Apple sold iPods at affordable price points, so why not the phones? The problem is that $350 is still expensive for older model phones with meagre and unexpandable storage.
Because you can't make an iPhone nano that has no screen and severely limited storage to meet the price point.
But Apple can't sell 5s for $350 and make any decent profit. That's what Android does. Sell alot of cheap product with no profit.
That's not obvious to me, but if you have numbers to back it up I would reconsider my position.
Some back of the envelope calculations:
Apple's margins on the iPhone overall are between 50 and 60 percent. The 's' models tend to have better margins, since they use the same physical form as the previous models, so I'll assume the 5s had margins of 60 percent.
Apple's margins on the Mac are about 20 percent. The Mac is not cheap crap and Apple makes more profit off the Mac than any PC maker does off of PCs, so I think it is totally reasonable for Apple to make 20 percent margins on the lowest priced iPhone.
With an initial selling price of about $650, that 60 percent margins means the initial cost was about $260.
If Apple were to sell a 5s for $350 and get 20 percent margins, it would mean the cost of the 5s would need to be $280. If Apple were to sell a 5s for $250 and get 20 percent margins, it would mean the cost of the 5s would need to be $200
The biggest costs drivers in the iPhone are things that are the screen, the SOC, and the LTE modem. All of those things benefit quite a bit from refinements in manufacturing process over time. For example, the A7 is fabbed on a 28nm process which was a fairly new process at the time. Now, it's a very mature process and the foundry has a lot more experience fabbing the A7 on this process. A similar story applies to the modem and the screen.
So.... I think it is highly likely that Apple can sell a 5s for as little as $250 and still make Mac-like profit margins. If that could drive sales growth in places like India I think it's totally worth it.
iPhone 6 Failure? Illustrate your claim with data or you're not different from a fucking troll.
Uttered by the boss: 60% of iPhone users didn't upgrade to 6 series...That is a failure. 6 series didn't sell to Apple's very own user base.
40% upgrade rate (measured on what date?) sounds pretty damn amazing to me. What is the comparative figure for previous generations, since a single data points is useless? And how many did they sell to first time customers? Loads is the answer, the 6 and 6+ were blockbuster smashes. The 6S and 6S+ comparatively underperformed because they couldn't match the spike of pent-up demand that met the 6, but were certainly not failures.
Uttered by the boss: 60% of iPhone users didn't upgrade to 6 series...That is a failure. 6 series didn't sell to Apple's very own user base.
40% upgrade rate (measured on what date?) sounds pretty damn amazing to me. What is the comparative figure for previous generations, since a single data points is useless? And how many did they sell to first time customers? Loads is the answer, the 6 and 6+ were blockbuster smashes. The 6S and 6S+ comparatively underperformed because they couldn't match the spike of pent-up demand that met the 6, but were certainly not failures.
I don't know the comparative figure for previous generations, different stats exist on the web... Only Apple can have the correct stats, but thanks to whatever they have, they finally decided to give 4 inch a boost...
I edited this reply several times to constrain myself. What I say is clear cut: iPhone users rejected large screens with a majority of 60%. Whether this is a "failure" or not in analysts' paradigms, I don't discuss...
The 5s is over. Gone. They kept it around because that size sells, and the internals are great. Remember the 6 is only approx 20% faster than the 5s, not the usual annual doubling of performance. For those that have it, it's a great phone. But those who want a smaller iPhone, that's the new model.
Fairwell, 5s.
If if you want a cheap phone, get an Android. I have an Android as a spare phone. 4.5", 5MP camera. It cost $29. I can remote control my Fuji camera with the Fuji app, play Crossy Road, and access Apple Music on there.
Having a new iPhone cheap would lower ASP and also stop iPhone from being viewed as such a premium item.
40% upgrade rate (measured on what date?) sounds pretty damn amazing to me. What is the comparative figure for previous generations, since a single data points is useless? And how many did they sell to first time customers? Loads is the answer, the 6 and 6+ were blockbuster smashes. The 6S and 6S+ comparatively underperformed because they couldn't match the spike of pent-up demand that met the 6, but were certainly not failures.
I don't know the comparative figure for previous generations, different stats exist on the web... Only Apple can have the correct stats, but thanks to whatever they have, they finally decided to give 4 inch a boost...
I edited this reply several times to constrain myself. What I say is clear cut: iPhone users rejected large screens with a majority of 60%. Whether this is a "failure" or not in analysts' paradigms, I don't discuss...
I don't know the comparative figure for previous generations, different stats exist on the web... Only Apple can have the correct stats, but thanks to whatever they have, they finally decided to give 4 inch a boost...
I edited this reply several times to constrain myself. What I say is clear cut: iPhone users rejected large screens with a majority of 60%. Whether this is a "failure" or not in analysts' paradigms, I don't discuss...
How did you come up with 60%?
Cook: Last question first, the number of people who had an iPhone prior to the iPhone 6 and 6 Plus announcements, so this was in September of '14, that have not yet upgraded to a 6, 6 Plus, 6s, or 6s Plus is now 60 percent. So another way to think of that is, 40 percent have, 60 percent have not.
Give Tim Cook some credit. He's not going to pay more for iPhone 5s components today because the volume is lower! That's just stupid!
In all likelihood, Apple/Foxconn is sitting on a pile of inventory of those components from a chunky last order, before the lines were switched off for good. These components would be dirt cheap today!
Secondly, out of Apple's 39% margins, most of the margins come from high storage phones. They don't make the same margins on the 64GB phones as they do on 16GB. So I don't see why they can't make even lesser margins on smaller cheaper phones.
