Rumored Budget iPhone May Not Come Cheap

6 May


Apple’s so-called “budget” iPhone may not be as affordable as speculated, according to JP Morgan’s Gokul Hariharan and Mark Moskowitz. The two suggest that the rumored iPhone would cost around $US 350, which would be “cheap” for a typical iPhone device, but considerably more expensive than what many may be accustomed to seeing from an “affordable” smartphone (ie. Google’s $US 299 Nexus 4).

One interesting theory suggests that Apple is utilizing the exact same strategy that had been applied to the iPad mini. Before the arrival of Apple’s 7.9-inch device, the most expensive tablets on the market could cost as much as $US 500 to $US 600 to purchase, whereas the cheaper models—for instance, the Nexus 7 and Amazon’s Kindle Fire—hovered around $US 200. By releasing an iPad model priced slightly less than the 9.7-inch iPad but featuring most of its core qualities, Apple essentially helped itself discover –if not create— a consumer group willing to pay higher than average prices for quality mid-end products. As Hariharan and Moskowitz’s report implies, the Cupertino company will attempt to recreate a similar scenario through a “mid-entry” iPhone that falls between the low cost Android smartphones and high-end handsets like the iPhone 5. A more thorough picture of the price segments believed to be targeted by Apple can be seen in the graph below (originally created by IDC):


Picture originally from: IDC 3Q12 price data

It’s worth noting that well before the iPad mini seized the tablet market, Apple enjoyed similar levels of successes with the iPod nano and the Mac mini, both of which came out as mid-level devices that featured a noticeably higher price point than the low cost market alternatives. Like the iPad mini, the iPod nano managed to generate immense revenue and profits for Apple despite cannibalizing the sales of traditional iPods and carrying a price tag that is a tad above the “affordable” level. The miniature iPod device, on a further note, also managed to give the Cupertino company a near insurmountable lead in the MP3 player market and paved way for years of record iPod shipments.

As of this moment, Samsung’s $US 200-$US 500 handsets account for more than 35% of the “mid-priced” smartphone market. In the event that Apple is serious about releasing a “budget” iPhone model and chooses to price it in the range of $US 350 to $US 400, within twelve months time, the device is predicted to claim approximately 20 to 25% of the market.

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