Low-cost iPhone seen generating $6.5B in 2013 revenue for Apple

Posted:
in iPhone edited January 2014
A rumored contract-free, low-cost iPhone geared toward emerging markets could net Apple $6.5 billion in revenue this year, one analyst believes.

Gene Munster of Piper Jaffray believes there's a good chance Apple will in fact release a new low-cost iPhone model this year. Unlike new reports that have claimed the device could be priced between $99 and $149, he expects Apple will charge around $199 for a new unsubsidized iPhone.

At that price, the new, less expensive iPhone model would be a significant discount over what Apple currently offers: A contract-free iPhone 4 costs $450 in the U.S., while taxes bring the cost up to $490 in China and $750 in Brazil.

Current iPhone models have gross margin between 55 and 60 percent, aided by carrier subsidies. Munster believes that Apple's contract-free iPhone with a price around $200 would instead have gross margins around 30 percent.

iPhone 5


He also believes that a cheaper iPhone would be a popular option in Apple's lineup: Munster's sales forecast for the end of 2013 calls for 30 percent of all iPhone sales to be the rumored lower-price model.

Accordingly, he sees the average selling price of the iPhone falling from its current level of around $640 to about $520.

In Munster's models, the $6.5 billion in revenue a hypothetical inexpensive iPhone would add to Apple's bottom line would be about 3 percent of the company's total revenue.

He believes that Apple's previous entries into lower priced market segments have demonstrated a "measurable positive impact on overall revenue" for the company. In the past, Apple has expanded its product lineup with the iPad mini and iPod mini, while the iPad itself has cannibalized sales of Apple's higher-priced Macs.
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Comments

  • Reply 1 of 86


    gm;dr

     

  • Reply 2 of 86
    mj1970mj1970 Posts: 9,002member
    So it's PROFIT we're concerned with more than REVENUE. What are the PROFIT projections?
  • Reply 3 of 86
    rogifanrogifan Posts: 10,669member
    Gene Munster needs to STFU. Where's this TV he's been predicting since forever?
  • Reply 4 of 86
    malaxmalax Posts: 1,598member

    Quote:

    Originally Posted by MJ1970 View Post



    So it's PROFIT we're concerned with more than REVENUE. What are the PROFIT projections?


     


    Exactly.  And the Mac mini has never really been a player in the "lower-priced segment" of the PC market, but it was never priced that way.  And therefore it didn't completely undermine the higher margin models.  I don't see how the same could be done with phones.  Giving away iPhones at (just above) cost in the developing markets will just alienate consumers outside those markets.

  • Reply 5 of 86
    allenbfallenbf Posts: 993member


    Seriously - how can you predict revenue on something that doesn't (and may never) exist??  


     


    Guess what?  I'm predicting that Tesla's hover car will generate 6 billion.  Now pay me.

  • Reply 6 of 86
    rob53rob53 Posts: 2,486member
    Gene speaks, stock market listens, and AAPL drops today because "investors" are afraid the lower margin will kill the stock. I know analysts think they have the right to propagate rumors but until they have factual information (usually only available when the product is released by Apple), they should not say anything because anything they say manipulates the stock market. Where's his disclaimer about his position relative to AAPL?
  • Reply 7 of 86
    jragostajragosta Posts: 10,473member
    rogifan wrote: »
    Gene Munster needs to STFU. Where's this TV he's been predicting since forever?

    Since at least 2009, to be exact.
    http://news.cnet.com/8301-17938_105-10314746-1.html

    It really amazes me that this guy who is so consistently wrong gets any press at all.
    rob53 wrote: »
    Gene speaks, stock market listens, and AAPL drops today because "investors" are afraid the lower margin will kill the stock

    You only have half the story.

    The analysts can say that Apple will introduce a low cost phone that will hinder margins and AT THE SAME TIME say that Apple is in trouble because they don't have any new products coming. Whichever one of their stories you choose, Apple stock falls.
  • Reply 8 of 86
    jragostajragosta Posts: 10,473member
    Unlike <a href="http://appleinsider.com/articles/13/01/08/wsj-cheaper-iphone-could-debut-in-2013">new reports</a> that have claimed the device could be priced between $99 and $149, he expects Apple will charge around $199 for a new unsubsidized iPhone..

    Anyone who projected that Apple would sell a $99 or $149 unsubsidized phone needs to have their head examined.

    Even $199 unsubsidized is out of the question. Apple would have to cut so many corners that it might as well be an Android crap-phone. That's not going to happen.
  • Reply 9 of 86
    dreyfus2dreyfus2 Posts: 1,072member

    Quote:

    Originally Posted by malax View Post


     


    Giving away iPhones at (just above) cost in the developing markets will just alienate consumers outside those markets.



     


    Nobody said that this is what they are planning. The rumor (and I am not saying I necessarily believe it) is about creating a lower-cost model. If they build an iPhone out of cheaper materials (say plastic), drop Gorilla glass for plastic or cheaper glass, use a standard iso retina resolution, use previous, or even older, generation chipsets, reduce storage capacity and drop 4G (which is not available in many of these markets anyhow) and end up with a device costing clearly less than $100 to make, they could well retain their margins without alienating anyone. This device would not be a match for the real iPhone, but it could still compete well with the tons of Huawai and Nokia Asha phones out there. Especially as it would give people in those countries access to the App Store and iTunes (both have been expanding into many more countries lately).


