Piper Jaffray: Apple needs to release inexpensive iPhone for the masses

“Gene Munster with Piper Jaffray believes a so-called ‘iPhone for the masses’ is likely an inevitable device from the company,” Neil Hughes reports for AppleInsider.

“In his view, Apple ‘needs’ to develop a low-cost iPhone for the masses that will compete with inexpensive Android devices that are currently finding success in the market,” Hughes reports. “For Apple to do this, Munster said the company could reduce the price of an existing phone, representing a more aggressive continuation of the company’s current strategy. Or, he said, Apple could make small changes, such as a handset without a Retina display and moderate components sold for a $200 price point contract-free.”

Read more in the full article here.

Related articles:
Barclays: Cheaper iPhone for emerging markets ‘key’ for Apple – December 4, 2012
Analyst: Apple to make cheap iPhone by 2014 – November 24, 2012


    1. That is, making themselves uber rich off the iPhone that certain users gladly pay through the nose and would gladly stand in line for days without showering simply to acquire the latest iPhone to replace their year old iPhone, just because.

    1. Absolutely. How much less expensive can it be than FREE?

      It will be a LONG, LONG, LONG time — IF EVER — before Apple builds an iPhone that sells for $200 or less with no contract.

      This is probably an analyst who wants the prestige of giving his kids and/or grandkids iPhones (rather than ignominy of giving Android or Windows phones) for Christmas, but wants to pay virtually nothing for them.

      1. IPhone 4 is free in USA. But, it is not free in India and other developing countries. Price point in India and other developing countries need to go down at $200 for scaled down version of latest iPhone. This way Apple can compete with those low cost android devices

      2. How many times do you all need to hear that they are talking UNSUBSIDIZED phone!!!! The “free” iPhone 4 is 450 bucks no matter how you slice it in markets that DO NOT have contracts!! Get with the planet, not your own private Idaho!

        1. Mercedes does not compete with Chevrolet. Tiffany’s does not compete with Jared. Nordstrom’s does not compete with K-Mart.

          The value proposition in the iPhone/iPad is so great that they are cheap when compared to any Android unit.

          Samsung, HTC, Motorola, RIMM, Nokia, et al aren’t making any money selling cheap handsets to the masses. What makes you think Apple could discount its far superior product and succeed financially where these stalwarts of world manufacturing cannot?

          1. “Mercedes does not compete with Chevrolet. Tiffany’s does not compete with Jared. Nordstrom’s does not compete with K-Mart.”


            But iPhone *does* compete with Android. … Just sayin 🙂

            1. The iPhone does not compete with Android. Android merely coexists with IOS in the sence that they are both available on planet Earth. Beyond that there is NO! competition. You can verify this by examining the profits and profit margins of each platform. There is no comparison or completion.

            2. You can try and spin it or list any reasons you want. The bottom line is that when when consumers go to choose a smartphone the two main choices are an iPhone or an Android device. They are direct competitors regardless of how much profit each company makes. The fact that they are direct competitors is the very reason Apple just won a billion dollars from Samsung.

            3. Apple only competes with Android because Google stole Apple’s protected IP. They’re having to compete against a (legal, for now) knockoff product.

          2. Mercedes and Tiffany’s have a very much smaller market share because, well, they cater to the wealthy. The mobile market is changing where users prefer to purchase a $300.00 phone and pay $40.00-50.00 a month instead of paying $200.00 a phone and have a $100.00 monthly service.

          3. @ greggthurman – Mercedes makes the ‘Smart Car’ that competes in the budget market.  So much for your made-up analysis.

            Competition is defined by consumers; if they decide to switch between two brands because of price or features, then the products are in competition.  This is an empirical matter, not decided by investors or bystanders, but my measuring cross-elasticities of demand.

            You can bet your ass that Apple considers Samsung+Android a competitor … otherwise what are the patent suits all about? Are you SERIOUSLY claiming that Samsung doesn’t take sales away from Apple? What an idiot.

