Benedict Evans:
A new, cheaper, high-volume iPhone would have the potential to mitigate or even reverse this trend. Clearly, like current low-end Android, it would sell to a demographic with a lower average engagement and purchase rate and so the average iOS rates would drop. However, it would mean that iOS’s reach would expand significantly at the expense of Android. How would a $200 or $300 iPhone sell? Easily double digit millions, possible up to 50m units a quarter.
Great article.
I think the low cost iPhone is a bad idea. They should have thrown the focus toward building a competitive product for the Galaxy Note audience. Apple should be less concerned about capturing low-end customers, and ensure they retain high end customers. Over and over again I hear the lucrative “high engagement” iPhone customer looking towards Android because of screen size. Personally, I like the size of the iPhone, but I know of many who jumped ship solely based on a larger screen. I think Apple’s existing “low cost” strategy of selling old models is just fine, and building a new form factor is wasted energy that could be spent better elsewhere.
Sounds to me like Apple is now chasing Android. They’ll make a large screen Iphone sooner or later to compete with the Note.
You make sense for the US. You don’t for many, many other countries where there are no subsidies and $800+ is simply unaffordable (sometimes it’s closer to $1000 due to customs/tariffs). Even $350 will be hard to swallow, but over 2-3 years it’s more or less affordable.
Yeah, a couple years ago the front-line was strong with “we don’t need one” then “Apple is genius for making older models the low cost version.” [can’t argue w/ the last, it was a good move]
It irks me to see so many grasping at the same BBC straw as a definitive factor in determining iOS dev as being N times faster as Android.
Really…it’s a fruitless argument neither side will ever win.
Ha Ha. No.
focus toward building a competitive product for the Galaxy Note audience.
The Galaxy Note audience is isn’t as large as the Buy A Discounted iPhone 4 audience? The phone that sold 10 million in over 4 months is an indicator in a market where the iPhone can sell 5 million in a weekend?
Ha Ha. Thanks.
It’s not the volume of customers that matters — Android has already won volume. It’s the kind of customer. Apple currently has the advantage of having the most valuable customers who are highly engaged and didn’t just opt for the free “smartphone” in a store. What I’m concerned about is that the high quality customers are being wooed by bigger screens. With that said, I certainly think Apple should continue to offer an inexpensive/free phone, but I question whether or not their energies on a new form factor could have been better served on a phone that competes at the high end. Also, I reiterate that I love the smaller iPhone screen — I want something that fits nicely in my pocket. But, it certainly seems that a lot of people have size envy — and those people are the sort of high value customers Apple needs to hold on to.
I respectfully disagree with this assertion. Ideally Apple would like to continue producing premium products at a top-tier. But reality dictates otherwise, in order to allow IOS to prevail over Android globally. A low-cost alternative is nothing but required in order to keep up with the masses at this point.
The ecosystem only thrives when developers are focused on developing for it. The sheer volume of android users, although not particularly “rich” is forcing Apple to attack in order to defend their developers base.
I hope they have a 40%+ margin on the low-cost iPhones, and that they come up with some clever way to subsidize them for users. iAds on lock-screen is one possible way.
Would not be surprised if Apple only offered it through their retail store and web store. This would certainly help with getting people into the stores and that´s always good.
This seems off. As I remember it, they pretty much made the older version a lower cost version as soon as AT&T allowed it to happen (AT&T called several of the shots due to that exclusivity agreement when the iPhone first came out). And this was more than a couple of years ago: the iPhone 3G began selling at $99 (plus contract?) in July 2009 when the 3GS arrived on the scene. I don’t remember anyone saying we don’t need a low cost version, and when offered the lower priced last model has sold like hotcakes, keeping Apple’s slice of the mobile phone pie pretty large.
My experience with underpowered phones that supposedly run the current OS has been bad. In fact, I’m never going to buy another Samsung phone because of my experience with one of their underpowered midrange phones. So, I hope this rumored lowcost iPhone isn’t underpowered — it’ll just devalue the whole brand.
Off by a few years, wasn’t meaning to be exact. I just remember the podcasts and posts about how genius they were for making that move.
Thanks for pointing out that the Note can’t match the sales of Apples two year old phones? You are welcome.
Still are. While the competition craps out phones on a near daily basis, Apple realises economies of scale by using an existing design as the entry level phone and still outsells dozens if not hundreds of other phones.
Genius, indeed.
Agreed. As several have pointed out, this will be a “low cost” phone, not a cheap phone.
No argument there at all. It is just the tech pundant angle calling their move genius because a low-cost phone is not required. Apple did it “right” but now that tune is changing to the exact opposite.
Long has the mid-range Android phones been lauded as crap yet the idea of a mid-range iPhone has an assumption of coming w/ a halo. It is the arrogance in the wake of backtracking that’s laughable to me.
[not speaking specifically about Jim here but the whole landscape]
It is not ” the exact opposite”. Because lauding Apple’s ability to sell a near three year old iPhone as it’s low cost phone was not celebrated as the end all, be all of Apple’s strategy forever and ever. The market has changed, Apple has changed, and now Apple seems on the verge of changing their strategy. And given the market conditions the strategy is arguably correct.
Apple did not need a “cheap phone” when Apple entered the market, it hasn’t needed a “cheap phone” to grow to this point, and if the reports are to be believed it has not relented and will suddenly make a “cheap phone”. But it may have decided that the time is right for a lower cost phone for emerging markets. If you can find a claim from the standard Apple press that Apple would under no circumstances make a phone for emerging markets, go ahead and link it. In fact, most of what you will find are assertions that Apple will never follow the strategies of other mobile handset makes and shit out a collection of underpowered disposables to try to compete in every single possible niche. Pointing out that Apple was not going to play that game is not an assertion that Apple under no circumstances would change it’s current strategy. Only a dullard refuses to change his mind when the facts change.
Maybe I didn’t clarify properly but you made my point. I agree 100% with your comment as it is exactly what I meant.
Notice I said pundants, never Apple. The one’s backtracking are the laughable one’s.
Understood. I apologise for my tone.
No issue. I didn’t read any tone into it.
I always appreciate good discussion. 🙂