Are you saying the iPhone 5S is rubbish? The analysts may have got the pricing wrong but in the past Apple have sold older models at reduced prices such as the 4S, so there is nothing wrong with continuing the price reduction idea with the 5S if a new model replaces it.
As noted before there are many of us who do not want a phone bigger than the 5 Series and who have not renewed our iPhones because we do not want the larger 6 Series. The introduction of the new 4 inch iPhone is important because Apple will need to make decisions on how far to upgrade the hardware and how the pricing fits in with the established 6 and 6S models.
It's not the fact that the phone might drop in price as Apple has always done, but by the incessant view by some that they need to offer a "cheap" phone. If Apple follows their pattern, the original iPhone 6 would become the entry level phone in the Fall. Those who clamor for the "cheap" phone always cite developing markets. Fact is, those markets overwhelmingly want and purchase larger screens as their phone is often their only device.
In addition, I wuld seriously doubt that Apple could ever remove enough cost from the 5S to PROFITABLY sell it for $350. There is a floor to how inexpensively they can make that phone.
The biggest cost of a new phone is all the model specific tooling both manufacturing and assembly. Apple is is bound to have written this down completely by now for the 5s, so actually I reckon they can make one very cheaply indeed, if they wanted to, which is a different matter!
Cook: Last question first, the number of people who had an iPhone prior to the iPhone 6 and 6 Plus announcements, so this was in September of '14, that have not yet upgraded to a 6, 6 Plus, 6s, or 6s Plus is now 60 percent. So another way to think of that is, 40 percent have, 60 percent have not.
There are still millions of older iPhones out there. If someone got a 6/6s they most likely sold a 5/5s/5c that's going to be used for at least a year but the new owner. You're never going to get 100% upgrading.
Apple sold iPods at affordable price points, so why not the phones? The problem is that $350 is still expensive for older model phones with meagre and unexpandable storage.
Because you can't make an iPhone nano that has no screen and severely limited storage to meet the price point.
He was referencing the iPod Touch which was a fully compatiable iOS device selling at $199. Not updated for a while though.
I don't know the comparative figure for previous generations, different stats exist on the web... Only Apple can have the correct stats, but thanks to whatever they have, they finally decided to give 4 inch a boost...
I edited this reply several times to constrain myself. What I say is clear cut: iPhone users rejected large screens with a majority of 60%. Whether this is a "failure" or not in analysts' paradigms, I don't discuss...
How did you come up with 60%?
Cook: Last question first, the number of people who had an iPhone prior to the iPhone 6 and 6 Plus announcements, so this was in September of '14, that have not yet upgraded to a 6, 6 Plus, 6s, or 6s Plus is now 60 percent. So another way to think of that is, 40 percent have, 60 percent have not.
I have a 6, so I havent updated for the 6s, or 7 but I am very much part of the installed base and I download 3-5 apps a month. I use apple pay. I have an Apple Music sub.
Comments
Some back of the envelope calculations:
Apple's margins on the iPhone overall are between 50 and 60 percent. The 's' models tend to have better margins, since they use the same physical form as the previous models, so I'll assume the 5s had margins of 60 percent.
Apple's margins on the Mac are about 20 percent. The Mac is not cheap crap and Apple makes more profit off the Mac than any PC maker does off of PCs, so I think it is totally reasonable for Apple to make 20 percent margins on the lowest priced iPhone.
With an initial selling price of about $650, that 60 percent margins means the initial cost was about $260.
If Apple were to sell a 5s for $350 and get 20 percent margins, it would mean the cost of the 5s would need to be $280.
If Apple were to sell a 5s for $250 and get 20 percent margins, it would mean the cost of the 5s would need to be $200
The biggest costs drivers in the iPhone are things that are the screen, the SOC, and the LTE modem. All of those things benefit quite a bit from refinements in manufacturing process over time. For example, the A7 is fabbed on a 28nm process which was a fairly new process at the time. Now, it's a very mature process and the foundry has a lot more experience fabbing the A7 on this process. A similar story applies to the modem and the screen.
So.... I think it is highly likely that Apple can sell a 5s for as little as $250 and still make Mac-like profit margins. If that could drive sales growth in places like India I think it's totally worth it.
I edited this reply several times to constrain myself. What I say is clear cut: iPhone users rejected large screens with a majority of 60%. Whether this is a "failure" or not in analysts' paradigms, I don't discuss...
They kept it around because that size sells, and the internals are great. Remember the 6 is only approx 20% faster than the 5s, not the usual annual doubling of performance.
For those that have it, it's a great phone.
But those who want a smaller iPhone, that's the new model.
Fairwell, 5s.
If if you want a cheap phone, get an Android. I have an Android as a spare phone. 4.5", 5MP camera. It cost $29. I can remote control my Fuji camera with the Fuji app, play Crossy Road, and access Apple Music on there.
Having a new iPhone cheap would lower ASP and also stop iPhone from being viewed as such a premium item.
http://www.imore.com/tim-apples-ceo-q1-2016
In all likelihood, Apple/Foxconn is sitting on a pile of inventory of those components from a chunky last order, before the lines were switched off for good. These components would be dirt cheap today!
Secondly, out of Apple's 39% margins, most of the margins come from high storage phones. They don't make the same margins on the 64GB phones as they do on 16GB. So I don't see why they can't make even lesser margins on smaller cheaper phones.
that was last year.
I have a 6, so I havent updated for the 6s, or 7 but I am very much part of the installed base and I download 3-5 apps a month. I use apple pay. I have an Apple Music sub.
This year I will update it.