      3. It’s not actually “free.” The upfront cost to customers is zero, but they end up paying the full price over the course of the required two-year contract. The price without contract (“unlocked”) for the iPhone 4 is $450.

        This article is speculating about an iPhone that actually costs $200 or less to the customer (with no contract). I don’t think Apple will do it. Right now, because of the subsidy from the wireless carrier, Apple probably makes (at least) about $400 in profit per iPhone sold, not matter which one the customer chooses. If there is a low-end iPhone model that sells for $200 or less, Apple’s profit will be less than $100 per unit. Why would Apple introduce a product that makes less than $100 per unit that will steal sales away from subsidized iPhones that make 4x the profit?

        I have speculated in the past about Apple introducing a different class of phone; it would be Apple’s take on the “feature phone.” It would use the limited “OS” that is currently used to drive the iOS-like (but not iOS) interface of the iPod nano. It would do everything expected of a feature phone (with Apple’s usability), be much smaller than an iPhone, and still have a touch interface. All of its “apps” will be built-in; what Apple provides when you buy it is what you get for the lifetime of the phone. Think of it as an iPod (NOT including iPod touch) with mobile phone features. It will not steal iPhone customers, because it will be clearly marketed so that no one who wants a “real” iPhone will buy it.

        I don’t think Apple will do this anymore, because the “free iPhone with two-year contract” proposition just works too well. No one who wants a “low-cost” iPhone will think that paying full-price for an inferior iPhone (with no contract) is a good deal. Most will go for the “free iPhone with two-year contract” deal.

          1. An iPod nano is a more “limited” device, compared to an iPod touch, yet it is a device that “delights” its customers (especially in its latest version). In fact, Apple ALWAYS intentionally limits its products in some important ways to ensure that they provide the best possible user experience.

            For example, major iOS (and Mac OS) upgrades are intentionally limited in functionality (or not allowed) because older hardware do not have the performance specs required to provide a great user experience. Apple limits the user customizations allowed for its interfaces. Apple limits the types of apps that make it into the App Store. It’s NOT the Microsoft and Android way to use design limits; they say “do whatever the heck you want with our OS.” Using intelligent and thoughtful design limits… THAT is the Apple way.

            So, there is absolutely no “design” problem with offering a less expensive more limited phone product. It just needs to be designed (and marketed) to provide a great user experience for what it is designed to do. Look at an iPod shuffle and its intentional deign limitations. No one who buys an iPod nano is thinking they are getting an iPod touch; they want a nano for its own (more limited) set of qualities.

            However, (as I said already) I do not think Apple will create such a device because the “free” offer is too good for an older gen iPhone with a two-year contract. Not enough customers will feel that an intentionally more limited phone, with no contract but with an upfront cost, is a better deal compared to “free” (even if the “free” is not really free).

  1. In other words, male the parts cheap as well as the experience. Some folks never seem to understand that what you pay for in an Apple product is the whole experience: quality hardware, quality software and an “ecosystem” that makes the whole far greater than the sum of its parts. Yeah, if anyone can figure out how to bring Apple quality “to the masses” it will be Apple, but Tim Cook cannot walk on water any more than Steve Jons did, and Jobs had his Reality Distortion Field working for him.

  2. We heard this same thing back in the days before Apple started bumping down the prior year’s model too. The fact is they’ve already done it. A free iPhone 4 on contract is definitely priced for the masses already. I’m really not sure that Apple needs a low end phone on the MetroPCS’s & Straight Talks of the world…

  3. This is definately true for markets without carrier subsidies. It is an amazing area of growth for Apple. I’m surprised they haven’t done this for China Mobile. Their use of different cellular tech would eliminate the spread of the cheaper phones through grey-markets resellers into other areas. Think iphone 4 with a 3gs back that inly works for China Mobile… Then watch you AAPL stock! 😉

  4. As many folks have pointed out and Jeffrey knows so well, Apple hits every price point now, including free. So this is just nonsense so his name gets posted on sites like this. A cheapy iPhone would hurt Apple in the long run. Quality iPhones are now available to everyone without any compromises. And that’s how it should be.

