Apple's iPhone 5c bet: Mass market without lowest pricing

Tim Cook and Apple management have said repeatedly that they don't do cheap. It's unclear whether that bet ultimately backfires

Apple CEO Tim Cook told Bloomberg BusinessWeek that the company never set out to make a low-cost phone with the iPhone 5c.

In an interview with BusinessWeek, Cook said the objective was to "sell a great phone and provide a great experience, and we figured out a way to do it at a lower cost.”

That lower cost wasn't low enough for many analysts. In the U.S. the iPhone 5c goes for $99 with a two-year contract and that's a good deal. Overseas, the iPhone 5c will run you $550 unsubsidized, a price tag that's too high to make a dent in markets like China.

Previously:  Apple iPhone 5C freakouts unwarranted

The conundrum highlighted in the BusinessWeek story revolves around whether Apple wants to be BMW or a mass market brand. My hunch is that Apple is really trying to thread the needle between the two points with the iPhone 5c.

For instance, Wal-Mart is offering the iPhone 5c at $79 with a two-year contract. It's unclear how Wal-Mart did that other than making it clear it could move volume. Perhaps other retailers follow.

Here's a possibility for all the iPhone 5c naysayers when it comes to emerging markets.

  • Apple gets more scale in developed markets with the iPhone 5c.
  • Component costs come down due to volume.
  • Apple cuts deals with carriers in emerging markets and lowers the effective cost. Apple doesn't have to be the cheapest phone in China just in the ballpark.

Cook and Apple management have said repeatedly that they don't do cheap. It's unclear whether that bet ultimately backfires, but there's a third way that may pay off: Low-cost enough with a dash of premium relative to cheap Android smartphone.

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