“Many analysts and Apple-watchers thought that the plastic-backed iPhone 5C would come with a smaller price tag to attract new users in developing markets, such as China,” Adrian Covert writes for CNNMoney. “But the iPhone 5C will cost $99 with a contract and $549 without. In China, where wireless carriers don’t subsidize phones, the iPhone 5C is going to cost 4,488 yuan ($733).”
“In some respects, the iPhone 5C doesn’t represent much of a strategy shift for Apple (AAPL, Fortune 500). The company has sold its year-old iPhone for $100 less than its new iPhone for several years. This is also the third year in which Apple has sold its two-year old iPhone with a $200 mark-down. So the iPhone 5C is really just taking the place of the year-old iPhone 5 in Apple’s lineup,” Covert writes. “What’s different is the sizable marketing blitz Apple is putting on for the iPhone 5C — a campaign that is typically reserved for Apple’s top-tier iPhone (now the iPhone 5S). Welcome to Apple’s solution to its sinking profit margins.”
Covert writes, “Simply switching the iPhone’s casing from aluminum and glass to plastic could reduce Apple’s manufacturing costs by a stunning $17 dollars per phone, according to Morgan Stanley analyst Jasmine Lu. But the iPhone 5C is by no means a cheaply made smartphone. Hawking budget products has never been part of Apple’s strategy, not even during its run of irrelevance in the 1990s. And having built itself back up on products that range in quality between the upper end of mid-range and premium, Apple has no reason to start now.”
Read more in the full article here.
MacDailyNews Take: Those who call for a cheap iPhone do not understand Apple or even basic branding.
The Story of the Cadillac Cimarron
The most important part of any luxury brand is its image and one bad model can ruin it. In the early 1980s, Cadillac joined other luxury brands in trying to attract more entry-level buyers with a smaller, more fuel-efficient car. Instead of coming out with a truly new product, GM added the Cadillac crest to what was, in all important respects, a Chevrolet Cavalier. It also added thousands to the price tag.
In all, it was neither a good Cadillac nor a good value. Even GM executives will readily admit today that this was a really bad idea. – CNNMoney
Related articles:
Apple doesn’t want, doesn’t need, and doesn’t care about a cheap iPhone – September 11, 2013
Doug Kass: Apple is making a strategic mistake with iPhone 5c ‘dud’ – September 11, 2013
Apple opts for profit over market share with not-so-cheap iPhone 5c – September 11, 2013
The true objective of Apple’s new iPhone 5c – September 10, 2013
Why would anyone buy an iPhone 5c instead of an iPhone 5s? – September 10, 2013Apple reveals flagship iPhone 5s with Touch ID, the world’s first and only 64-bit smartphone – September 10, 2013
Apple unveils iPhone 5C; pre-order September 13th, on sale September 20th – September 10, 2013
Apple to release iOS 7 with completely redesigned user interface on September 18 – September 10, 2013
As I’ve said before, a cheap iPhone is just be the oldest model they still sell, or it would be keeping an even older model around for an extra year, or introducing something new that which matched the lower spec of an older model they’ve already discontinued – which would be stupid. The only other alternative is to make something which is actually cheap and low spec and therefore crap.
What these analysts want is an iPhone 5 that is magically half the price. Of course if Apple did that they’d make no money, and then the analysts would moan.
Not one analysts has ever suggested what this cheap iPhone would logically consist of so as to be cheaper.
Just as Bentley or Ferrari will never make a cheap car for China either……………figure it out Wall Street, this is yet another example of stock manipulation !!
The confusion in these comments is crazy. The need for a cheaper phone is in China and India and places where incomes are lower and iPhone prices are not subsidized.
Apparently Apple understood the need for a cheaper phone as the have just started retaining the three year old model in China.
Most comments to this article completely miss the whole context on why so many people have been waiting for Apple to addresses this problem. Well apparently Apple saw it as a problem too because they just (quietly) solved it.
This will be huge in the developing world.
Correction: Apple just made a cheap phone… the plastic POS iPhone 5 knockoff that will sell for the same price but cost them significantly less to manufacture.
Not only is Tim Cook an incompetent, his greed and arrogance are ruining Apple in the process.
