Very few people seem to realize how much of an aspirational brand Apple is in China, the most brand and status conscious consumer in the world today. It is, right now, the world's largest market for luxury cars. Apple cannot reach down to a lower demographic in China without risking its aspirational status. And the potential downside is even greater given the forecasts about where personal incomes are headed in the Middle Kingdom. Apple is wise to sit where it is and wait for the Chinese market to come to them rather than they coming to the Chinese market.
Nobody expects BMW or Rolex or Ducati (or Macs, for that matter) to sell a budget model, why do people expect Apple to do the same with the iPhone?
Huh. Go figure. I was taken to task the other day for saying that Apple's persona is that of a premium brand. Two or three members went after me for even suggesting that Apple is viewed as a premium brand. Nobody chimed in to say otherwise.
Can everybody please stop about a cheap iPhone? Come one do the math - even if Apple released a dirt cheap phone with basic functions - and sell if for $400 - will the carriers (ATT, Verizon, Sprint, T-mobile) would they care if you are using the cheap iPhone - would they drop their price on the service end just because you are using the cheap iPhone? Just what i thought -- Hell FREAKING NO!!!
Instead of bashing Apple - why dont you bash the carriers - they are the ones milking us every month for all they ca.
The purpose for the iPhone 5c is to get around the production bottleneck that cost Apple so much money in making the original iPhone 5. The iPhone 5s will be equally hard to manufacture. Removing this bottleneck will put Apple back at the 40% gross margins they had achieved before the iPhone 5. You can expect the 5c to drop in manufacturing cost faster than any of the other models because of how much less expensive the shell is to manufacture.
Adding in the additional units purchased will also incrementally drop the cost of the phone. Many observers on Wall Street have been talking about how much ground Samsung has made up in the profitability area of smart phone production. The change back toward more traditional gross margins, and the loss of Apple's use of Samsung production facilities for iPhone parts like cpu's, memory and eventually screens, will hit that competition with a double whammy. If Apple finally wins closure in some of its legal battles, then Samsung will be hurting on several fronts in this battle. This is not going to be over soon and betting against Apple at this point is probably not a good idea. Next year will bring the larger screens and further drops in costs to manufacture iPhones. Expect Apple to be producing huge amounts of cash for many years to come.
Nobody expects BMW or Rolex or Ducati (or Macs, for that matter) to sell a budget model, why do people expect Apple to do the same with the iPhone?
MacBook Air isn't a budget model? Mac Mini isn't a budget model? iPad mini? iPod nano? Shall I go on?
Apple is occupying as many categories as they can in electronics and computing. It's smart. People worried that the MacBook Air would cannibalize the sales of the MacBook Pro. It did. But that doesn't mean that Apple is making less money, it means they're selling more products. Apple offering to fill different needs at different price points means that sure, some people will buy a 5C who would have gotten a 5S, but some people will buy a 5C who would have gotten a cheaper, subsidized smartphone.
I understand you wanting to have Apple be associated only with the highest quality products and are concerned that this will be a step backwards in brand image for them, but I think they did a nice job with them—I don't think they look cheap, and am told they don't feel cheap either.
And just for the record, "Cookie cookie cookie starts with C."
Can everybody please stop about a cheap iPhone? Come one do the math - even if Apple released a dirt cheap phone with basic functions - and sell if for $400 - will the carriers (ATT, Verizon, Sprint, T-mobile) would they care if you are using the cheap iPhone - would they drop their price on the service end just because you are using the cheap iPhone? Just what i thought -- Hell FREAKING NO!!!
Instead of bashing Apple - why dont you bash the carriers - they are the ones milking us every month for all they ca.
Just a thought.
Costing $100 less by Apple standards is cheap. Black Friday Apple discounts are at most $15.
MacBook Air isn't a budget model? Mac Mini isn't a budget model? iPad mini? iPod nano? Shall I go on?
You can buy a Dell Inspiron laptop from Amazon for $300. Or a Sansa MP3 player for 30 bucks. Those are what most people take to be budget models. Apple's product lineup, like any other manufacturer, has a bottom end, but that doesn't mean that viewed from the perspective of the entire market, that bottom end is automatically a budget model.
For branding reasons, companies put a floor on their price range. In the U.S. you can't get cheaper than a 1-series with BMW, but that car is certainly not a budget model. Fact is, BMW sells cars cheaper than the 1-series, but they go by the MINI brand name and has a totally separate dealer network. And even the MINI is still not a budget model.
