“On Monday, September 23rd, Apple announced the company had sold more than nine million 5c and 5s handsets in the first weekend of sales. The surprisingly high unit sales number for Apple’s newest iPhone handsets caused analysts to rewrite and reconsider their narratives on Apple’s prospects for early success,” Robert Paul Leitao writes for Posts at Eventide.
“Apple’s decision to focus its new handset efforts on the top tiers of the smartphone market and forgo an aggressive effort to gain market share in emerging markets at this time is in line with Apple’s approach to the company’s primary product markets,” Leitao writes. “As the smartphone market continues to mature, Apple will address the hundreds of millions of potential customers in the world’s emerging markets. But that time isn’t now. Apple’s next big step will be a carrier agreement with China Mobile. China is Apple’s largest national market outside the United States and the only country other than the US to deliver 10% or more of Apple’s reported revenue total. Apple doesn’t currently have an iPhone revenue problem. Apple is first confronting the challenge of reduced operating income per revenue dollar due in large part to falling gross margin.”
“Adding China Mobile as an authorized iPhone carrier in the December quarter and ahead of the early 2014 Lunar New Year celebrations will ‘turbo charge’ unit sales. The carrier will be added after the substantial completion of the global rollout of the new iPhone 5 series handsets. At that time the production ramp for the new handsets will accommodate the addition of the world’s largest carrier. But Apple’s continuing focus is on the top tiers of the smartphone market,” Leitao writes. “By this time next year Apple may choose to address emerging markets with a lower-cost iPhone handset. But Apple’s biggest challenge at this time isn’t iPhone unit sales growth. The biggest challenge is the company’s increasing reliance on the iPhone line for revenue growth and aggregate gross margin performance. Management’s obsession with customer satisfaction and attractive gross margin puts emerging market initiatives on the proverbial back burner for now… Apple will first cement its position as the market leader in the high-end tiers of its current product markets.”
Read more in the full article here.
“Apple will first cement its position as the market leader in the high-end tiers of its current product markets.”
Wait..what? You mean Apple haven’t done that already?
/s
=:~)
While Apple plots, the copiers play catch up.
Apple is years ahead of the industry, always.
I’m guessing Robbie here is new to writing about Apple, the smartphone industry, or just writing in general. Because this is neither news nor deep insight. This has been Apple’s strategy for YEARS.
Quality…. NOT Quantity. Meanwhile AmoZone (“Wall Shits Darling Company”)ships & litters our homeland with schlock products imported from schlock producing companies purchased by the Heehaw consumer, who believe anything they read from bribed Wall Street Analysts and corporate corruption facilitated by the mother of all corruption The United States Government.
Might iAlso point out that quality products, good customer service & support, produces return business. Which by the way is the best kind of business and in the long run, most profitable kind of business model. This type of business model also keeps existing customers happy while iDare say attracts new customers into the fold. AAPL is not in the Junk Business. If you like shit products, look no further than SamDung & Gaagle’s FagMaDroid steamy turds laid upon us by previously stated unethical business tactics. If there were one mistake Steve Jobs made in his life, it was inviting Eric T. Mole to lunch. Sad.
Imho never going to happen.
And it’s silly to ask when Apple woudl bring a cheapo phone. Just as noone (or better; no sane person) asks or wonders when BMW is going to bring out their €10.000 cheapo car ‘to capture market share’.
A significant cheaper phone would come with significant quality and feature trade-offs. This would damage Apple’s brand image – as cheapo buyers will still expect premium quality – and also negatively affect its corporate culture (which is now entirely geared towards excellence and to make no trade-offs at all).
Many pundits / analysts seem to forget that too much demand can actually ruin a company, even the size of Apple.
Say BMW’s comes with a €10.000 car, orders will be through the roof as people buying the cheapo car will still expect BMW-quality. BMW then would either need to build vast economic overcapacity to keep delivery times acceptable, or let huge waiting times tarnish its brand image.
So I don’t believe Tim Cook is ‘not aware’ of market opportunies, but instead think that he is (rightfully) terrified of some of those ‘opportunities’, for various reasons, and steers well cleer of them.
With each passing month, I become more and more appreciative of calm, coolheaded Cook at the helm.
It may happen in a different way!
in 2014, iPhone 5c 16 GB could be free with Contract.
in 2015, iPhone 5c 32 GB could be free with Contract
This will take care of the whole idea of cheap phone without reducing the Quality!