All this is going to do is cause the resale value of the iPhone 5 to skyrocket!
We all know it’s a better phone than the 5c and can even compete with the ripoff 5S. There is not one single, compelling feature that makes a rational person want to upgrade (that is, unless your contract is up; and even then I wouldn’t do it).
You’re not from Korea, so either Redmond or Mt View. How much do they pay you?
These trolls don’t get paid in money. They’ll settle for Samsung executives blowing their skin flutes.
Prease bro my skin frute. I vely much wood rike that.
You’re forgetting that Apple added in support for many more frequencies, which costs money in both materials and licensing fees.
Apple was never even expected to make “cheap” iPhone.
But they did not even offer “inexpensive” one, as the lowest price for iPhone is still $399, not $299 what would be needed for new level of sales volume.
Apple doesn’t need a cheap iPhone because the folks who are waiting for one won’t spend anything after they buy the phone.
The iPhone business model has the consumer spending for much more than just a phone. Just look at Android. They are sold as a commodity, BOGOs and freebees, and the app market sucks for the devs, ‘cuz people who shop for the cheapest tech are cheap and don’t spend like the average Apple customer.
Apple’s iPhone 5c is inexpensive at 100 dollars for 16 gigs. I still don’t see why people think Apple is going for the “Hee Haw” market. (I hate that term) Sure, you can find Apple products in Walmart, but so what? What happened to Cadillac was essentially what is going on with the Big Three at the moment. Those companies went under, and the entire state of Michigan has to suffer for it. At least Washington State has Boeing and Nintendo. At the very least, iPhone 5C will be seen as a “trendy” alternative to the “austere” Space Grey iPhone. Just like the iPod Nano, and the iBook laptops.
You are missing the point.
The point of a cheaper (not necessarily “cheap”) phone is to provide a quality but lower end iPhone for customers in countries like China and India with lower incomes and lack of phone subsidies. Walmart in the US has nothing to do with it.
It turns out Apple thinks this is a good idea too. It appears they are continuing to sell the three year old iPhone 4 at an even more discounted price in China and other places. Good job Apple!
So Apple has now dropped the entry price for iPhones four times:
1. After first launch
2. When they started selling previous year models
3. When they started selling two year old models
4. Now the have started selling 3 year old models in countries where newer phones are too expensive for most people.
Great job Apple! This will allow tens of millions more people to afford iPhones.
This “Fire Tim Cook” meme is starting to get stale and old. If you hate Apple because of their business decisions, then go for Microsoft. Their business decisions in the mid-1990s were squeaky clean compared to “plasticgate”. Or maybe Samsung is your style?
After Jobs was forced out of Apple, those in charge introduced the “Performa” line of Macs even allowed a Mac clone for a time. These low cost Macs exposed many more people to Macs. However, Apple introduce too many “performa” models including some only for the educational market.
Some of these “performa” models as well as their 14″ and 15″ monitors had quality control issues. When Jobs returned to Apple after Emilio purchase NeXT, Jobs killed the “performa’ line. The low end “performa” line was a good idea, just very poorly executed.
Unlike the PC industry dominated by two OS’s, the phone industry has iOS, Android, WIn8 and yes BB. Android and Win6 are exposing more people to their OS’s because of their different price points. This will come back to haunt Apple to some degree.
I’m actually glad the mobile market has a wealth of OS’s to choose from. The Apple/Microsoft duopoly soft of stagnated the PC market in my opinion. Microsoft’s shenanigans did not help either. Fine OS’s like BeOS and OS/2 got killed off because of M$’s greed. Thankfully, they can’t pull that off now, and smaller companies like Jolla can get in on this. It also helps that only 100 people have WinPhone: All MS employees. 🙂
Don’t forget Steve Ballmer’s sons. They’re forced to use Windows phones. Wife Connie carries one for show, but has a muted iPhone in a concealed pocket of her handbag
I disagree. I think people are far more emotionally and financially tied to their phones than their computers, especially considering that in much of the world people have phones but not computer.
All that needs to happen is these Android botnets to do some real damage, i.e. wiping out bank accounts, running up huge premium text messages, shutting down phones, etc. to make people switch to something more secure. I seriously doubt people will maintain loyalty to an OS that burns them and is seriously security compromised like people did with Windows, because the software is so much less expensive and there is no “I have to use Windows because my work does” excuse.