For the first time, people who opt for the cheap iPhone will be singled out by design.
"Can't afford the 5S?" Says the elitist Apple user. For the first time, there will be two obvious classes of Apple users. Those who can afford the best, and those who can't. Or so some critics point out.
Because many people don't need all the cutting edge hardware of the 5s or even the 5. We would like to buy an Apple phone, but Apple refuses to make a viable phone for this segment of the market. It's not about wanting a cheap phone, it's about wanting a phone that is suited to more modest needs for a reasonable price.
Instead, we have the choice of an 8GB iPhone 4s for $450. That's just not competitive. If that was the price for a 64GB version, then maybe we're talking. But $450 for a 2 year old device with 8GB of storage?
The iPhone 5C is not a mid-tier phone. It is a different option for people in the market for a high end phone.
Save your pennies. BMW doesn't make an affordable car for me but I want one.
Agree. But that mettle is being put to the test. As iCahn is making his trademark move on Apple. How much influence can he exert on Cook?
From the Apple Corporate Governance Guidelines:
I. The Role of the Board of Directors
The Board oversees the Chief Executive Officer (the “CEO”) and other senior management in the competent and ethical operation of the Corporation on a day-to-day basis and assures that the long- term interests of the shareholders are being served. To satisfy its duties, directors are expected to take a proactive, focused approach to their position, and set standards to ensure that the Corporation is committed to business success through the maintenance of high standards of responsibility and ethics.
If the board would just remove that bit about the "long-term interests of the shareholders" then they and Cook could do what they want, and not worry about what the street or shareholders think. And everyone would all still make money. Every publicly traded company should remove any verbiage that leaves them beholden to shareholders. Keeps to much of a stranglehold on corporations - particularly in this Internet-charged era of insane stock pundits and raiders like Carl Icahn.
Great points. People were already criticising the 5C as the 5 'cheap' months before the reveal. Until the price came out and people HELD the phone.
Plastic no longer means cheap. That's how powerful the Apple brand is.
This is only in Apple fans' heads.
Much as I am concerned, (most) Nokia Lumias didn't look/feel cheap for, what? - 2 years now?
That being said, as I mentioned before, I'm not too thrilled with 5c look. Not because it is plastic, but because it is too boxy. This is completely personal impression (and many will disagree), but while I'm finding boxy look good for metal-made products, boxy plastic looks a bit... more boxy; I'd prefer more organic, tapered at edges look.
Maybe I'll change my opinion once I get a chance to see 5c in person.
Here's the problem ... what does the plastic case get them?
They had to redesign a phone that people are going to put in a case anyway. So the whole color thing is ridiculous. The very fact Apple is selling a case for a phone that is being marketed based on its case color is ridiculous. If it were the bezel that was colored then maybe there would some rationale here for what they did. But it's not. Why not just keep making the previous year model and release a brand new case design every year? The net result would be the same and wouldn't require complete retooling.
I mean aren't they going to have to redesign the 5c at least every other year to continue to make it compelling? How long can they keep the same case design before the public starts looking elsewhere? So end the end, what does it actually save them, if they have to continue to support two phone designs at once, rather than a single design to gets downgraded over time?
Is it to keep the flagship phone separate and unique? In other words, to keep the number 2 model different from the number one? If so, will that actually work?
Very few people seem to realize how much of an aspirational brand Apple is in China, the most brand and status conscious consumer in the world today. It is, right now, the world's largest market for luxury cars. Apple cannot reach down to a lower demographic in China without risking its aspirational status. And the potential downside is even greater given the forecasts about where personal incomes are headed in the Middle Kingdom. Apple is wise to sit where it is and wait for the Chinese market to come to them rather than they coming to the Chinese market.
Nobody expects BMW or Rolex or Ducati (or Macs, for that matter) to sell a budget model, why do people expect Apple to do the same with the iPhone?
I get what you're saying but it's a totally different market, especially considering that 3rd party developers are involved. Apple sells millions of their products while BMW, Rolex, and Ducati are nowhere near that.
I better example would be Banana Republic and Target. While the Republic makes good money they make nowhere near what Target makes. Why? Marketshare. Investors don't want to invest in niche companies as much as widely accepted companies with strong profit margins. And so, they believe Apple still has room to give on profit margin and grow on marketshare so that they have an all around stronger business model. Honestly, can't you see Banana Republic going bankrupt before Target? The goal is to find the sweet spot of huge market share and big profit margins.
