Low-cost iPhone could generate billions for Apple

“A $330 phone,” Barbara Kollmeyer writes for MarketWatch. “That’s the secret of potential success for Apple in China, says Morgan Stanley, which laid its ideas in a research note Tuesday. ‘Stabilization in China smartphone pricing and growth in China Mobile’s 3G smartphone share ripen the market for a lower-priced iPhone. A $330
iPhone triples Apple’s addressable market in China and is incremental to EPS even at a low 40% (gross margin) and with flattening growth for the legacy iPhone… Even in a scenario of low 40% gross margin and 1/3 iPhone cannibalization rate (flattening legacy iPhone shipment growth), which we view as conservative, the iPhone Mini adds incremental revenue and gross profit dollars.'”

“And, she says, China Mobile’s 3G network is taking off and that carrier could be a big driver for iPhone growth in that country,” Kollmeyer writes. “AppleInsider calculates that Apple could add nearly $2.4 billion to its handset business via a $330 iPhone mini.”

Read more in the full article here.


    1. The PC industry cannibalized itself because price was the only way they could distinguished one from the other. The same can not be said of Apple for they innovate with both hardware and software.

    2. Personally, I’m rather disheartened to see Apple’s share price fall every day when the market is going up and Apple’s rivals’ share prices are easily outdistancing Apple’s. It makes little sense to me. On the surface, it just APPEARS as though Apple is doing something very wrong.

    3. You’re right, but while the PC industry had extremely low margins, the iPhone has extremely high margins today. Before the iPhone came out, at the height of the iPod popularity, Apple had a margin of 30 % and was the envy of the computer industry. Today they have 40 %, and the iPhone alone probably has 50 % or more. If the iPhone over time went down to 30 % there would be nothing wrong with that, it would still be iPod-like success, and the market is so big and the iPhone so popular that it would more than make it up in volume. For an idealistic company like Apple, the main purpose of profits should be to keep the company running for a long, long time. And an Apple with 20 % mobile phone marketshare and 30 % margin looks a lot safer than an Apple with 10 % marketshare and 40 % margin (which is what they have today). This is still an ecosystems war, and if Apple gives Android another 3 years to mature and doesn’t try to curb its marketshare, eventually Android will have the better ecosystem.

  1. Apple could make a cheaper iPhone and still make a good margin. Their R&D costs have certainly been covered.
    Think a hard plastic shell like the 3GS
    a good but inexpensive display, same resolution as the 4 to unify.
    not so slim
    basically a 3gs, but faster and with a display that doesn’t fragment for developers.

      1. The stars are great for ppl like you who parrot RDF platitudes all day. I’m sure you would’ve gotten high ratings on all your posts telling us how the iPad mini would fail and symbolize the downfall of Apple, too. Those of us who deviate from the fanboy common wisdom, who dare question whether an iPad mini, iPhone Plus or budget iPhone could actually be viable ideas are the ones who suffer underneath this system, which is nothing more than a popularity contest.

        But it’s all good, rebels like R2 will wear our low-starred posts with pride.

    1. I think the “star rating” system is an unnecessary add-on for this site, but it’s not killing me. Just post your point of view without regard to the number of stars it’s likely to generate.

  2. Yet another ‘expert’ telling Apple how to run their business. Not likely to sell if it has a reduced feature set and reduced quality. I guess the stock will take a dive as a result of Apple not following what this ‘expert’ says they should do.

  3. Gene Munster was cheerleading for an iPhone Mini years ago and it never happened.
    It’s just my opinion that Apple needs a less expensive smartphone for China sales considering the lower Chinese pay scale. How much less expensive, I have no idea. I feel very certain, though, if Apple completely ignores going after market share in China, shareholders will be hurt worse than they are now.

    I’m not telling Apple what to do because I don’t know anything about running a successful business. Apple obviously has the talent and money to do whatever it needs to do to keep the business healthy. However, Wall Street sees things differently and what might be good for the company will surely be detrimental to shareholders, at least in the near-term. Maybe Apple has some grand scheme planned but I can only look at current conditions and it really doesn’t look too good from a shareholders point of view to let Samsung take away the majority of China’s smartphone market without Apple putting up any resistance.

  4. Apple are providing lower cost alternatives such that they can be offered for free with a contract.
    They area long as many phones as they can sell so I don’t see a need for a lower cost phone that apple could not meet volume on.
    The key thing will be if a cheap phone could provide access to apples app environment. If not what’s the point?

  5. Why should Apple inc. make a cheap iPhone for the Chinese market after the awful experience of scalpers paying people to buy dozens of iPhones on their behalf? After one man sold his kidney to acquire an iPhone or was it an iPad? After stores had to be closed because they could not cope with the demand for a full priced full fat iPhone?
    Or do you want Apple inc. to patronize the Chinese by telling them effectively that they are not good enough for a full priced iPhone? And if indeed the majority of Chinese people would like a cheap iPhone, what would stop them or scalpers exporting them to other countries? e.g India, Indonesia, Africa…
    Oh ye who would know so much more than Apple inc. on how they should run their “Worlds largest company by market cap” better!

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