A Piper Jaffray analysis of global unlocked smartphone prices solidifies the firm's expectation that Apple will launch a low-cost iPhone later this year, with the new handset purpose-built to compete in the untapped market estimated to be worth $135 billion in 2013.
Apple's least expensive handset, the iPhone 4.
Following up on his report from early January, analyst Gene Munster on Tuesday reiterated his stance that Apple is likely to release a more affordable iPhone targeting developing regions like China and India.
"We believe a lower priced iPhone will be a positive for AAPL shares for two reasons," he writes. "First, despite its lower margin, it should accelerate gross profit growth given the size of the low-end market (we estimate $135B in 2013); second, investors have historically bought into AAPL ahead of major new product releases."
By taking available pricing in six international markets — Germany, UK, France, China, Brazil and India — Munster was able to come up with a snapshot of the low-cost segment. He notes that the lowest priced iPhone, the iPhone 4, is still 133 percent more expensive than the global average for a low-end smartphone, suggesting Apple is only skimming the top of the market.
As for Apple's other handset models, the iPhone 5 is 19 percent more expensive than comparable flagship handsets from rival manufacturers, while the iPhone 4S is 48 percent more than mid-range devices. This means that Apple's biggest gap in pricing is between seen in the low-end segment.
"This low-end segment is important given we estimate it is a $135B market in 2013 that Apple is currently not participating in," Munster writes. He notes the sector will account for 60 percent of smartphones, or 540 million units at a $250 average sales price.
In the core markets of China and India, the cost of an average low-end handset is $138 and $140, respectively. The iPhone 4 sells for an average of about 265 percent more in those countries. A similar report on Monday said Apple could triple its share of the addressable Chinese market and add billions of dollars in revenue by launching a low-end device.
Munster expects Apple to debut an affordable $199 iPhone in the September quarter and believes the company could sell around 37 million units over the remainder of 2013. That number would jump to around 96 million units for 2014 and 170 million units in 2015.
Rumors claim Apple is working on a device for emerging markets, with the unit built from low-cost materials like plastic.