Our Version‘s Aaron Steele explains why he believes “there will not be two different iPhone 5 models in September.”
Steele writes, “This sounds an awful lot like those iPhone nano rumors that were so common a few years ago, doesn’t it? And I think the end result is going to be the same: nothing will materialize.”
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“First, when has Apple ever wanted to address the ‘cheap’ anything market? You could argue that they did this with the Mac mini, but I wouldn’t call that a phenomenal success and I don’t think most die hard Windows users would call a $599 computer ‘cheap,'” Steele writes. “Secondly, I am not convinced that Apple is going to expand their presence in the phone market the same way that is commonplace in the computer market–with a portfolio of a wide range of products.”
Steele writes, “I say don’t hold your breath for a second iPhone 5 model for the pre-paid crowd. Look for Apple to address this market with the iPod touch.”
Read more in the full article here.
Related article:
RUMOR: Apple’s next-gen iPod touch to get 3G data connectivity – July 8, 2011
I don’t understand this fascination with Apple addressing the “cheap” smartphone market. They sell a $49 phone. When the iPhone 5 is released, precedent suggests that the iPhone 4 will be reduced in price to $49.
I don’t believe that there is any reason that Apple needs to have a “free” phone. In fact, it dilutes their brand. Free does not engender customer loyalty. The customers think of the phone as disposable since they didn’t pay for it.
It’s the same fascination people have with Apple addressing the cheap computer market.
And I agree, it does not engender customer loyalty.
Its not the phone that is going to be cheap, it is the plan that is going to be cheap; that is what I believe is coming.
Maybe not this year, but I think Sprint is going to offer a data only solution with 2GB per month. That data is where your voice and SMS is going to go over.
I find it hard to believe that a carrier would offer a data only play for a phone. That means they lose out on all of that voice revenue.
This is probably why we haven’t seen a 3G iPod touch up to this point. I imagine Apple has a hard time selling that to the carriers. My thought is that they will have finally been able to do this due to the success of the iPad. We’ll see.
You haven’t seen a 3G iPod touch yet because it would take from iPhone sales. The carriers want both voice and data sales, but esp. data. A 3G iPod touch could let people buy just a data plan (much like the iPad), and then use Skype or similar apps to make calls, all over the data plan. You won’t see a 3G iPod touch because people could replace iPhones with iPod touches, and carriers would be angry. People don’t carry iPads for phone calls; they’re just too big.
Good point.
Do carriers really want data more than voice (I don’t know)? Isn’t data more expensive for the carriers? Obviously the world is moving to heavier data use, but I’m just wondering which is cheaper for the carrier.
iOS 5 will support iPhone 4, iPhone 3GS and the next-gen iPhone.
Why not keep 3GS at $49 for a while, offer $99 iPhone 4, and then the $199, $299 tier for the iPhone 5. Originally, the 3GS went to the $99 price point, before the more recent $49 price. Maybe after a while they could drop it lower, but if it’s going to be supported, keep the 3GS as the “cheap” iPhone. No need to create an entirely new product line, and the iPhone 4 should not be dishonored by being branded “cheap”.
> Why not keep 3GS at $49 for a while…
There is ONE very good reason. As long as iPhone 3gs is sold “as new,” Apple will be obligated to support it with iOS upgrades during its two-year contract period. They are being sold as new right now, so presumably, iOS 6 (next year’s upgrade) will need to support iPhone 3gs. If it’s sold for another year, iOS 7 will need to support iPhone 3gs. The need to support that old ARM processor, lower system RAM, and a display that is not “Retina” will be a drag on advancement of the iOS platform.
I also think iPhone 4 is “too good” to be sold as the new $49 iPhone, whereas iPhone 3gs was significantly inferior to iPhone 4. It will steal away sales of the next iPhone. And $99 is too close to $199 to make a difference and justify production of both iPhone 4 and the next iPhone.
I think Apple will surprise us with a completely new and distinct phone product. It will be sold as the new $49 iPhone and will have built-in “smart” features, but will be separate from the iOS line. Apple will ask for a $200 subsidy instead of the current $400 (for iPhone 3GS), so it will be both cheap to buy and cheap(er) to own during its two-year contact (sold with no contract for $249). No one who wants a “real” iPhone will choose it, but it will be highly desirable to the hundreds of millions of customers who buy “feature phones” and currently do not consider iPhone due to total cost of ownership.
