Analysts, pundits: Apple must move to address the low-cost smartphone market

“The recent media trend of negative news on Apple is just a phase that will pass according to analyst Gene Munster and pundit MG Siegler, both of whom agree that the coming months will see Apple getting its groove back with a refresh in its product lines, as well as perhaps some new products,” Kevin Bostic reports for AppleInsider.

“Siegler and Munster spoke on a panel along with TUAW’s editor-in-chief, Victor Agreda, with all parties agreeing that Apple’s sales figures fly in the face of the negative coverage the company has been receiving of late,” Bostic reports. “‘I’d say it’s mostly a media-driven anomaly right now,’ Siegler said of the current perception of Apple. ‘There’s definitely some truth to the idea of, you know, success: You’re as high as you can go. Where can you go from there?'”

Bostic reports, “All three panelists agreed that Apple must move to address the low-cost smartphone market in order to continue growing. Munster was upbeat on Apple’s chances going forward.”

Much more, incuding talke of “iWatch” and “iTV” in the full article here.


    1. Apple DID release their answer to netbooks. It’s called iPad. 🙂

      So, Apple will also release their answer to the “low-cost smartphone.” It just won’t be what the “experts” expect.

  1. Nonsense…what low cost phone?! I don’t see analysts asking for a low cost Ferrari. Do they even understand Apple’s philosophy, which is what got Apple to this dominant position in the first place?

    1. Analysts never seem to take a company’s goals into consideration. Their solution is always “build it cheaper” to increase sales. They make running a business so cut and dried. It’s almost impossible for a company to maximize profits and go after major market share. Maybe one or the other but not both at the same time. If it was that easy, every company would be successful. Running a successful company is filled with compromises. Picking the right ones is very difficult. Following Wall Street’s near-term suggestions will only get companies into trouble in the long haul.

    2. Anal-cysts only see cheap unimaginative solutions to problems that only water down a company and reduce it’s stature because their “vision” wouldn’t see you past next week. They also have nothing to lose by parting their lips and letting anything spew out, no real skin in the game.

    3. Excuse me? Weren’t these some of the same analysts who were complaining that Apple’s margins were narrowing and causing Apple’s stock to tank because of the lower cost iPad mini???? Yes, I think they were. What do they think will happen when Apple starts pursuing the lowcost smartphone market which is mainly achieved by cutting margins to the bone to compete in a race to the bottom???? IDIOTS!

  2. Since it was the iPod that put Apple back on the map for the masses back in 2001 they should use the same strategy for the iPhone.
    I would recommend starting out with the iPhone Shuffle… basically an iPhone that starts calling people out of your contacts list randomly.

  3. There is certainly an opportunity for Apple to address the market elsewhere in the world, but only Apple knows whether they want to do so.

    It would be possible to Apple to produce a lower cost ( but still not cheap ) iPhone for these large markets. They could use standard resolution screens ( no retina ) and components that are no longer cutting edge, together with a housing designed for efficient mass production. The important thing would be that it would still be a quality phone and allow customers to get into the Apple ecosystem at a lower purchase price without committing to a contract. Most of the world does not use monthly contracts, so outright purchase price is a significant issue for those customers.

    The advantages to Apple would be that it’s customer base would increase, more people will be exposed to the Apple brand and tempted to move further up the scale, increased profits from huge global markets and Apple would establish a beach head against what could otherwise become an Android monoculture.

    The downside would be lower overall margins ( but increased profits ), some cannibalisation of higher end iPhones in certain markets, more manufacturing capacity would need to be found and more products supported.

    I think it’s finely balanced whether Apple should do this or not, but my feeling is that things come out a little more in favour of a cheaper iPhone than against. Shifting from tower Macs to iMacs worked out well and so did the introduction of iPod minis. I see no reason why Apple couldn’t pull this off successfully too.

      1. Possibly, although I suspect that the low-cost phone would be at least reengineered to utilize current components. An older design tends to become more expensive to maintain in production. In addition, as part of this reengineering, Apple might very well take the next step and actually redesign a new device targeted for this purpose.

        It is widely stated that a low-cost iPhone will not be “retina.” But I am not so certain. Apple is moving towards retina displays in all of its product lines and a non-retina device would be a step backwards and an obstacle to future Apple innovation. Economy of scale might favor sourcing a larger quantity of retina displays for iPod touch, iPhone, and iPhone LC rather than maintaining a separate display line. Ultimately, however, this is all up to Apple.

