Apple would address 65% of smartphone market with low-cost iPhone

Posted:
in iPhone edited January 2014
While Apple currently competes in the high-end smartphone market, a low-cost iPhone would allow the company to address the 65 percent of the market it does not currently serve.

Gene Munster of Piper Jaffray believes a cheaper iPhone would allow Apple to sell handsets to a market that represents 580 million potential customers.

"We believe that the high-end smartphone market (above $400 USD off contract) for [calendar year 2013] will be about 320 million units, of which we believe Apple will capture 50% market share," Munster said in a note to investors on Thursday.

"We believe this means Apple is missing the other 65% of the market, or 580 million units, given its current product lineup without the lower priced phone."

iPhones


He also isn't concerned about the prospect of reduced margins with a cheaper iPhone, expecting the total impact to be less than 1 percent over the next few years.

"We believe the opportunity for Apple is too large to miss, as the low end market is growing significantly faster than the high end smartphone market," he said.

Munster previously said on Wednesday that he sees a low-cost iPhone generating $6.5 billion in revenue for Apple, assuming the rumored device were to launch at the end of 2013. He expects the company to charge around $199 for a new unsubsidized iPhone geared for emerging markets like China.

Currently, Apple's cheapest iPhone without a contract is the iPhone 4, which sells for $450 in the U.S. But taxes bring that cost up to $490 in China and $750 in Brazil, two key countries where low-end, contract-free smartphones are big sellers.

This week, a flurry of reports, including one from The Wall Street Journal, claimed Apple is interested in reaching new customers with a less expensive iPhone. The moves by the company are said to be in response to the popularity of low-end devices, particularly those running Google's Android mobile operating system.

Rumors of a cheaper iPhone are not new, but analysts have continually predicted that Apple will build a cheaper handset. Many have cited Apple's approach with the iPod and iPad, both of which saw their product lineup grow with smaller and cheaper options.
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Comments

  • Reply 1 of 101


    Oh no ! Not again ! ..... too much is too much ....

  • Reply 2 of 101
    steven n.steven n. Posts: 1,115member
    They may. They may not. I always thought an iPhone 3GS with updated guts (A4 and lightning mostly) would make a good "cheap" phone.
  • Reply 3 of 101


    gm;dr

     

  • Reply 4 of 101
    gordygordy Posts: 971member


    OMG, this again?  The iPhone 4, which runs rings around "free" phones, is $1 or less with a contract.


     


    I think the tech media wags the dog with some of these stories.

  • Reply 5 of 101
    Um, a free iPhone isn't low-cost enough?
  • Reply 6 of 101
    gazoobeegazoobee Posts: 3,754member
    I wouldn't say it will never happen but this analysis is BS. He's basically including feature phones in the "smartphone" category to get these numbers.

    The "low end" of the smartphone market he talks about, are the far flung markets where no one want's to pay more than 50 bucks for their phone and the networks are so bad they couldn't get a decent data contract anyway.

    What good does having an iPhone do you if the data network doesn't exist in your country or you have to pay triple what we pay to access it?

    The whole idea that a "cheap" iPhone means everyone in Africa and India will go out and buy one is just ridiculous IMO. A feature phone would be a much better choice in terms of a "low end" device for those markets.

  • Reply 7 of 101
    dbhdbh Posts: 41member


    it's stated that they are talking about off-contract cheap phone... do note that these "free" iPhones still carry a monthly subscription fee... 

  • Reply 8 of 101
    gordy wrote: »
    OMG, this again?  The iPhone 4, which runs rings around "free" phones, is $1 or less with a contract.

    I think the tech media wags the dog with some of these stories.

    scotty321 wrote: »
    Um, a free iPhone isn't low-cost enough?
    Apparently you guys don't understand what free really means. The idea of a "cheap" Apple phone doesn't mean a phone that requires a $50 data plan over two years (costing you $1200). It means a handset you can use with a Rechargeable SIM card and no contract at a low handset price, which is how most not-so-rich people around the world actually use a cell phone.
  • Reply 9 of 101


    No, they wouldn't. 


     


    "Apple would address 500% of the tablet market with a 5" tablet."


     


    See, I can lie, too.






    Originally Posted by tonton View Post

    Apparently you guys don't understand what free really means.


     



    What we don't understand is why the up front cost matters when you still pay out the ear monthly regardless of how you get the phone. And yes, even on PAYG, with no data or anything else but voice*, you pay more than these third world countries can handle. So even if Apple makes a magical iPhone that is $200 off-contract with worthless build quality and utterly destroys their brand mindshare, they'd still whine that it's too expensive monthly. 


     


    *See, here's the thing: APPLE MAKES A SMARTPHONE. If you want just voice, go buy something else. 


     


    Of course, Apple will do this, since they're now in the market of just doing whatever the analysts say they "have" to do.

  • Reply 10 of 101
    rogifanrogifan Posts: 10,669member
    Is Gene Munster paying AI to put up stories quoting him? Why do we care what he says? :\
  • Reply 11 of 101
    dbhdbh Posts: 41member

    Quote:

    Originally Posted by AppleInsider View Post



    Munster previously said on Wednesday that he sees a low-cost iPhone generating $6.5 billion in revenue for Apple, assuming the rumored device were to launch at the end of 2013. He expects the company to charge around $199 for a new unsubsidized iPhone geared for emerging markets like China.