I know!! They’ve been doing this for years, fer cryin’ out loud. Hello! Why engineer, market and build a new phone when you already have a perfect strategy for the lower end. For those fostering this rumour, definitely click whoring based on “educated” opinion.
No Apple doesn’t need a “cheap” or “free” iPhone, but a reasonably priced (ca. $300), dual GSM/CDMA chip, no-contract iPhone which could run on T-Mobile, AT&T, Verizon and various pay-as-you-go options like Virgin Mobile would be a huge. Many people want an iPhone and they don’t want or need to pay ridiculous monthly data fees for two years.
That’s not reasonably priced; that is, for a smartphone, extremely cheap. There are very few smartphones on today’s market that are $300 or so. Even the “$0 with plan” smartphones still fetch over $400 in subsidy money over the 2-year contract.
Dream on Synth, dream on.
Analysts equate numbers sold and revenue generated with profit. So they think a company needs to expand into a low profit, high volume area in order to succeed.
There’s a reason no one hires an analyst to run their company (actually lots of reasons).
The fact is, a voice/data plan from any carrier is the true cost of owning a smartphone, no matter which phone you buy. If you can’t afford the monthly plan, then you shouldn’t be getting a smartphone, even if it’s free.
At this point in time I couldn’t give a fat Greek’s backside if the iPhone came in one version or two. Just blow my mind with the iPhone 5, that’s all I ask. Make it 4″, even 5″. I like big screens. The bigger, the better.
And it’s coming in September to coincide with the launch of iOS 5? Would it be sprinkled with fairy dust by then?
Ballmer’s nuts, fat Greek backsides, fairy dust…
Your starting to come across as a little excited that same-sex marriage is now available in New York.
just saying…
Fairy dust mixed with unicorn tears! 🙂
I’m going to write an article on why there won’t be 23 versions of the iPhone this September!
This article is talking about a cheap iPhone, while everyone else is discussing Apple’s current iPhones. Not even a “free with contract” 3GS would fall into the category of cheap, as it still retails for $450 (all of which has to be recovered via subsidy).
Current iPhone price is close to $700 (when you include that plan subsidy). Even the cheapest 3GS still costs over $500. Meanwhile, the cheapest Android phone (without subsidy) can be bought for less than $200.
I can’t possibly see Apple EVER selling an unsubsidised iPhone for less than $400. It would simply kill their current profit margins. As I said, even 3GS costs $500 today in the US (and in every other market outside the US, iPhone is more expensive).
Exactly, which is why my theory is not that Apple will introduce an inexpensive iPhone, but use an updated iPod touch with 3G as the device they will target towards pre-paid plans.
Agreed. Most teens and especially Tweens could get away with access to a texting app and, gulp, Facebook.
There are two primary reasons why Apple has been so reluctant to offer unlocked, unsubsidised iPhones on the US market. First, there is practically NO market for such a phone. Neither AT&T, nor T-Mobile (possible other GSM carrier in the US, assuming that an unlocked, unsubsidised iPhone supports their frequencies) has cheap prepaid smartphone plans that don’t contain the subsidy portion. Second, an unlocked iPhone on the US market costs slightly less than a locked, subsidised one (with subsidy portion added to the price, which is today around $700). At such a price ($650), it would be 30% less expensive than the same device elsewhere in the world. Being so small, it would be massively exported on the black (gray) market out of the US.
We’ll have to watch and see how Apple’s recent experiment with the unlocked offering of iPhone 4 goes, but I have a feeling vast majority of those devices are crossing US borders and going to EU, China and the rest of Asia.
Again, I think we’re in agreement here. I’m not meaning to imply that Apple is going to find a way to offer a more inexpensive iPhone, for the reasons you mention. And my reference to the pre-paid market was outside of the US.
What I am unsure of is what is the primary use of smartphones that are pre-paid in those countries? If it’s voice, then my theory of an iPod touch with 3G wouldn’t work. But if it’s data and apps then surely this is a possibility.
Keep the same pricing structure as you have with iPad–$130 more for the same device with 3G capabilities. That would put todays iPod touch at $360. If you could assume a slight price drop I bet it could go as low as $329 (assuming the iPod touch drops to $199, where it has been before).
Thoughts?
An iPod touch with data only might be an intriguing and interesting product. There would be very little support for it from the carriers, which would likely mean that Apple would simply offer it unlocked (and unsubsidised, of course).
