ for a 3 year old cell phone...

  • Reply 9 of 122
    hill60hill60 Posts: 6,992member


    Aaah, it's almost Christmas, time to bring out the old chestnuts.

  • Reply 10 of 122
    lkrupplkrupp Posts: 10,341member
    Right, because Apple needs all the help it can get to keep from going bankrupt with its flawed business model that has failed this past decade and caused investors great pain.
  • Reply 11 of 122
    It's the $80 per month that keeps people away form the iphone, not the hardware cost. The subsidized $99 4S is dirt cheap...
  • Reply 12 of 122

    Quote:

    Originally Posted by blackbook View Post


    The problem with the current approach of selling outdated handsets for "free" is that the handsets are obviously outdated. A better example would be the fact that the iPad Mini outsells the iPad 2.


     


    A new iPhone at a low end price point would outsell the current old iPhones and likely wouldn't cannibalize the premium top tier iPhone.





    I think I'd have to see the specs on this "new, for the masses" iPhone before passing judgement. Why would I buy the more expensive one if I could get everything in the cheaper one?

  • Reply 13 of 122
    hill60hill60 Posts: 6,992member

    Quote:

    Originally Posted by blackbook View Post


    People that don't live in the US or buy their phone outright don't want to pay $450+ for a 3 year old cell phone...



     


    I don't live in the US and didn't buy my iPhone outright, it was included as part of my plan, although for this two year stint I paid a little extra for the 64GB model.


     


    I've been "buying" phones this way in Australia for nineteen years.

  • Reply 14 of 122
    Unfortunately Munster has not exactly been the best predicter when it comes to Apple. This is evidenced by his earnings calls, Apple TV call etc. his accuracy rating is somewhere in the mid 40% percentile. He's actually manipulated the stock more than anything else Think about it.
  • Reply 15 of 122


    Originally Posted by hill60 View Post

    I don't live in the US and didn't buy my iPhone outright, it was included as part of my plan, although for this two year stint I paid a little extra for the 64GB model.


     


    I've been "buying" phones this way in Australia for nineteen years.



     


    See, you don't matter because you're still first world.


     


    Apple MUST create a $100 off-contract phone for the third world (so that they can then go pay $70 a month for forced data), otherwise they will fail.

  • Reply 16 of 122
    blackbookblackbook Posts: 1,361member

    Quote:

    Originally Posted by island hermit View Post




    Why would I buy the more expensive one if I could get everything in the cheaper one?



     


    Same argument can be made for the iPad Mini...

  • Reply 17 of 122
    tylerk36tylerk36 Posts: 1,037member

    Quote:

    Originally Posted by Tallest Skil View Post


     


    See, you don't matter because you're still first world.


     


    Apple MUST create a $100 off-contract phone for the third world (so that they can then go pay $70 a month for forced data), otherwise they will fail.



    Even if they did and a third world person bought the damn thing they would get so frustrated wit the thing they would have taken it to a pawn shop and sold it for $25.00 walking out frustrated and therefor splurging at Mc Donald's for the whole family on the dollar menu.  Third world people have no concept of technology.  Oops did I say that?

  • Reply 18 of 122


    Following the iPod (Nano) tradition?


     


    Not sure how well that would translate. But just maybe . . .

  • Reply 19 of 122

    Quote:

    Originally Posted by blackbook View Post


    The problem with the current approach of selling outdated handsets for "free" is that the handsets are obviously outdated. A better example would be the fact that the iPad Mini outsells the iPad 2.


     


    A new iPhone at a low end price point would outsell the current old iPhones and likely wouldn't cannibalize the premium top tier iPhone.



    I agree with this. Having last year's model sold at a discount is good for Apple, but I think it is an interim measure for them. The iPad Mini is, indeed, a good example.


     


    Most car companies don't keep an old model around (e.g., Corvette) while introducing a new and improved Corvette. They expand the product line to try and make you "buy up." with value added crap. Like bigger engines and plastic fake air intakes and stupid looking spoilers and front air dams. To the point where you pull up to a stop light and the girl in the next car asks, "...how old are you...Nine?"


     


     


    Apart from the Retina display...I can't really think where they could make it cheaper, though. What features would they give up? 


     


    My biggest hope would be Apple would find a way to circumvent the big Telecom providers! :)

  • Reply 20 of 122

    Quote:

    Originally Posted by johnmcboston View Post



    It's the $80 per month that keeps people away form the iphone, not the hardware cost. The subsidized $99 4S is dirt cheap...


    DITTO


    +1

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