Insiders "now confident" Apple will launch lower-priced, lightweight iPhone as early as June

Posted:
in iPhone edited January 2014
After discovering several unreleased iPhone prototypes through its research back in December, analysts at the investment research firm Topeka Capital are raising their convictions this week that Apple is gearing up to introduce one of these models at a much lower price point around mid year.

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"In late December, our research uncovered iPhones in different screen sizes for potential launch in May/June, allowing Apple to better bifurcate the market and pave the way for a lower-priced iPhone," analyst Brian White told clients in a research note Monday.

The analyst went on to say that he believes June would serve as the earliest point of entry for the device, which could be brought to market under names such as "iPhone mini" or "iPhone Air" given the prototypes' lighter weight due them being wrapped in plastic enclosures.

"We believe a $250 to $300 price point for a lower-priced iPhone would make sense and 58% below the $649 price point for an unlocked 16GB iPhone 5," White said. "A $250-$300 price range would also be competitive with China-based Xiaomi that offers a high-end phone experience at a mid- range price of ~$320 in Chinas."

Even with a gross margin estimated at 10 to 15 percentage points lower than existing iPhone models, the analyst believes the device's expected $250-to-$300 price point will allow Apple to significantly expand its reach in the smartphone market and broaden inroads in China, while also opening up opportunities in other BRIC countries such as Brazil, Russia, and India, where growth potential stands at its highest.
For example, we estimate that Apple was unable to address at least 60% of the smartphone market in 2012 (not to mention the feature phone market) due to the high price point of the iPhone, while we believe a high percentage of the annual smartphone unit growth of 688 million between 2012 and 2016 units (i.e., from 717.5 million to 1.4 billion) as estimated by IDC, will be outside of the high end market.
As for how Apple plans to shave down the retail price of this so-called lower-cost iPhone, White believes the device will adopt a more cost affordable display, case, memory, wireless, camera and processor.

"The case would be an interesting area of cost savings with a lower priced material (e.g., plastic) versus the aluminum unibody casing on the iPhone 5, while adding colors to excite consumers," he said.
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Comments

  • Reply 1 of 112
    asciiascii Posts: 5,941member
    The success of the iPad mini could be pushing them in this direction.
  • Reply 2 of 112
    geekdadgeekdad Posts: 1,131member


    Very interesting....but Apple has never really approached the lower end of the market. This would be a huge change of strategy for them. We will see......

  • Reply 3 of 112
    antkm1antkm1 Posts: 1,441member

    Quote:

    Originally Posted by AppleInsider View Post



    As for how Apple plans to shave down the retail price of this so-called lower-cost iPhone, White believes the device will adopt a more cost affordable display, case, memory, wireless, camera and processor.



    "The case would be an interesting area of cost savings with a lower priced material (e.g., plastic) versus the aluminum unibody casing on the iPhone 5, while adding colors to excite consumers," he said.


    Is he talking about basically the iPhone 3Gs with updated internals and lighter weight?  I'd love to see the return of the more comfortable, ergonomic design.  The chamfered corners softens the previously hard/cold feel of the iP4, in the 5, but it's still feels cold and uncomfortable to hold for being one of the most personally intimate devices Apple sells.

  • Reply 4 of 112
    Of course, anything is possible. But I just don't see Apple compromise on their high standards. A cheaper screen has been used on the iPod touch, but this line seems out of line:

    [I]As for how Apple plans to shave down the retail price of this so-called lower-cost iPhone, White believes the device will adopt a more cost affordable display, case, memory, wireless, camera and processor.
    [/I]
    I really can't see Apple skim on the current 'iPhone experience'. And will they save $$ with a cheaper camera? The darn thing costs a mere $18. So now what, they're gonna save a buck - or 10 - on this item, another 5 there, another 10 there? It doesn't look like they could half the MSRP with cheaper parts.

    But if they do, it might become:
    iPhone S (3") $299
    iPhone M (4") $499
    iPhone L (5") $649

    I'll just call the cheapest one the iPhone/s
  • Reply 5 of 112
    antkm1antkm1 Posts: 1,441member

    Quote:

    Originally Posted by geekdad View Post


    Very interesting....but Apple has never really approached the lower end of the market. This would be a huge change of strategy for them. We will see......



    iPod Nano?  iPod Shuffle?  Mac Mini?  Those are all targeted at the lower end of the market.  Just Apple's take on the lower end.  and that's only looking at Current generation models that are for sale.

  • Reply 6 of 112
    richlrichl Posts: 2,213member

    Quote:

    Originally Posted by PhilBoogie View Post



    I really can't see Apple skim on the current 'iPhone experience'. And will they save $$ with a cheaper camera? The darn thing costs a mere $18. So now what, they're gonna save a buck - or 10 - on this item, another 5 there, another 10 there? It doesn't look like they could half the MSRP with cheaper parts.


