“One of the reasons for Apple’s recent run-up to $500 is the growing optimism surrounding a potential deal with China Mobile,” Trefis Team writes for Forbes. “Following a recent meeting between the CEOs of the two companies, fresh rumors have erupted about Apple being close to a deal with the carrier. What has raised hopes further is China Mobile chairman Xi Guohua commenting that ‘both sides sounded keen’ during recent talks.”
“A deal with China Mobile could alone add tens of billions to Apple’s value,” Trefis writes. “In our analysis, we are taking a more conservative estimate of 100 million additional iPhones by 2020 considering the more competitive dynamics at the low-end in China. Additionally, accounting for the potential margin hit of a China Mobile deal, we assume the iPhone average pricing to decline from about $600 currently to $350 and margins from about 50% currently to less than 30% by the end of our forecast period (2020). This increases Apple’s value by $45 billion and our price estimate to $650, an upside of about 10% to our current $600 price estimate. ”
Read more in the full article here.
Those margins won’t be below 35. In fact, they’ll probably go higher seeing as the materials will be cheaper for a lower cost phone. I wonder if Apple goes even higher end as well. I’ll bet they would easily move the needle on a $299 phone. I realize that they have that now with bigger storage options, but it seems a little lame to do that forever.
Only if Tim Cook if fired.
2020 is a long way off and some other tech product shift is likely to occur by then and that is hindsight folks! 20/20
I’ll have to take that $50 billion opportunity as wishful thinking. Most of the articles I’ve read insist that only local Chinese smartphone brands will have any impact in China. $100 smartphones will be the norm in China or so they say.
The only way around this would be for Apple to finance its own smartphones with low interest plans which should be relatively easy for Apple from a money standpoint. Although I’m not sure that’s very complicated as far as accounting is concerned. I’m just very certain Apple has enough money to do whatever it needs to do if money is all that it takes. I’ve always got this voice in my head telling me that a company with more money always has more options than a company with less money, and selling cheaper products isn’t always the best option. Wall Street’s answer to everything is to just sell it cheaper. That’s just plain stupid. Where did they learn something like that? Is there really a foolproof theory behind that reasoning?
Splendid take LB !
Gold iphones may sell at a premium, especially if they can actually put about 4 micron gold plating on the outer shell.However, might cost $50 per phone so would need to sell for $125 to $150 premium over regular phone. Would be a big seller in China and some ME countries.
Gold plating wears off too easily, I can’t see Apple opting for that.
I think that a champagne gold iPhone will be gold coloured – but not using actual gold, much like this gold coloured iPod minis that had shells made of anodised aluminium.
It is the people of China’s loss they have not struck a deal yet.