The danger with Apple becoming too much of a niche product is that that model does not work in their business. Rolex and Ducati can survive there because they're much smaller companies but Apple and tech in general is different. We see this playing out in history when Steve had to come back to save the sinking ship in 1997. Their marketshare can't sink too low and they need to be continually growing because the truth is a company is never totally still. It is always either gaining or losing momentum.
Consider that the iPhone5 most likely has a BOM under $200. Apple could honestly sell the 5C (which most likely cost even less than the 5 to make) for $450 and still have a grossly huge profit margin. Also, there something psychological with going under $500 in a person's mind. They begin to see the product not as cheap, or overly expensive, but closer to a mid tier product.
You can buy a Dell Inspiron laptop from Amazon for $300. Or a Sansa MP3 player for 30 bucks. Those are what most people take to be budget models. Apple's product lineup, like any other manufacturer, has a bottom end, but that doesn't mean that viewed from the perspective of the entire market, that bottom end is automatically a budget model.
Exactly. And your original point was that the 5C is a budget model. It's not. They're just offering variety at different price points. I get what you mean about your worries that the brand is putting out something less expensive, but I don't think it will water down the brand. It makes them more competitive, even if they are some of their own competition.
Comments
Very few people seem to realize how much of an aspirational brand Apple is in China, the most brand and status conscious consumer in the world today. It is, right now, the world's largest market for luxury cars. Apple cannot reach down to a lower demographic in China without risking its aspirational status. And the potential downside is even greater given the forecasts about where personal incomes are headed in the Middle Kingdom. Apple is wise to sit where it is and wait for the Chinese market to come to them rather than they coming to the Chinese market.
Nobody expects BMW or Rolex or Ducati (or Macs, for that matter) to sell a budget model, why do people expect Apple to do the same with the iPhone?
Huh. Go figure. I was taken to task the other day for saying that Apple's persona is that of a premium brand. Two or three members went after me for even suggesting that Apple is viewed as a premium brand. Nobody chimed in to say otherwise.
Instead of bashing Apple - why dont you bash the carriers - they are the ones milking us every month for all they ca.
Just a thought.
Don't know if I agree. If Cook was impervious to external pressure, there wouldn't be any dividend or share buyback at all.
Before that, T. Cook said is was "religious" for many things, but not the dividends. Not sure that even S. Jobs could have hold
back 145 billions$ from the shareholders.
Adding in the additional units purchased will also incrementally drop the cost of the phone. Many observers on Wall Street have been talking about how much ground Samsung has made up in the profitability area of smart phone production. The change back toward more traditional gross margins, and the loss of Apple's use of Samsung production facilities for iPhone parts like cpu's, memory and eventually screens, will hit that competition with a double whammy. If Apple finally wins closure in some of its legal battles, then Samsung will be hurting on several fronts in this battle. This is not going to be over soon and betting against Apple at this point is probably not a good idea. Next year will bring the larger screens and further drops in costs to manufacture iPhones. Expect Apple to be producing huge amounts of cash for many years to come.
Nobody expects BMW or Rolex or Ducati (or Macs, for that matter) to sell a budget model, why do people expect Apple to do the same with the iPhone?
MacBook Air isn't a budget model? Mac Mini isn't a budget model? iPad mini? iPod nano? Shall I go on?
Apple is occupying as many categories as they can in electronics and computing. It's smart. People worried that the MacBook Air would cannibalize the sales of the MacBook Pro. It did. But that doesn't mean that Apple is making less money, it means they're selling more products. Apple offering to fill different needs at different price points means that sure, some people will buy a 5C who would have gotten a 5S, but some people will buy a 5C who would have gotten a cheaper, subsidized smartphone.
I understand you wanting to have Apple be associated only with the highest quality products and are concerned that this will be a step backwards in brand image for them, but I think they did a nice job with them—I don't think they look cheap, and am told they don't feel cheap either.
And just for the record, "Cookie cookie cookie starts with C."
Costing $100 less by Apple standards is cheap. Black Friday Apple discounts are at most $15.
MacBook Air isn't a budget model? Mac Mini isn't a budget model? iPad mini? iPod nano? Shall I go on?
You can buy a Dell Inspiron laptop from Amazon for $300. Or a Sansa MP3 player for 30 bucks. Those are what most people take to be budget models. Apple's product lineup, like any other manufacturer, has a bottom end, but that doesn't mean that viewed from the perspective of the entire market, that bottom end is automatically a budget model.
