Cheap 'iPhone 5x'? Don't get your hopes up

Cheap 'iPhone 5x'? Don't get your hopes up

Summary: Rumors and pundit wisdom suggests that Apple is gearing up to release a cheap iPhone to compete against Android. But the case for Apple needing to release a cheap iPhone is a very flimsy one indeed.

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(Source: Apple)

I've no doubt that a new iPhone is on the way – the rumor mill is calling it the iPhone 5C, or iPhone 5S, or iPhone 6 – and while no one really knows what Apple will unveil, many pundits are predicting that a cheaper iPhone will be added to the line up.

The reasoning behind this is two-fold. First, Apple is fighting to compete against a tsunami of cheap Android smartphones, and, according to pundit logic – the only way to compete against cheap is to become cheap. Another problem that Apple is allegedly facing is that it needs to break into emerging markets, and in order to be able to do that it needs a cheap iPhone.

But we should be careful not to confuse pundit wisdom with genuine wisdom. Pundit wisdom would have Apple building $500 MacBooks, $5,000 television sets, and iPhones with 6-inch displays.

But fortunately for Apple, CEO Tim Cook doesn't listen to pundit wisdom. And it seems that Apple is doing just fine without their help.

The problem with a 'cheap' iPhone are many and varied. Here are just a few:

Just how cheap is cheap?

Pundit wisdom would have Apple building $500 MacBooks, $5,000 television sets, and iPhones with 6-inch displays.

Just how cheap should the new iPhone be? How much should Apple shave off the price to make it cheap enough to compete? A buck? $10? $50? $100? $250?

The problem with entering into a price war is that there's no bottom to it. Companies are willing to scrabble in the dirt for razor-thin margins just to try to succeed. Just look at what happened to the PC market.

But cheap is also no guarantee of success. The Android smartphone scene is dominated by one player – Samsung. The cheap strategy doesn't seem to work for most Android players, so it's hard to see how it would work for Apple.

Compromises galore

To make a cheaper product, Apple would need to compromise on the design. But where should Apple cut corners? Cheaper screen? Lousier processor? Smaller battery? Poorer finish? Less storage?

None of these sound like the makings of a compelling, popular, and well-respected product.

So where's the savings to be made?

Fragmentation

The iPhone and a cheap iPhone would set up some sort of fragmentation point that would have a knock-on effect somewhere down the line (probably the app store).

Apple's product upgrade cycle at present seems to focus on more power and better displays, but a cheaper iPhone would, by default, be an inferior iPhone, and this cheaper twin might not be able to run new apps, so developers would have to code around it.

Apple hasn't done this before, and it's hard to see the company doing it in the foreseeable future.

Why bother?

Why exactly does Apple need a cheaper iPhone? The existing iPhone is selling about as fast as the company can make them, and the company is pulling in billions every quarter.

Given healthy sales, why does Apple need to react like Android is presenting such a threat?

There's already a cheaper iPhone (in fact, there's two)

Apple is already shipping a cheap iPhone. In fact, it has two. You can pick up an iPhone 4S for $99 or the iPhone 4 for $0.99 with a two-year contract. When the next iPhone is released, it is likely that the iPhone 4S will slip into the $0.99 price point, and the flagship iPhone 5 will be on sale for $99.

Given this structure, why exactly does Apple need a cheap iPhone, and where exactly does it fit into the price and spec ecosystem?

Topics: iPhone, Android, Apple, iOS, Mobility, Smartphones

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19 comments
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  • Exactly right

    I don't see how a cut rate phone helps them.
    They are always going to have resistance in developing countries because of the "apple tax". With android the lower income consumer's money goes towards what is most important - the hardware. They don't care about the apple app ecosystem.
    SunFire23
    • ... or the google tax

      All Android phones come with the Google tax.

      Google's assumption that users of it's software have "no reasonable expectation of privacy".

      That may cut it with users with a near zero economic footprint. But I wouldn't build a business model around them.
      Henry 3 Dogg
    • You're missing the point...

      Yes, Apple has two "cheap phone" options. They are both old phone models. Consumers know they are the "old" phones. I know some people buy iPhones on price who have gone this route. Others shopping on price go for an Android device.

      What if the "iPhone 5C" uses a plastic body (like the iPhone 3G) and essentially iPhone 5 guts? Apple can flip the bit to enable "new phone only" features on the "5C", which rarely seem to be driven by any real technological limitations.

      Customers feel like they are buying a new phone, not last year's model. Apple sells more units and manages its supply and manufacturing chain better.
      RationalGuy
    • non-subsidized price in developing countries

      They need a cheaper "new" iPhone in developing countries that do not have subsidized contracts. This is why Android is winning. Who wants a 2-year old iPhone 4 with a 3.5" screen when there's NEW Androids that are just as cheap?
      ChazzMatt
  • They recently made a cheap itouch

    By shaving off features. So there is a precedent.
    Mac_PC_FenceSitter
    • A cheaper iphone

      "To make a cheaper product, Apple would need to compromise on the design. But where should Apple cut corners? Cheaper screen? Lousier processor? Smaller battery? Poorer finish? Less storage?"

      How about not making an obscene amount of profit, just a respectable amount.
      calfee20
    • There is no so thing as an "iTouch"

      *rolls eyes*
      RationalGuy
  • iPhone 5C

    We are seeing pretty credible photos on the rumor sites of the plastic "iPhone 5C," just as we did last year of the iPhone 5, so I think it is coming. That said, it is probably simply going to replace the iPhone 4 and 4S. Maybe Apple will go so far as to just have the 5C (with iPhone 5 internals) and the updated 5S (and not carry over the existing iPhone 5). The 5C can be the $0.99 or $99 subsidized option depending on capacity, and the 5S will sell for $199 subsidized. Unsubsidized the 5C can go for $450 in the US just as the 4 currently does, and $375 overseas if they release a smaller capacity version.