     


    On high volume products, a couple of dollars here and there can make a big difference to a company's margins. 

  • Reply 7 of 112
    antkm1antkm1 Posts: 1,441member

    Quote:

    Originally Posted by PhilBoogie View Post

     


    Well, there's no doubt the memory would be the first to get slashed 8GB only.  They did put a lesser display in the iPod Touch, and it's fine...acceptable compromise.  I can also see previous gen chipsets too.  The real question is this...how much does that affect price??  I know display and battery usually rank up there with most costly items.  The case I really doubt affects cost all that much, however stamping out plastic bodies is probably a lot easier to produce than milling a billion-and-one aluminum cases from CNC machines.


     


    My theory is, they will make the internal design much easier to assemble.  Keeping production costs down and production output up will be how they save money, not on components.  We have already seen the result of producing a finely crafted product.  Supply-chain issues and slower sales.  By producing a much simpler design that requires less tolerances, yet continues to hold a high level of quality, you will reduce production costs, speed output and produce higher profit at a lower margin.  If anyone can do it, Apple can.

  • Reply 8 of 112
    wizard69wizard69 Posts: 12,830member
    Lower end doesn't have to mean low quality. Apple has a pretty huge margin on iPhone they could maintain a reasonable margin on a lower cost phone while maintaining quality. By the way lower cost doesn't dictate a plastic device, they could easily die cast a natal housing for example.
  • Reply 9 of 112
    Apple can't really believe that a cheaper iphone is the way forward. The problem is the iphone is a premium product with a price tag to match which offers very little from its ios. You could buy a galaxy s3 mini get more from it than a 529 pound iphone 5. Apple talk a good story but not much else
  • Reply 10 of 112
    Shareholders want more money! They'll do anything, including change Apple's core strategy! lol
  • Reply 11 of 112
    blackbookblackbook Posts: 1,361member
    antkm1 wrote: »
    Well, there's no doubt the memory would be the first to get slashed 8GB only.  They did put a lesser display in the iPod Touch, and it's fine...acceptable compromise.  I can also see previous gen chipsets too.  The real question is this...how much does that affect price??  I know display and battery usually rank up there with most costly items.  The case I really doubt affects cost all that much, however stamping out plastic bodies is probably a lot easier to produce than milling a billion-and-one aluminum cases from CNC machines.

    My theory is, they will make the internal design much easier to assemble.  Keeping production costs down and production output up will be how they save money, not on components.  We have already seen the result of producing a finely crafted product.  Supply-chain issues and slower sales.  By producing a much simpler design that requires less tolerances, yet continues to hold a high level of quality, you will reduce production costs, speed output and produce higher profit at a lower margin.  If anyone can do it, Apple can.

    I hope you're right because I don't like how the article talks about them shrinking margins 10-15% for this rumored iPhone Mini.

    scott1612 wrote: »
    Apple can't really believe that a cheaper iphone is the way forward. The problem is the iphone is a premium product with a price tag to match which offers very little from its ios. You could buy a galaxy s3 mini get more from it than a 529 pound iphone 5. Apple talk a good story but not much else

    The S3 Mini is probably the worst example you could have used. It barely compares with an iPhone 4.
  • Reply 12 of 112
    herbapouherbapou Posts: 2,221member

    Quote:

    Originally Posted by PhilBoogie View Post



    Of course, anything is possible. But I just don't see Apple compromise on their high standards. A cheaper screen has been used on the iPod touch, but this line seems out of line:



    As for how Apple plans to shave down the retail price of this so-called lower-cost iPhone, White believes the device will adopt a more cost affordable display, case, memory, wireless, camera and processor.



    I really can't see Apple skim on the current 'iPhone experience'. And will they save $$ with a cheaper camera? The darn thing costs a mere $18. So now what, they're gonna save a buck - or 10 - on this item, another 5 there, another 10 there? It doesn't look like they could half the MSRP with cheaper parts.



    But if they do, it might become:

    iPhone S (3") $299

    iPhone M (4") $499

    iPhone L (5") $649



    I'll just call the cheapest one the iPhone/s


     


    They need a 4" device for $400 or less considering the Nexus 4 sells for $360 and is a much better phone than the 4s and the 4. A low price 5" would be nice but I guess the big screen iphone will be high end so expensive, unless they do one with the same resolution as the iphone 5.

  • Reply 13 of 112


    first off, the iphone 5 is too light for some reviewers


    2nd, for most investors, low cost means lower margin... and that means less profit


    3rd, a couple weeks ago, it was a 5"diag iPhone that everyone felt apple 'must' make to make inroads against the Galaxy.