The problem with such a device is that there is a strong chance that many would try to buy it in order to use it as a phone (using SkypeIn, or something similar) and bypass carriers’ voice networks (and plans).
Sprint is currently offering (via Virgin Mobile) a $20 500MB monthly data-only plan (with a MiFi device). They also offer a smartphone plan at $25 (unlimited data and text, 300 min voice). I have an Android with this plan. I tried using Skype for voice-over-data to compensate for rather severe 300 min voice bucket (no free nights, weekends, or friends — every minute counts). The fundamental problem with using data for voice is that is is extremely unreliable and nowhere nearly as robust. My data speeds consistently tested a 1.5mbps down, 700kbps up. Unfortunately, a 3-second interruption (which I rarely ever notice while surfing or listening to Pandora or radio, which uses buffering) will simply terminate your phone conversation.
Anyone hoping for a 3G iPod touch in order to use it as a mobile phone replacement has misguided hopes (based on my own experience). The only time Skype (or Google Voice via GrooveIP) worked reliably is over WiFi, for which 3G isn’t needed anyway.
Yes, which is why my thought is that Apple could offer the same pricing structure as iPad.
As for the data use issues, I don’t think Apple would market it as a phone. They would market it just like iPad, an iOS device with 3G connectivity. Since they wouldn’t market it as a phone, they’re not setting the expectation for users. If users set that expectation on their own, does Apple really care?
When it comes to the carriers, couldn’t they see advantage to people using Skype and others for voice? Users go over their data plans and pay the carriers more. I’m not saying that outweighs other considerations, just a thought.
If the unlocked iPhone 4 proves to be canibalising the other unlocked markets, I doubt that, once iPhone 5 arrives, Apple will offer it unlocked as well. It is much more likely that the 4 will remain on offer as unlocked (or for $100 subsidised), and 5 would only be offered subsidised in the US. Of course, other markets, where unlocked phones are more common (and cheap voice/data plans without subsidy are widely available) will likely have an unlocked iPhone 5 on offer from day one.
If one considers the IPOD product line there is clear evidence of making a lower priced reduced feature product with great success.
One can certainly see how such a product line is a great success. However, even the cheapest iPod shuffle is at least twice more expensive than a comparable lesser-name brand. The point is, Apple’s massive profit margin remains intact across the product line.
For any iPhone (including the cheapest one) to hold onto the nominal Apple profit margin, the retail price would simply have to be above $400, based on the parts/components cost breakdown as determined by companies such as iSupli. It would be difficult to imagine an iPhone without data features (e-mail, web, etc), and such require certain components, with which the price simply cannot go that low.
Addressing the cheaper market…hmm..iPod nano/shuffle?
Apparently I am out in left field on this one. I believe an iPod Touch w/dumb phone capability.. but no 3G.. would be an excellent candidate for the “cheap iPhone” market. Most buyers that fit the current customer profile (high end) would still go for the iPone 5 (with data anywhere), but there would be a huge market for a Touch that also serves as a phone… but data would be limited to WiFi. A lot of the current iPhone owners that now use ATT&T’s minimum data plan (<200mb) could live with this… and save big bucks. There are a huge number of people that would be willing to pay $300 for a Touch w/voice.
“…when has Apple ever wanted to address the ‘cheap’ anything market?”
Remember the original iPod? It couldn’t compete with the cheap ssd competitors and Steve Jobs even said something about how the cheapo market wasn’t for Apple. But then they released the iPod nano and a year later Apple was the undisputed king of ALL mp3 players.
There is a difference there, though. Like @Predrag said, Apple isn’t opposed to making cheaper devices, but those products you mention still had high margins, and compared to other devices in the category were not cheaply priced.
Also, Apple first introduced the iPod mini, not nano, and it was priced at $249 for 4GB. This was when the low end original iPod was still selling for $299. The iPod mini was not Apple entering the “cheapo” market.
someone might argue that the Shuffle was the entrance to the “cheapo” market, but even that one wasn’t. When it appeared, the original 512Mb model was $100 (the 1GB version costing $250, at the time when the Mini was $250 for 4GB). At the same time, Samsung and RIO were selling 1GB devices for below $100. In other words, the Shuffle was arguably twice as expensive as the nearest competitor. Yet, it was able to capture almost 60% of the flash-based MP3 player market, and that was BEFORE Apple introduced the Nano.