    Remember, the 4S still has the old port and the smaller screen. It makes sense to standardize on 4" screens and the lightning port. That's the real reason for the 5C.
    KPOM1
  • Cheaper iPhone

    I hope they make one for their own good.Or else... It is recession time in the rest of the world and no matter what they say on the news, there are more and more people with less income. They can make the new iPhone and make it as expensive as they want, but sooner or latter it will backfire. If only all the snobs buy one, that will soon not be enough to keep them afloat. People are buying Android phones not just because they hate Apple, or because they have "more" options of personalizing their phone, they are buying it because they have less and less money. And for less money they get something as good as Apple products.Sure some of the phones are made from plastic...who cares. As long as Apple will be a stubborn company who does not listen to any of their customers, they will be loosing customers. It may take some time, but it will come to that, when it will be too late. You just can not be as ignorant as them at this time. It worked out in 2007/9 and 10. But the way I see it, they are selling less and less of the phones. I remember a few years back, everyone wanted to own one, now the demand is far smaller. A new iPhone will sell but...Do not get me wrong, a 100€ Chinese no name Android phone, can do all the things or more that Apple iPhone 4S or 5 can do with Jelly Bean. Perhaps some of them not as good, and sure it has no Apple logo or status, but it is disposable, you do not care if you forget it, brake it, loos it, and it still serves you good for the year you are using it without breaking the bank or being tied to a phone company or plan.For some that is more than enough.
    mburnik@...
    • The poor and indigent...

      ...are not, and never have been, Apple's customer base. What would be the purpose of pandering to a customer base that has no money? They won't be buying overpriced accessories. They won't be buying apps. Apple's business model isn't predicated on one-time profits from selling a device, it is from persistent revenue streams. The whole infrastructure...from manufacturating to logistics to support, likely isn't worth the effort for a market that doesn't generate any additional profit. It's bad business to chase after customers that don't generate profit, or, even worse, cost you money. A customer I have to pay to keep isn't worth having as a customer. It would seem like common sense, but you'd be surprised how many people think they are entitled to be a customer for a particular product without returning any measurable benefit for the vendor.
      jvitous
  • CHeaper iPhone

    The reason they need a cheaper phone is not to satisfy US demand, it is for the emerging markets of which, there are no subsidies. In laces like China and India, they pay full price for a phone so, here in the us it cost about $600 for an unsubsidized phone, that is not affordable in emerging markets. $300-$350 is hence, the need for a cheaper phone. The iPhone 4S and 5 will still be too expensive to sell overseas, they need to make a version that is cost effective for consumers and Apple.
    Dennis Chesney
    • Re: Cheaper iPhone

      Why is there never any discussion about cheaper Jaguars, cheaper Mercedes, or cheaper Porches? If Godiva chocolates wanted to sell a $1.00 candy bar, they could - but they don't - and I never see anyone complaining about it.... Companies that tend to succeed over the long term generally understand and serve specific markets - and respect those market boundaries. Is that elitist? No - if you've already staked out a market and it serves you well, why undercut it? I'm not seeing Porsche, Mercedes, BMW, OR Godiva reaching down the price well to attract the 'masses' in emerging nations - they'll 'just' settle for the 1% - 5% that can entertain purchasing their products....
      earljgray
      • replay earljgray

        Well Audi A2, Mercedes A, BMW 1, Porsche Boxter,... to name a few of the cheaper versions of BRAND CAR MANUFACTURERS...even the Jag went with Ford platform to keep the price down...
        mburnik@...
        • replay earljgray

          I forgot the Audi A1, history is full of contradictions and people, companys, countries doing things they would not do, unless they had no other option, or to please the masses. Usually it all starts with a war....
          mburnik@...
  • Apple is at risk of repeating history.

    Think Macintosh.
    ye
    • How soon they forget

      Thank you for bringing that up. I'll bet they've never considered that.
      Robert Hahn
  • Cheap iPhone?

    $50 dollars cheaper than current prices would make next iPhone a "Cheapie", right?
    avanbrunt
  • iPhone Line Up

    How about this scenario:
    This year: iPhone 5s (32/64/128GB), iPhone 5 (32/64GB) and iPhone 5c (16GB) lineup starting at $199 for 32GB iPhone 5s, $99 for 32GB iPhone 5 and free for 16GB iPhone 5c subsidized (or $649/$549/$399-$449 unlocked) while phasing out iPhone 4/4s for carrier subsidy. Apple may still sell unlocked iPhone 4s in Apple store at full price but I double they will do that if 5s and 5c are released to carriers on top of 5.
    I understand that iPhone 5c won't make sense much in Apple price scheme next year if it's already free with carrier subsidy this year (supposed). How about no subsidized iPhone 5c next year and it can be purchased unlocked at $299-$349? That way, Apple can still maintain 4 types of phone on the market without interfering the carrier subsidized price scheme next year: $199 iPhone 6, $99 iPhone 5s and free iPhone 5 subsidized.
    Cun Con
  • Cheapo iPhone

    Why would Apple bother.
    The rumored iPhone 5C is expected [if rumors are right] to be a stripped down iPhone 5S. Meanwhile they are still selling iPhone 4, 4S and 5 - all cheaper or shortly will be even cheaper. All use iOS 7 [although some to limited functionality because of hardware differences].
    Unless Apple intends on dumping the old models or sell the 5C to to "developing" countries, it may just eat sales into the new full iPhone model.
    When the iPad mini came out, it ate into iPad [full] sales. Apple makes more money off the full iPad than the mini.
    Gisabun