For branding reasons, companies put a floor on their price range. In the U.S. you can't get cheaper than a 1-series with BMW, but that car is certainly not a budget model. Fact is, BMW sells cars cheaper than the 1-series, but they go by the MINI brand name and has a totally separate dealer network. And even the MINI is still not a budget model.
For the first time, people who opt for the cheap iPhone will be singled out by design.
"Can't afford the 5S?" Says the elitist Apple user. For the first time, there will be two obvious classes of Apple users. Those who can afford the best, and those who can't. Or so some critics point out.
Save your pennies. BMW doesn't make an affordable car for me but I want one.
The Board isn't an external force. They probably said hey Tim, do you think we can spend $30 billion next qtr? If not, we're gonna give some back.
Agree. But that mettle is being put to the test. As iCahn is making his trademark move on Apple. How much influence can he exert on Cook?
From the Apple Corporate Governance Guidelines:
I. The Role of the Board of Directors
The Board oversees the Chief Executive Officer (the “CEO”) and other senior management in the competent and ethical operation of the Corporation on a day-to-day basis and assures that the long- term interests of the shareholders are being served. To satisfy its duties, directors are expected to take a proactive, focused approach to their position, and set standards to ensure that the Corporation is committed to business success through the maintenance of high standards of responsibility and ethics.
If the board would just remove that bit about the "long-term interests of the shareholders" then they and Cook could do what they want, and not worry about what the street or shareholders think. And everyone would all still make money. Every publicly traded company should remove any verbiage that leaves them beholden to shareholders. Keeps to much of a stranglehold on corporations - particularly in this Internet-charged era of insane stock pundits and raiders like Carl Icahn.
This is only in Apple fans' heads.
Much as I am concerned, (most) Nokia Lumias didn't look/feel cheap for, what? - 2 years now?
That being said, as I mentioned before, I'm not too thrilled with 5c look. Not because it is plastic, but because it is too boxy. This is completely personal impression (and many will disagree), but while I'm finding boxy look good for metal-made products, boxy plastic looks a bit... more boxy; I'd prefer more organic, tapered at edges look.
Maybe I'll change my opinion once I get a chance to see 5c in person.
C is for Cook
S is for Steve
You already know which one is better /s
Here's the problem ... what does the plastic case get them?
They had to redesign a phone that people are going to put in a case anyway. So the whole color thing is ridiculous. The very fact Apple is selling a case for a phone that is being marketed based on its case color is ridiculous. If it were the bezel that was colored then maybe there would some rationale here for what they did. But it's not. Why not just keep making the previous year model and release a brand new case design every year? The net result would be the same and wouldn't require complete retooling.
I mean aren't they going to have to redesign the 5c at least every other year to continue to make it compelling? How long can they keep the same case design before the public starts looking elsewhere? So end the end, what does it actually save them, if they have to continue to support two phone designs at once, rather than a single design to gets downgraded over time?
Is it to keep the flagship phone separate and unique? In other words, to keep the number 2 model different from the number one? If so, will that actually work?
Very few people seem to realize how much of an aspirational brand Apple is in China, the most brand and status conscious consumer in the world today. It is, right now, the world's largest market for luxury cars. Apple cannot reach down to a lower demographic in China without risking its aspirational status. And the potential downside is even greater given the forecasts about where personal incomes are headed in the Middle Kingdom. Apple is wise to sit where it is and wait for the Chinese market to come to them rather than they coming to the Chinese market.
Nobody expects BMW or Rolex or Ducati (or Macs, for that matter) to sell a budget model, why do people expect Apple to do the same with the iPhone?
I get what you're saying but it's a totally different market, especially considering that 3rd party developers are involved. Apple sells millions of their products while BMW, Rolex, and Ducati are nowhere near that.
Consider that the iPhone5 most likely has a BOM under $200. Apple could honestly sell the 5C (which most likely cost even less than the 5 to make) for $450 and still have a grossly huge profit margin. Also, there something psychological with going under $500 in a person's mind. They begin to see the product not as cheap, or overly expensive, but closer to a mid tier product.
You can buy a Dell Inspiron laptop from Amazon for $300. Or a Sansa MP3 player for 30 bucks. Those are what most people take to be budget models. Apple's product lineup, like any other manufacturer, has a bottom end, but that doesn't mean that viewed from the perspective of the entire market, that bottom end is automatically a budget model.
Exactly. And your original point was that the 5C is a budget model. It's not. They're just offering variety at different price points. I get what you mean about your worries that the brand is putting out something less expensive, but I don't think it will water down the brand. It makes them more competitive, even if they are some of their own competition.