for operators voice is steady revenue… i mean if you speak on an average 2 hours a day you speak more or less 2 hours a day… so they get that steady revenue… but thing is new phone models or new network wont make you talk more.
now for Data… that revenue stream is growing… today you have a normal phone, u dont use much features or apps… tomorrow you get ur self a smart phone like iphone you use data.. and hence when operators upgrade or enhance the network you find faster speed… and u think hey i can play this i can read this i can send this… so u use more data… (you will notice that hardly any operator offers unlimited bandwidth anymore) so soon u use up ur data quota… what do u do? u get more perhaps… fact is u wont increase ur talk time.. but u would definitely over time increase ur data consumption… and operators make money on that.
also remember… when u call someone… often receiving party does not pay any money for receiving a call… however when u chat and share pics and whatnot… u are using up ur quota of data and so is the person downloading… guess who is making money 🙂
making a cheaper iphone with lesser feature addresses all those consumers aspiring for a apple phone. plus eats into android. more user base on ios = more people develop apps for ios… meaning fewer of them work on android = lesser new content or apps for android = more ppl moving to apple
lets not forget… advertisement money whence these affordable iphone hit the masses…
apple addressed masses ALWAYS… using PC analogy is not fair. for ipods check apple line up… same or similar to this apple will bring in 1-2 distinct Phone offerings to address markets…
are we all forgetting how ppl said apple wont make CDMA phones coz of BS reasons… and today over 30% of CDMA smartphone market share apple control in US.
also this is PHONE business operators will subsidize… so it WILL get affordable… when was the last time apple launched a phone NOT supported by operators??
so maybe not this september… but sooner than later we will see cheaper iphone… matter of time.
Every single US mobile operator charges you your voice minutes when you are on a voice call, regardless of who made the call. Calling or receiving a call, the minutes meter is running. They even count those minutes when you call into your own voice mail, to check voice messages! The only time they DON’T charge minutes (outgoing OR incoming) is if they are somehow unlimited (such as nights/weekends, mobile-to-mobile and such). As argued before, I can’t see Apple selling a cheap iPhone for below $400 (or $0 subsidised).
And by the way, it was quite challenging to read through the message so devoid of capitalisation and punctuation, not to mention the shorthand “TXTNG” spelling. It doesn’t take all that much effort to put a capital letter at the beginning of a sentence, or to type y-o-u (rather than u); or ’cause rather than coz…
Predrag,
The dude was just giving his 2 cents, give him a break about his texting english, did not see anywhere saying English composition skills as a prerequisite for writing here in the comments
Also I don’t live in US and we do not have “minutes” kind of billing, meaning so for me to receive a phone call does not cost me. Hence I kind of understand his point of view.
They aren’t prerequisite, but it makes it infinitely easier to read, and it takes so little more effort when writing. My point was not to come across as a grammar nazi, but to suggest that one’s writings here are more likely to be read if they are written with capitalisation, punctuation and spelling in mind.
> First, when has Apple ever wanted to address the ‘cheap’ anything market?
This guy is not very observant. iPod started out as a high-end product priced at more than double the current iPod touch. Now, there’s a $49 iPod shuffle.
> You could argue that they did this with the Mac mini
Again, not very observant. The low-end of the PC market was defined by “netbooks” (cheap laptops). Apple did address this segment VERY successfully. It’s called iPad.
I have absolutely no doubt that Apple will eventually go after the “feature phone” segment of the mobile phone market.
Ken,
I’m observant enough to read your comment ;).
The iPod shuffle has already been commented upon in the comments. The original iPod (and iPod touch, etc.) target different markets than the shuffle. The shuffle itself, when compared to other similar products, is not “cheap”.
We just differ in opinion in your second point. Apple didn’t address the netbooks with a laptop. We agree on that. I just consider the iPad to have created a market all its own, not as a competitor to netbooks. Now, I don’t argue that it steals sales from other netbooks, but I don’t see it as in the same market as a netbook, that’s all.
Thanks.
Well, a “cheap” Apple phone would target a different market segment than the current iPhone. That’s entirely my point.
iPod shuffle, in order to be a successful “cheap iPod,” HAD TO address a different market segment. If it had functioned like a “real” iPod, it would have taken away sales from Apple’s most profitable product at that time. Apple would not make such a dumb move.
iPad HAD TO be Apple’s answer to netbooks without being a major threat to Mac sales. It was carefully designed to complement owning a Mac, not replace it. This may change in the coming years as iPad matures, but not when it was released.