    Currently, Apple's cheapest iPhone without a contract is the iPhone 4, which sells for $450 in the U.S. But taxes bring that cost up to $490 in China and $750 in Brazil, two key countries where low-end, contract-free smartphones are big sellers.


     


    Quote:

    Originally Posted by Gazoobee View Post



    I wouldn't say it will never happen but this analysis is BS. He's basically including feature phones in the "smartphone" category to get these numbers.



    The "low end" of the smartphone market he talks about, are the far flung markets where no one want's to pay more than 50 bucks for their phone and the networks are so bad they couldn't get a decent data contract anyway.



    What good does having an iPhone do you if the data network doesn't exist in your country or you have to pay triple what we pay to access it?



    The whole idea that a "cheap" iPhone means everyone in Africa and India will go out and buy one is just ridiculous IMO. A feature phone would be a much better choice in terms of a "low end" device for those markets.

     


     


    i'd say that Southeast Asia and China as stated in the article has more people opting for the 50 bucks Android phones though that does not necessarily mean that telcos here are not having data plan... though most are on prepaid data plan as well.. and having these cheap iPhones will surely bring down Android dominance here in Asia..

  • Reply 12 of 101
    jason98jason98 Posts: 763member
    scotty321 wrote: »
    Um, a free iPhone isn't low-cost enough?


    Low cost means a cheap unsubsidized phone without a contract and obligation to pay X amount per month. Usually prepaid users pay some cheap rate per minute (e.g 3c) or per MB and sometimes their money never expire even if the service is not used
  • Reply 13 of 101
    rob53rob53 Posts: 2,028member
    With T-Mobile's apparent decision to only provide the iPhone without a contract, it means even the old iPhone4 would cost a couple hundred dollars. Gen(i)e only addresses China as a market for unsubsidized phones but I wonder if that's the direction most cellular suppliers will be going to in the future. They might take a gamble and think they could make more money by only providing a service (haha) instead of also paying for the phones. If this is the direction Apple has to compete in, getting a lower cost phone for everyone is something they will need to pursue. I discovered my brother actually bought an iPhone5 off-contract so he could use a smaller, local cellular provider. He usually is anal about total cost so it must have been a better deal to buy the iPhone outright than to get nickel-and-dimed for two years.
  • Reply 14 of 101


    Originally Posted by rob53 View Post

    With T-Mobile's apparent decision to only provide the iPhone without a contract, it means even the old iPhone4 would cost a couple hundred dollars.


     


    And still be cheaper after two years than on a subscription. So I really don't get this "MUST BE CHEAP MUST BE CHEAP MUST BE CHEAP" stuff. 


     


    It's a smartphone. Beyond that, it's a flagship smartphone.

  • Reply 15 of 101
    nasseraenasserae Posts: 3,157member


    The only low-cost iPhone you will ever see (if there will be one) will be iPhone 4 or 4S with updated connector.

  • Reply 16 of 101

    Quote:

    Originally Posted by Tallest Skil View Post






     


    What we don't understand is why the up front cost matters when you still pay out the ear monthly regardless of how you get the phone. And yes, even on PAYG, with no data or anything else but voice*, you pay more than these third world countries can handle. So even if Apple makes a magical iPhone that is $200 off-contract with worthless build quality and utterly destroys their brand mindshare, they'd still whine that it's too expensive monthly. 


     



     


    Virgin Mobile. $35 per month, unlimited text, voice, 4G.

  • Reply 17 of 101


    And Again, the same analyst fires up the same rumor.


     


    Ai, please stop megaphoning that rumor.

  • Reply 18 of 101
    anonymouseanonymouse Posts: 6,578member

    Quote:

    Originally Posted by AppleInsider View Post



    "We believe the opportunity for Apple is too large to miss, as the low end market is growing significantly faster than the high end smartphone market," [Munster] said.


     


    Yes, I remember when they said the same about Netbooks.

  • Reply 19 of 101
    MacProMacPro Posts: 18,216member
    gordy wrote: »
    OMG, this again?  The iPhone 4, which runs rings around "free" phones, is $1 or less with a contract.

    I think the tech media wags the dog with some of these stories.

    Yes and no ... selling an old model cheaply is not quite the same as making a new up to date but perhaps less featured model. Having said that I don't have a clue what Apple could leave out as anything they did leave out would lessen the Apple experience. So color me skeptical on a cheap iPhone. I agree totally that the 4 is a cheap entry point but better yet so is a 4s which has virtually all 5's features except screen real estate and speed (I could be missing some things but I only have a 4s so not totally sure).
  • Reply 20 of 101
    apple ][apple ][ Posts: 8,650member


    And why does Apple need to capture these riff raff, broke customers again?


     


    What's the upside? 


     


    So a few more people with no money and probably not even a single credit card to their name can become an Apple customer? Who wants them or needs them?


     


    Where's the profit for Apple here? 

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