Instead of continuing to make the iPhone 5, Apple are now putting the same circuit board into a cheaper case, which also allows for final assembly to be performed more economically too.
This offers multiple advantages. First of all, there is an obviously different look for the top tier iPhones, yet the cheaper ones also have a special advantage – trendy colours. People can opt for the 5C and instead of saying that they couldn’t afford a 5S, they can say that they wanted a funky colour.
Secondly, it’s cheaper to make. The case costs less to make and the phone costs less to assemble. This will be good for margins.
Thirdly the specialist automated machines that were needed to mill the case for the old iPhone 5 can now all be used to make cases for the 5S rather than continue to make iPhone 5 cases for the ‘old’ model 5. Therefore the housing manufacturing capacity doesn’t have to be shared between two models and can all be deployed for the iPhone 5S, while the 5C will be made using other facilities.
Lastly, the new iPhone 5C is a full spec, 2013 model iPhone and will still be supported for years to come.
I think that we can expect the same pattern to continue in future years. This time in 2014, the 5S components will; appear in a range of coloured cases and a new iPhone 6 will become the flagship iPhone.
Thanks for this. It seems like every one is looking at the colorful, plastic iPhone, and think that Apple is going the way of Samsung. These new iPhones will still have the same amount of quality that Apple is know for. Just look at the iPod Nano from a few years back. Same thing, different era.
Thanks for providing a well reasoned response. A refreshing change from the orandy, jay Morrison, BLN bullshit.
I honestly think the whole point of the iPhone 5C (besides the obvious cost advantages) is the colors. I think the colors are a bigger deal than anyone is admitting.
The iPhone, and the smartphone revolution it started, is now seven years old. Just having a smartphone, or even an iPhone, is no longer that big of a deal. When a product reaches this level of ubiquity, consumers like to have options to make their purchase feel truly theirs, and one of the simplest, that always seems to work, is color options. Yeah, my iPhone might not be any different on the inside from yours, but mine’s RED!!
Don’t believe me? Remember the iPod mini? When it was released, everyone thought Apple was nuts! A tiny iPod with less space for only $50 less than a full model? Who would buy that? But it flew off the shelves and became a runaway hit, because it came in colors. (Especially the pink one!)
The iPod mini came out at just about the time when the iPod became fully mainstream. Just having an iPod wasn’t a big deal any more. But now you could get a pink one. And the consumers ate it up.
Mark my words, the iPhone 5C is going to be a huge success, especially among younger consumers. They’ll get to have their iPhone, and pick the color. They’ll love it.
——RM
Active & business engaged people in China recognize and value quality and want to have the benefits of a quality product.
People with the $s don’t want 3 Androids in 3 years, they want 1 iPhone instead.
The fact that some people think Apple is a luxury brand makes me sad. It’s pitiful, truely. There is no barrier to entry for anyone making minimum wage. If you think you’re successful because you have an iPhone and a MBP… Sad.
There seems to be a lot of confusion as to what the iPhone pricing problem was.
In developing countries with highly subsidized phones (you pay a fraction of the real price when you commit to a voice/service plan) there was no pricing problem.
The problem was in places like China and India where lower incomes and lack of subsidies made iPhones an expensive luxury only a small percentage of the people could afford.
But it appears Apple has just started keeping around 3 year old phones in China. Finally iPhone can stop being a luxury brand in China and become the affordable higher quality brand Apple should be.
My prediction…
I think that the price for the “plastics” will come down significantly next year (due to highly automated manufacturing and assembly),
iPhone 5C, $0/$350
iPhone “6C”, $99/$450 (same design as 5C but with 5S internals)
iPhone “6”, $199/$650 (new design, new internals)
That gives them the same respectable market coverage as the likes of VW/Audi; middle class and higher end.
The original iPhone 5 industrial design will be phased out of the line-up; Apple learned the hard way that it was just to damned cost prohibitive to manufacture and assemble.
And I don’t believe the cost of the materials itself is a factor, it’s more or less the number of ways those materials can be manufactured, cut, molded, shaped, and assembled, that play a bigger role in costs, mainly due to low yields.