     


    Well, I believe a larger iphone before a smaller one, unless the wristwatch device is a phone (and a iPod nano) (iphone nano)... but it won't be cheap.


    squeezing the margins out of the iPhone 4 makes more sense for another year and fit the low end specs well (runs just about any 4s app, yet no Siri, no LTE, no large[r] screen, and will likely be even farther behind after iOS7 is out).  


     


    Even with that, it makes no sense, unless apple sees a whole new factory capacity coming online, it makes no sense to take up production capacity with a phone with such a low ASP (meaning it would have to sell 2-3X the flagship to 'earn' it's production space).


     


    unless there is a breakthrough in ITMS that makes it's the major profit center, or a major major risk from the Kindle space (a kindle phone), where Amazon makes a play to drive eyeballs away from the ITMS ecosystem, I can't seek Apple driving their ASP/gross margins down  for 'market share'


     


    [Edit:  Finally read Asymco this morning.   If you read into this the fact that ITMS is now projected to be a larger profit center than Mac by year's end...  the play for uber cheap phone for the app/media/content play is rationalized....That said, I still stand on the premise that selling the iPhone 4 'at cost' is likely a better play than building a new phone from scratch.]

  • Reply 14 of 112
    blackbookblackbook Posts: 1,361member
    herbapou wrote: »
    They need a 4" device for $400 or less considering the Nexus 4 sells for $360 and is a much better phone than the 4s and the 4. A low price 5" would be nice but I guess the big screen iphone will be high end so expensive, unless they do one with the same resolution as the iphone 5.

    That's all never gonna happen.

    Why in the world would Apple make a phone identical to the 5 or with a larger screen than the 5 and sell it for half the price?

    That's a ridiculous assumption that they would do that to price match the Nexus of which is selling poorly.

    The cheaper iPhone I would assume will either have a smaller screen or a crappier screen. I personally prefer smaller high quality over a 4 inch low quality screen.
  • Reply 15 of 112
    rogifanrogifan Posts: 10,669member

    Quote:

    Originally Posted by ascii View Post



    The success of the iPad mini could be pushing them in this direction.


    Yeah and the mini isn't plastic. Not sure why all these "analysts" think a less expensive iPhone has to be plastic.  I'd love it if they took cues from the iPod touch in terms of design.  Maybe Apple is leaking this plastic nonsense to really throw people off.

  • Reply 16 of 112
    neilmneilm Posts: 620member
    iPhones are going to be bigger! No, wait, they're going to be smaller! Or cheaper! Or not!

    :yawn:
  • Reply 17 of 112
    A lower priced phone specifically designed for emerging markets like India/China makes sense. Just in China alone, this lower priced option would give you access to nearly half a billion more potential customers. What I would not do, is have it compete in the US, EU, etc... with the current full featured iPhone.
  • Reply 18 of 112
    herbapouherbapou Posts: 2,221member

    Quote:

    Originally Posted by blackbook View Post





    That's all never gonna happen.



    Why in the world would Apple make a phone identical to the 5 or with a larger screen than the 5 and sell it for half the price?



    That's a ridiculous assumption that they would do that to price match the Nexus of which is selling poorly.



    The cheaper iPhone I would assume will either have a smaller screen or a crappier screen. I personally prefer smaller high quality over a 4 inch low quality screen.


     


    They are already selling a cheaper phone with a smaller screen, its called the iphone 4...  


     


    The most urgent need for a low cost phone is in emerging market. Apple is suppose to design the best hardware for the customers right?  Well those guys can only afford one device, so they need something with a very long battery life and a decent screen size (4"+) for $300 max unlock. Its a matter of putting the best possible specs without creating bottlenecks or speding too much on one particular component, so a well balance phone. If Apple is so "talented", they should be able to come out with something. I would aim for a 20% margin using old components already being mass produce for there other device, exept for the screen and casing. Spreading the ecosystem is key here.


     


    The key elements of emerging markets situation is this:


    * Unreliable electrical grid with frequent power outage or no connection to the power grid at home


    * No telco land lines (cable or phone)


    * Very low income.


    * They can only afford one device ( computer,phone, tablet, ipod) so the obvious choice is almost always a phone.


     


    I am sure people in the US would consider the Apple emerging market phone like garbage, but it could still be a premium product for billions of people, giving them acces to the Apple ecosystem.

  • Reply 19 of 112


    iPhone Nano, etc. 


     


    Might make a lot of sense if they maintained the build quality and continued to make user experience the top priority. 

  • Reply 20 of 112
    dasanman69dasanman69 Posts: 12,980member
    blackbook wrote: »
    I hope you're right because I don't like how the article talks about them shrinking margins 10-15% for this rumored iPhone Mini.
    The S3 Mini is probably the worst example you could have used. It barely compares with an iPhone 4.

    It barely compares to the SGS 3.
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