Dear analysts, perhaps you’ve forgotten, but Apple doesn’t do cheap

“Apple’s older-model-at-cheaper-prices strategy seems to be working so well that Apple has little incentive to change it,” Chris Maxcer writes for MacNewsWorld.

“But, but, but… isn’t Apple losing to Android? Doesn’t Apple have to go after all these new smartphone consumers who might otherwise fall to the dark side and never come back?” Maxcer writes. “No. Apple is crazy profitable.”

Maxcer writes, “Apple is not backed into a corner just because everyone else seems to be buying Android… Apple’s success has come because it produces high-quality products that people are willing to pay for.”

Read more in the full article here.

MacDailyNews Take: Yes, again:

Newsflash: Apple sells premium products at premium prices to premium customers – SteveJack, October 23, 2012

Related articles:
Why a cheaper iPhone model makes economic sense; next-gen iPhone, budget model may both sport 4-inch screens – January 9, 2013
Low cost iPhone? Apple has no problem cannibalizing its own business, typically with good results – January 9, 2013
Cheaper iPhone could boost Apple’s market share but ding margins – January 9, 2013
Gene Munster: 60-70% chance Apple debuts $199 iPhone for emerging markets – January 9, 2013
Bloomberg: Apple developing cheaper, smaller iPhone for 2013 holiday release – January 9, 2013
WSJ: Apple prepping less-expensive iPhone – January 8, 2013
Apple to launch low-cost iPhone with 5-inch display for emerging markets in 2H13, sources say – January 8, 2013
Barclays: Cheaper iPhone for emerging markets ‘key’ for Apple – December 4, 2012


  1. Apple, indeed, does not do cheap. But they can do less expensive with differing feature sets. Observe the iPod evolution, with classic, nano, shuffle and touch variants. None are cheap but each reaches a different user with a high value product. Which is why an iPhone variant with a different feature set can’t be ruled out. Only Apple knows for sure.

    1. They did it with the Mac line too.

      As the smartphone continues to evolve from a fun and promising gadget (v1), to a luxury connectivity tool for many (345), then an indispensable workhorse for 6 billion people (in the future), the features and form factors will change.

      A farmer in rural China may need something just a little different than a Wall Street broker.

      1. But why does Apple need to develop hardware for a farmer in rural China with $99 to spend? How do they make a profit after providing support and services? Let Samsung worry about that.

    2. Correct – Apple’s model is to take the majority of the high end market where profit margin is best. Then when that is established start producing cheaper models squeeze the competition further into the low cost low margin arena.
      Apple combine improved component costs with novel design which means they do not just replicate the high end model with cheap parts. Instead they are able to produce high quality products with functionality tailored for mainstream use.
      That’s why the MBAs lost the hard and optical drives and can in a form factor designed for on the go.

    3. This has been discussed by both Steve Jobs and Tim Cook.

      They do not purposefully set out to build cheaper products to aim for the low markets. They set out to build extremely well made products that work for their intended purpose. If they can do that and make something that’s inexpensive, then they will.

      Apple is not in the mobile phone business per se. They built a device with mobile phone capabilities, because that’s where the media player market was headed. Rather than building a media player that also acted as a phone, they decided to rethink what was really needed. So they set out and built a mobile computer that was capable of being a mobile phone, a media player and anything else they wanted.

      Apple could build a less expensive phone, but it would need to have an extremely limited feature set – a.k.a. a feature phone. Something that would not detract people from buying one of the current iPhones. As I’ve stated before, it would have to be similar in difference between an iPod nano and an iPod touch.

    1. Imagine if they had: All their “conservative” guidance through the years would have been wildly more optimistic and then the analysts wouldn’t have successfully pursued a short-selling model to make big bucks off Apple!

  2. There are basically two things that you can do to build a cheaper device: use lower specification technology, or reduce the quality of construction. By nature of them being older the devices they currently sell are of lower specification. By nature of them constantly improving the quality of construction the older devices they currently sell are of lower construction quality. Admittedly there are further compromises they could make, but they’d be just that, and they’d all involve development costs. Even if apple were willing to make those compromises the expense of developing and making a new product would offset some of the savings over the existing offerings.

    One other option would be a smaller screen. I suppose they could put a non retina screen in an old retina model – thus avoiding giving developers another resolution to develop for, but that still seems like a lot of effort for not much gain other than some marketshare (but little increase profit).

    1. The biggest problem with designing purpose-built low-cost phones (rather than letting last year’s model serve that role), is that Apple needs all the smart people they can find to help them keep pushing forward.

      To take some of your best people and ask them to spend their valuable time designing something that’s obsolete before its launched is un-Apple like. Think about Samsung. I would guess the vast majority of their smartest people are working phones that are, by design, weak and obsolete.

      Plus, by using older models as their lower-end products, Apple is keeping valuable production capacity in play. And they need all the capacity they can get.

      It will happen. Apple will eventually start defining iPhone models for different price-points, markets, and customers — but it will happen on their terms.

      1. Exactly, selling old phones is basically the same as designing a new cheap one but without the cost of doing a new design, reconfiguring manufacturing, or potentially giving another option for your developers to have to cope with.

    2. Apple doesn’t build a new product to target an old product definition. The world has moved on from feature phones, but various market groups can’t afford more than the price of a feature phone. If Apple goes after this market segment, it won’t be producing a feature phone at any price. They’ll be taking a fresh look at what today (and tomorrow’s) technology can do for the current (and slightly future) needs of this market segment.

  3. I agree that Apple won’t release a cheaper iPhone for the sake of it being cheap. Apple won’t simply go after those who can’t afford an iPhone, but they may go after those who wouldn’t buy an iPhone for a specific reason. The most common complaint I hear is from friends who spend their weekends cycling and trekking. They want a smartphone that is tougher and less easy to break. I can imagine Apple releasing an iPhone designed to take hard hits and drops, aimed at sportsmen and kids. Maybe.

  4. I take issue with the “premium customers” part. I believe Steve’s dream was to place a tablet in the hands of every last man, woman, and child on earth. This period we’re in now is about amassing cash and IP, but they will soon transition to a strategy in which their products are not exclusive but ubiquitous.

  5. I switched to the Mac in 2000 after buying an ipod classic, despite 20 years as an IT techo and many years in the windows world. Back then, even Most Apple nerds believed Apple would only ever be a niche player but i could see that Apple’s philosophy to technology would win against microsoft et al in the end because it was just so much better, and i could also see that the move from windows to apple, though initially slow, was only in one direction. Ever since then, i have read the “wisdom” of apple watchers who almost universally called on Apple to be less Applish. It has always struck me that American analysts have (a) no real idea about anything and (b) seem to think that they would be better at running Apple than Apple. None of us foresaw the success of the iPhone, let alone the iPad, or iTunes for that matter. Which just goes to show that Apple know what they are doing and the “analysts” have (a) no idea and (b) type with one hand in their trousers. Alas, deeply embedded in American culture is the belief that everyone’s opinion is important, regardless of whether they actually know what they are talking about. My late father would have called it “verbal diarrhea”.

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