Foxconn has gone on record saying the iPhone 5 is the most difficult device they’ve ever had to assemble… leading to constraints in production.
I just don’t get that mentality. Sure, Apple is expensive, but everyone has one. How can it be a luxury brand if it has the largest market share? When I think of luxury brand, I think of REALLY expensive. Like, Vertu expensive. The Vertu Ti is 900,000 dollars, yet it runs on Android Snack-of-the-month version. You have to be insane to pay triple digits for an outdated phone with a buggy OS. All because the phone has diamond buttons, leather case, and “concierge” service. I’ll stick with my $100 iPhone 4, thanks.
Everyone in China has an iPhone? Apple has the highest market share their? Check your facts. 🙂
I was referring to the United States. Sorry if I was not clear on that.
We agree Apple isn’t a luxury brand in the US but Apple is a worldwide phone provider. For a large percentage (half?) of the world it has been an unaffordable luxury brand.
“Simply switching the iPhone’s casing from aluminum and glass to plastic could reduce Apple’s manufacturing costs by a stunning $17 dollars per phone, according to Morgan Stanley analyst Jasmine Lu.”
While everyone else was tripping over themselves predicting that the iPhone 5C would be significantly cheaper, it felt like I was the only one pointing out the very obvious reasons why it would not be. Switching casing materials couldn’t possibly reduce costs much. Where was the real cost reduction really going to come from? No one had an answer, but still strangely insisted it would somehow be much cheaper. Fact is, the only possible way to make an iPhone cheaper by more than $250 is if Apple used noticeably inferior hardware across the board, making compromises on critical iPhone features such as display quality, and battery life, and speed. And obviously, Apple was not going to produce an extremely low quality version of the iPhone just to win over some of the cheapskates.
Hopefully the 5C still feels like an Apple product in the hand – solid and elegant, so it still provides a better tactile experience than the competition’s plastic and carbon fiber offerings.
It still works for other countries (China in particular, where it can be even cheaper since it saves shipping costs), and in this country still counts as a lesser version you would buy your kids, employees, and other lesser beings, saving yourself a few bucks while still getting them the Apple product you and they will love and respect.
Its just cheap enough so you can trade is a samsung and get an iphone for nothing down.
Cheap iPhone?
When will everyone realize that the barrier for so many people, myself included, is not the price of the phone.
What do you mean by “Barrier for so many people”? Are you referring to the carriers that don’t have iPhone? Just curious.
…Yeah, no cheapo’s! Although they will and have now made them gay, girlie and just stupidly ugly…..
MDN is trolling for hits with this analogy.
In all, it was neither a good Cadillac nor a good value
so, in order for the analogy to work, a $300-$400 iPhone would have to have a shitty OS, shitty design, and be made of shitty materials. Furthermore, it would have to be more expensive than equivalent offerings from competitors.
why do you think that a $300 iPhone (made mostly of 2 year old Apple designed parts) would include a shitty OS, be poorly designed, and be made of shitty materials? It wouldn’t. Apple doesn’t make crap. iOS is great. So, the analogy is idiotic.
Well I think many would say Apple has already chosen quantity over quality, moving their production to china early on. Cadillac, by the way, was never a quality car. There has never been an American car that was quality all the way to production. America has been, and will always be, a country full of those who care about profit over quality and a lasting product. Most Americans are fully clothed in Chinese made clothing from American companies which have gotten cheaper and cheaper and more and more expensive. The 5c signifies the beginning of the end of the quality goal that Steve Jobs cared so much about. He NEVER would have released such a product.
I get it. I’ve got an unlocked iPhone 5. Apple prices aren’t that much different than other brands (e.g. Samsung) when buying unlocked. It’s the cheap chinese knockoffs that are really winning in Asia. My point is than many, MDN included, argue that Apple is a luxury brand, and I think that’s laughable. Taste isn’t a luxury. Apple has taste.
The Cavalier was a fine car. Great on the road, reliable and a workhorse.
That’s not to say GM wasn’t wrong to try to make it a luxury car with a higher price tag but the car itself was a fine car.
Aapl profit margin will be improved to 4x % .
When have we ever seen the terms “Apple” and “cheap” in the same sentence without a “is never” in between?