      1. I don’t care of gene or Jeffrey know, it is obvious you did not read the article. UNSUBSIDIZED is the key, you should do your homework before positing please. iPhone 4 is 450 bucks, and so is not available to the “masses” that are not in countries with contracts available….

        1. Ok UNSUBSIDIZED, whatever, but APPLE can still offer the “masses” a quality uncompromisable two year old phone for the price of cheap phone. Like I said there is no need for one, it would be foolish for Apple to do this.

  5. This guy needs to let Apple do their marketing without his two cents. Apple should stay in the market place just as they have been. They don ‘t need some one arm WS analysis telling them what to do.

  6. I agree with him. I also think Apple needs to sell cheap-crap computers to compete with the lowest end Dells and others, and cheap-crap plastic netbooks, because they are so important. Oh – what’s that you say? That already all got sorted out and Apple has crushed Dell and also the whole netbook thing? Hmmm. Maybe the same principle applies here.

  7. For those that have unlocked phones, and hence no contract, what are the monthly costs for similar service? I bet the monthly outlay is.no cheaper than a contract price.

    1. In other parts of the world than the us, it is definately cheaper. Average in Germany is about $60/mo with HALF being your 2 yr “payment plan” on the phone, and the other half is your actual plan. When you finish your 2 yr contract on your phone (OR you bring in your own unlocked phone), the price drops to about $30. I’ve seen discount plans through stores such as ALDI that can be as low as $15/mo including talk/text/Internet!

      Even visiting the US and bringing my unlocked iPhone 4, I purchased a sim/service for $30/mo no contract. Service sucks, but definately far less than any plan you would sign up for with a “free” iPhone 4, no matter how long you stay on using that same phone!

    2. In the UK, I use an unlocked iPhone which I bought outright and I pay £10 ( $16 ) per month for unlimited internet, unlimited SMS and 250 free minutes of calls.

      I’m spending a hell of a lot less than I used to pay on monthly contract and of course it’s up to me when I choose to upgrade my handset because I’m not locked into a contract. If I’m feeling well off, I buy the new iPhone and if cash is tight, I keep my existing phone for longer.

      My partner uses a second hand 3GS on the same deal. She paid £120 for the good as new phone and pays the same monthly charge as me. Over a two year period, she ends up paying a total of £360 ( $580 ) for the phone and service ( averaging out as £15or $24 per month ). It’s hard to find a monthly deal that exactly matches, but the nearest I can find costs £27 ( $43 ) per month for fewer bundled calls and internet capped at 500 MB per month.

    3. Yes, and this is the $$$ (BIG) question!

      Service providers like AT&T simply don’t discount their product if you have your own hardware – – it is still at least $60/month. The only way to break the high monthly fee is through third party providers, which takes a big hit on service quality/availability/etc.

      FWIW, just this week, I did a price check on how much for two iPhones on the big boys’ networks. All of the plans were basically the minimums – the exception being that at least 1GB/mo data was used, to get rid of the rediculous “200MB” offerings. The results were:

      AT&T: $120/mo
      Verizon: $140/mo
      T-Mobile: $120/mo

      Since the above was for two lines, the “per smartphone” works out to $60 to $70 per month.

      Since we know that a chunk of this is the subsidy back to Apple, there’s literally no incentive for the consumer to *not* upgrade his phone every two years, because he’s not getting any discount after 2 years.


  8. So why does the most profitable company around need business advice from those who have never run a company? Until a person has produced superior profits, they aren’t qualified to give advice.

    1. This makes perfect sense, inasmuch as the economics and marketing principles that apply to every other company in the world don’t apply to ‘the most profitable company.’

  9. Stop changing apple the way it is! Apple is not for everyone! It’s for the people who appreciate quality and have some money to spend! Sick and tired of this type of suggestion!

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