Neil Hughes
"It's time for a mid-range iPhone," analyst Chris Whitmore with Deutsche Bank declared in a note to investors on Monday. He believes Apple will offer a lower-end iPhone priced between $300 and $500 paired with a pre-paid voice offering.
Whitmore noted that of the addressable market of 1.5 billion mobile customers worldwide, two-thirds of those are pre-paid users. He sees a so-called "iPhone 4S," released alongside an anticipated fifth-generation iPhone, as a new category of device that would help Apple address that market.
If Apple were to price this "iPhone 4S" at $349, Whitmore estimates that Apple could have the product be incremental to its corporate gross margin without negatively impacting profitability.
"Apple shipped (about 87 million) units over the past 2 years which suggests it has reached only 6% penetration of its current addressable subscribers," Whitmore wrote. "Looking forward, we believe Apple has room to run both in terms of greater market penetration as well as incremental carrier additions going forward."
Whitmore sees an "iPhone 4S" that would look a lot like the low-end iPod touch. He estimates that an unlocked iPhone priced at $649 has a manufacturing margin of 70 percent, while the $229 low-end iPod touch has 38 percent margins.
"Using this framework, we believe an 8GB iPod touch with an RF module could be priced ~$350 (unlocked without a contract) and still generate healthy manufacturing margins of ~53%," he said.
Speculation of a contract-free entry-level iPhone geared toward the huge global prepaid market is of course nothing new. Just last week, a different analyst stoked the fire by declaring that a "mini iPhone" would give Apple a larger piece of a $70 billion worldwide market.
Wall Street watchers believe that a cheaper iPhone would be a meaningful way for Apple to expand the market of its smartphone business. Surveys based in China, where prepaid subscribers are the majority, show that hardware cost, service plan cost and upfront payment are the three largest hurdles, respectively, to iPhone adoption.
In addition to speculation and encouragement, there have also been media reports that have suggested Apple is working on a cheaper iPhone. In February, The New York Times revealed that Apple has looked into building a cheaper iPhone, but rebutted reports from The Wall Street Journal and Bloomberg that claimed the company is planning to release a smaller model about half the size of the iPhone 4.
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87 Comments
This kind of makes sense I suppose with all these conflicting reports about 'iPhone 5' and 'iPhone 4S' - on one hand we have a brand new design with completely new features, and on the other a phone which will look similar to the iPhone 4 and be merely an evolutionary upgrade.
With recent news of a China Mobile iPhone as well, it seems likely Apple will have to cater for a cheaper device in that market and frankly why wouldn't Apple expand its iPhone offerings beyond merely one device.
Now is the time. A 3" iPhone 4S and a 4"+ iPhone 5. Come on Apple, don't tell me we will have 'waited' 15 months for nothing, or rather an extra 3 months for a mere evolution to a revolutionary device.
Prepaid Mobile is the way to go in Countries Like India and China.
Apple Released Iphone 3GS in India This week for $450 (Unlocked)...For a 2 year old device this is still pricey by around $75-$100.
If they able to relase Iphone 4 for this price that will be Great (Once I5 released)
This kind of makes sense I suppose with all these conflicting reports about 'iPhone 5' and 'iPhone 4S' - on one hand we have a brand new design with completely new features, and on the other a phone which will look similar to the iPhone 4 and be merely an evolutionary upgrade.
With recent news of a China Mobile iPhone as well, it seems likely Apple will have to cater for a cheaper device in that market and frankly why wouldn't Apple expand its iPhone offerings beyond merely one device.
Now is the time. A 3" iPhone 4S and a 4"+ iPhone 5. Come on Apple, don't tell me we will have 'waited' 15 months for nothing, or rather an extra 3 months for a mere evolution to a revolutionary device.
I'd think the iPhone 4 base design will hold for the next iteration and that a plastic-backed iPhone with "modern" components could be used for a $350 model. For instance, the same display panel in the iPod Touch, with A4, etc.
In the future everyone will have an iPhone for fifteen minutes...
(with apollogies to Andy Warhol)
He estimates that an unlocked iPhone priced at $649 has a manufacturing margin of 70 percent, while the $229 low-end iPod touch has 38 percent margins.
"Using this framework, we believe an 8GB iPod touch with an RF module could be priced ~$350 (unlocked without a contract) and still generate healthy manufacturing margins of ~53%," he said.
This was clear to anybody looking at the price difference between an iPhone 4 (unlocked, 32 GB) and an iPod touch (4th generation, 32 GB), but this 70% raw margin on the iPhone is really one of the best money-making machines currently around.
Think of it, do you know any volume product that has 70% profit margins (and costing three figures)? And that carriers hiding that profit margins in monthly fees is the only real reason the iPhone has almost twice the profit margin of an iPod touch. Force carriers to simply mark on their monthly bill what of it is used to re-pay the loan they have you to purchase the phone (and force them to put a time limit on this) and suddenly handsets might actually be compared on price as well.