YES, It may be lighter, more colors and more appealing in 2014, 2015 besides being the best buy for the buck.
I agree. Some people just can’t do research. Apple does have a low end phone, the 4S. In China they still sell the 4. This is the same thing Android makers do. Their cheep, emerging market, phones are not the latest and greatest; but 2 to 3 year old tech. I believe the 5C is easier to produce in mass quantity than the 5 was. Like the 5S now, they could not keep up with demand. When the 5C replaces the 4S next year Apple will have a affordable and available for most markets.
you are not doing the research
The prices you are mentioning are SUBSIDIZED prices, they dont play that game over there. Try to buy an unlocked phone and you will see they are very expensive compared to the crap sold by samedung and all in those emerging markets
@Panda
This is a very, very good point.
I’ve found, in my own business, that small contract customers expect not only as much service as large contracts, but that the most time-consuming clients are (by far) some of the small ones. So we don’t do small contracts any more. It’s not even remotely close to worth it.
Anyone worried about this strategy hasn’t really thought it through.
It’s always easier to capture territory from the high ground. If they need to, Apple could make a phone as cheaply as anyone else. The difference? As a premium brand they’d capture market rapidly, and with their high margins today, they’d have the cash to fund that kind of shift. But as long as this strategy is working, why give it all way now?
Anyone worried about this strategy hasn’t been to China.
With all of this talk about low-end, low-margin products for emerging markets, you’d be forgiven for thinking the streets of China were filled with bicycles and cheaply made hatchbacks. On the contrary, you’ll often see wall to wall Audi. China’s middle class is larger than the United States. That’s the market they’re after (and winning, if you can afford it, Apple is the only choice already in China).
MDN. Can we please lose iJah420’s ‘FagMaDroid’ comment. It’s well past time to stop using Fag as a derogatory term.
While I agree with the thought, I suspect that the poster wanted to say FRagMaDroid, but used up too many of his “r”s on Talk Like A Pirate Day.
Robert Paul Leitao is quite correct, but there is no need to him to say any of it because this is exactly what Apple have been saying for many years. I find it hard to believe that there is even one individual reading this MDN article who was unaware that Apple’s priority was making the best products rather than going for market share by offering cheap products. They’ve done this in all product categories for as long as I can remember and have always explained why too.
I would think Apple wants to acquire user base that they can cross sell. You sell them a phone and you can convert them from a PC to a Mac user or further sell an iPad. These customers tend to buy more apps and ibooks as well.
If you target a low end market, you are unlikely to do cross selling much. Your marketing and sales related costs go up so the low end market isn’t as cheap as it seems. Also, you need to have more customer service and warranty repairs for lower end products. Why bother selling to customers that are only keen to download free apps or watch movies online? Apple doesn’t earn a cent out of those activities.
I think Wall Street, lay men, and androids will be looking at Market share first. i think that doesn’t work for Apple. Being high- end commands premium pricing and thus higher margin.
Oh no! Porsche isn’t going to produce a car for the emerging markets either?
Apple is not Porsche.
Porsche makes cars for people with small penises and too much money.
Apple betters the world by making the the best technology products humanly (or otherwise) possible. Ideally for everybody. Yes Apple is high end, but Apple does not make, nor do they aim to make, niche products.
Where did the idea that Apple is high end come from? Was this from the “oh so perfect” 90s, when Apple was self-destructing from Sculley’s ideas? I remembered the 20th Anniversary Mac, which looked very high end, and sophisticated. Was the 90s the period that Apple tried to go for the “upper class” market?
You occasionally write good posts. This was not one of them.
Porsche is very much like Apple. They sell quality produce at high prices and with a decent margin so they can make money. They don’t care about “emerging” markets, and neither should Apple. You missed his point.
You misspelled “Fragmandroid”. You forgot the “r”, and the “n”. Just letting you know…
Who cares about the turd-world market? If you live in dumps like Brazil or India, then you can have a cheap 20 dollar dumbphone. If you want quality, you have to live in a powerful, and influential region like America or Europe. No iPhone for you, you trash picker! Gosh, you guys are worse than America’s Hee Haw demographic…
How unabashedly inflammatory. Tell me about your childhood… When did your father stop beating you? Have you stopped beating your wife yet?
“By this time next year Apple may choose to address emerging markets with a lower-cost iPhone handset.”
There they go again. The stupid analysts didn’t get their cheap iPhone this year, so, maybe next year.
Thanks Quiviran. I should have seen the similarity to Fragmandroid.