        1. Kingmel gets what I was meaning.

          Selling an old model for a lower price isn’t the answer. Older iPhones were all designed to be premium products, sold at a premium price. To make a quality product to be sold at a lower cost, it would make sense to design it specially so that it is optimised to be assembled efficiently using state of the art techniques.

          Assembly costs and the time taken to do it are significant factors. By designing an entirely new iPhone optimised for rapid assembly, Apple can maintain quality, but reduce costs, while still clearly differentiating this model from the top of the range iPhones.

          It might be acceptable to make it a bit thicker and a bit heavier if that would bring down the costs, but I suspect that Apple would be able to make it lighter, thinner and cheaper too.

    1. Excellent analysis, alanaudio. As you say, only Apple is in a position to decide whether or not a “low-cost” iPhone makes sense, and whether or not additional market share at lower margins is in the best interests of the company. Apple is not known for chasing market share, and will definitely *not* do so at the expense of quality and user experience. However, a lower cost iPhone could be a strategic move for the future – eventually competition will force Apple to reduce margins and/or accept reduced market share. There is undoubtedly a lower floor for smartphone market share that Apple wants to maintain to keep its overall iOS ecosystem vibrant and healthy. Therefore, compromises will be made, sooner or later.

      As far as increasing profits (in the iPhone arena), that is debatable. Apple already collects around 70% of the profits in that market. Reducing margins to chase the final third is likely a losing proposition, overall, especially if it cannibalizes flagship iPhone sales. However, it is reasonable to speculate that Apple will broaden its iPhone model lineup, just as it did with the iPod.

      I am not overly concerned about an Android monoculture at this point. That prospect seemed more likely to me a couple of years ago than it does now, with Samsung moving towards Tizen and Android fragmenting – mostly driven by Google’s purchase of Motorola Mobility.

  4. Why is it that these people never seem to learn from the past. is that their memories are so short that they can’t remember even a couple of years back. Apple has all those retail stores pushing products so even if one product loses popularity, there are others that will somewhat take up the slack. I realize iPhones make up most of Apple’s revenues and profits but with $137+ billion in the bank, Apple can probably find other ways, if necessary, to make up revenue.

    I fail to see how Apple is in dire straits if they don’t build a really low-cost smartphone for China. Competition is going to very high with all those Android brands selling at cut-rate prices. If a company doesn’t profit from selling at a price point, it doesn’t matter how many devices get sold. Apple will continue to try to balance quality with profits and Apple’s products still won’t be dirt-cheap. It doesn’t make sense for Apple to try and compete with Samsung because Samsung has many other revenue sources and if their goal is to gain most market share, they’re going to go to razor-thin margins.

    I do feel Apple should go after the Chinese market but not by merely selling low-cost devices. Make the Chinese iPhone a quality, higher priced item and hope the Apple branding will entice Chinese consumers. I don’t know what the Chinese consumer is looking for in the way of products, so their concepts of value may be different from mine. All I know is that a proper balance must be kept and it doesn’t work trying to grab major market share. That never works well in the end. Too darn much overhead and inventory problems. Wall Street might like it but it’s not a good goal for any company.

  5. Apple has 4 different iPods, 2 different iPads, why not 4 different iPhone. Different sizes, cost, & colors. We love iPhone because of style, iOS, & apps. “iPhones for everyone.” Apple is no longer just a ‘Mercedes’ company. Stop being snobs. Grow the damn market!!!!!

    1. Apple sells three different iPhones. The iPhone5, 4s, and 4. . . At price points from free to over $1000 depending on whether you opt for a two year contract, no contract, memory configuration from 8GB to 64GB memory in two colors. How many price points and phones do you want?

  6. Apples’ ‘low cost’ iPhone? The iP4 is $.99 with a contract, so could easily be sold for $200-300 without. Still runs the most current OS, has a Retina display, access to at least 90% of available Apps. Plus Apple has possibly recouped all the manufacturing equipment costs, so they would retain their high margins. Makes more sense than a plastic crap phone that doesn’t live up to what Apple stands for or people’s expectations.

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