     


    The bigger question is, if this would still be a device that Apple would ship. But looking at the pricing of e.g. the iPod Nano, I guess a decent and differentiated device could be made at this price point.

  • Reply 10 of 86
    chabigchabig Posts: 640member

    Quote:

    Originally Posted by allenbf View Post


    Seriously - how can you predict revenue on something that doesn't (and may never) exist??  



    It's easy. Imaginary price times imaginary sales.

  • Reply 11 of 86
    apple ][apple ][ Posts: 9,233member


    Apple has extremely high margins on most of it's products, compared to the rest of the industry. Even if Apple's insanely high margins were to shrink slightly, then so what, there would still be a very nice margin left, with plenty of profit and mind boggling revenue to report.


     


    Apple's stock goes down, because they are still making a ton of money, enjoying very healthy margins.


     


    Meanwhile, other stocks, like Amazon, which sells products at cost or even at a loss (Kindle Fire), continues to rise.


     


    Maybe Apple should just sell phones for $49. Don't worry about any potential loss of revenue or the fact that Apple would be losing money on each phone sold. I'm sure that Apple will make it all up in quantity, just like the other people, and maybe Apple's stock will shoot up again. If only Apple could lose $50 on each phone sold, then that would be awesome! When earnings time comes, Apple could report that they only lost $40 per phone, exceeding all expectations, and the stock would jump up at least 10%.

  • Reply 12 of 86


    What about the analysts estimates for MicroSoft Surface ?

  • Reply 13 of 86
    Fore these ideas about a "low cost iPhone" to be true, they need to include a redefinition of what a low cost "smart"-phone is.

    It's not a F#%&#%ing large screen-latest-CPU-new-design-thing. Rather a iPod Nano - stripped iPhone but with some sort of essentials for tying the user to the Apple universe. What can that be?

    A iPod using 3G to stream from iTunes-match? And for making calls?

    Apps? Hardly the same as for the iPhone.

    Webb? Don't think so but maybe. Thus maybe WebbApps (HTML5-stuff) but not iOS native stuff.

    E-mail? Could be.

    Maybe modeled towards a use case where mobile broadband is scarse?

    Don't know. Can't really find the right mix here. Anyone else?

    I think they will aim to be the Mercedes/BMW/Audi of the smartphone/iPad/computer world. Where's the innovation in car's today? Design. Oh, they use LED instead of light bulbs. Same engine year after year. Just a new design.

    Profit.

    End of discussion.
  • Reply 14 of 86
    jungmarkjungmark Posts: 6,800member


    it's a stock manipulation play. If Apple produces a low cost iphone (not likely), analysts will cry the ASP is decreasing...sell sell sell!. if apple doesn't produce one, analysts will cry market share, market share, market share ... sell, sell, sell. It's a no win situation for Apple.


     


    There's a reason why he's an analyst. He failed at running a business. Apple is doing fine, thank you.

  • Reply 15 of 86
    jfc1138jfc1138 Posts: 3,090member


    I suppose a simpler iPhone, with the precedent of the simpler iPods, the shuffle, nano etc. does have a great deal of precedent. 

  • Reply 16 of 86
    jungmarkjungmark Posts: 6,800member

    Quote:

    Originally Posted by jfc1138 View Post


    I suppose a simpler iPhone, with the precedent of the simpler iPods, the shuffle, nano etc. does have a great deal of precedent. 



    here's a problem with that. the ipod's main purpose is to play music.


     


    the iphone's purpose is the apps (Apple will never make a dumb phone) and ecosystem. How can you make that experience for cheap?

  • Reply 17 of 86


    Originally Posted by jungmark View Post

    it's a stock manipulation play. If Apple produces a low cost iphone (not likely), analysts will cry the ASP is decreasing...sell sell sell!. if apple doesn't produce one, analysts will cry market share, market share, market share ... sell, sell, sell. It's a no win situation for Apple.




    "But… but no one manipulates the stock. It's just bubbles bursting and speculation leveling out to Apple's "real worth"! All trades are legitimate ones, made in the face of Apple's actual failure!"

  • Reply 18 of 86
    Gene Munster is just making noise. Nothing to see here.
  • Reply 19 of 86
    jragostajragosta Posts: 10,473member
    jfc1138 wrote: »
    I suppose a simpler iPhone, with the precedent of the simpler iPods, the shuffle, nano etc. does have a great deal of precedent. 

    On the surface, that looks valid - but a little more consideration says it's not practical.

    The iPod Touch starts at $299 - and that's wtihout cell phone hardware or the extra battery size needed to power it. How are they supposed to start with a $299 product, add cell phone hardware, add a larger battery, and sell it for $199 (much less $99 to $149)?
  • Reply 20 of 86
    drblankdrblank Posts: 3,383member


    I think there should be an option for ALL Apple mobile devices to be used as a cell phone.  All it takes is a chip and an antenna, right?  Then people can just pair a bluetooth headset and be done with it.  Then we can eventually get tablets of all sizes people want with a voice/data chip inside to be used for data and voice over cellular lines with a bluetooth headset or a build it microphone/speaker system in a car.   That way people can buy whatever sized product they want.


     


    Sometimes, I would like to just take my iPad out and not have to carry both iPhone and iPad with me, and if I need to answer or make a call, I just put on a BlueTooth earpiece.  And just have whatever carrier I want with so many devices linked to the same number as an additional device.

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