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Report: Apple 'cheap' iPhone actually a mid-price device?

updated 11:00 pm EDT, Fri May 3, 2013

JP Morgan analysts think Apple will hit 'sweet spot' in prepaid market

Two analysts from Wall Street investment bankers JP Morgan have produced an analysis of possible scenarios for the rumored (but not announced) "low cost" iPhone model expected to debut later this year, aimed at the large worldwide "prepaid" market. Based both on research of existing entries in that market space as well as Apple traditions, Gokul Hariharan and Mark Moskowitz believe that when Apple does bring out the device, it will not be a cheap "bargain" iPhone but instead a "mid-range" entry that should cost between $350 and $400.

While still expensive by the standards of some developing markets, the price would represent a substantial discount from the existing iPhone 5, which costs more than $650 to purchase without a contract in the US and substantially more elsewhere. The pair believe Apple will follow the course set by the introduction of the iPad mini, which was far from the lowest-priced entry in its 7-to-8-inch category but significantly less than the full-size model -- and quickly came to dominate sales, reports AllThingsD.

The key, as seen in both the iPod nano and iPad mini products, is to make an iPhone that is very distinctly different from the premium iPhones, but still bearing the core features consumers want in its own high-quality design. This cheaper iPhone, which would be more affordable to buy outright, would sit comfortably in the middle of the range of smartphone prices -- a better unit than the junky low-end, not as expensive or bound to a contract as the flagship smartphones -- which is, by comparison with the two price extremes, lightly populated with worthwhile competitors.

The theory is in keeping with Apple's desire to maintain quality standards but find less-expensive options wherever possible. The Mac mini, designed from the ground up to be an entry-level Mac to entice potential "switchers," has been a popular mainstay in the desktop line and found additional uses as media- and file-server class devices. A lower-cost iPhone could likely have the effect of leading the industry into producing more mid-priced, higher-quality smartphones -- which could both accelerate the transition from feature phones as well as provide incentive for low-end smartphone users to upgrade a step further up to a better, more capable smartphone without a dramatic change in cost.

A "no-contract" iPhone could also be popular in markets beyond the "developing" economies, though the sometimes-accurate trade paper DigiTimes reports that the low-cost model would launch only in limited markets at first to gauge reaction. It would likely compete head-to-head with Samsung in countries where the Korean phone maker has done well, particularly China, India and Japan. A North American launch could also work for the sizeable prepaid market in the US, and make a desirable budget no-contract option for the holidays, students, international travellers, kids and other demographics.

The report from DigiTimes claims that Apple will produce less than three million units in its first run, suggesting a limited release if true. The JP Morgan analysts believe that Apple could "steal" some 20-25 percent of the mid-price prepaid phone market with their version over the course of a year in a range of devices that is currently dominated by Samsung.

by MacNN Staff



  1. benjitek

    Fresh-Faced Recruit

    Joined: 10-24-11

    Slow news day?

  1. Peter Bonte

    Fresh-Faced Recruit

    Joined: 08-27-01

    As if Apple would price a new model less than $200, a $350 starting point seems perfect for a lower cost model. That Apple will only produce a few million to start with is BS, this thing will sell much better than the iPhone 5(s), especially with a bigger screen.

  1. Spheric Harlot

    Clinically Insane

    Joined: 11-07-99

    Price it $100 above what people will easily pay, offer it in white, black, red, yellow, pink, and purple, watch people lampoon it the way they lampooned the iPod mini for being too expensive yet, and then see sales take off and completely obliterate most of the worldwide market.

  1. Arne_Saknussemm

    Forum Regular

    Joined: 04-05-11

    "obliterate most of the worldwide market"

    Yeah right, in your own particular "universe"

    Yet the weakening Apple Stock most likely will experience a lift welcomed by investors.

    Design wise it will be refreshing to see well executed (J.Ives) colorful devices if the spectrum of colors prediction comes true.

  1. Spheric Harlot

    Clinically Insane

    Joined: 11-07-99

    Originally Posted by Arne_SaknussemmView Post

    "obliterate most of the worldwide market"

    Yeah right, in your own particular "universe"

    You don't actually remember the iPod mini.

    We'll see about the worldwide market. As it is, they're growing US market share quite handily, despite not offering a device such as proposed in this story.

  1. winstef

    Fresh-Faced Recruit

    Joined: 02-12-06

    Will Apple do a plastic phone?
    Nope. The subsidy phone market messes up this move ... until iPhone dominance in the US slows. Follow the money; Apple gets about $450 per phone. Right now, Apple is expanding contracts with subsidy carriers, not the reverse.
    Nope. Apple's strongest instinct and history is to give buyers more reasons to purchase at a premium price. Leaping into the abyss, aka Dell hell, is not in the cards. Tie this into subsidy prices and the Nope gets louder.
    Maybe. Apple would need distinctive onboard features that allow it to charge enough to keep decent margins on a plastic phone. Possible, but what? Super security. Fingerprinting. Biometrics. A suite of Apple apps. Passport purchasing. Dunno.
    Yep. Wall Street expectations have been reset. This is good. No more is Apple expected to double its sales every week or so. Now it can deploy a cheaper phone with smaller margins without getting creamed. Again.

  1. Spheric Harlot

    Clinically Insane

    Joined: 11-07-99

    Apple makes the best product they can, positioning it at the high end, and eventually build slightly lower-market alternatives.

    They introduced the iPod mini, drying up the mid-level market, and then the iPod shuffle, which actually competed with the bargain-bin market despite being higher-priced.

    They've already done that in the past, to great success.

    They may not need whiz bang features. It might be enough just to be an iPhone that can withstand Samsung's ludicrous subsidies and sales commissions.

  1. jpadhiyar

    Fresh-Faced Recruit

    Joined: 10-16-12

    The J.P.Morgan makes a lot of sense actually. And besides that, earlier rumors too indicate this range (remember the $330 iPhone rumor?)

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