“Investors should ignore supply chain noise about the iPhone 5c and trust that Apple made the right move in maintaining its margins, one prominent analyst said on Thursday,” Neil Hughes reports for AppleInsider.
“Maynard Um of Wells Fargo Securities believes Apple’s pricing strategy with the iPhone 5c, making it the company’s mid-range phone with a $99 on-contract price, will pay off in the long run,” Hughes reports. “He noted that last year’s mid-range smartphone, the iPhone 4S, saw its sales ramp up heading into November and December, as more casual buyers showed interest during the holiday shopping season.”
“If Apple had taken lower margins and hoped for unit volumes to offset, there would have been “no guarantee of price elasticity driving volumes,” he said. In addition, a cheaper iPhone 5c may have resulted in even greater margin pressures as Apple transitioned to its next models in 2014,” Hughes reports. “‘We believe the certainty was the right choice and would not necessarily discount demand yet,’ Um said.”
Read more in the full article here.
MacDailyNews Take: Again, a major target for iPhone 5c are the disillusioned Fragmandroid settlers as they come off contract (God knows they’d never pay a cent to get out of their mistake early). iPhone 5c is not a phone for which anybody lines up at launch. iPhone 5c will have consistently good sales over time. iPhone 5c is already selling better vs. iPhone 5s than iPhone 4s did vs. iPhone 5.
Also, with its pricing, it’s likely very effective in upselling iPhone 5s.
Related articles:
Wall Street Journal backpedals on iPhone 5c supply chain cuts story – October 17, 2013
Apple ups iPhone 5s orders, ramps down iPhone 5c production, sources say – October 16, 2013
Apple cuts iPhone 5c orders for Q4, says source – October 16, 2013
Why would anyone buy an iPhone 5c instead of an iPhone 5s? – September 10, 2013
I don’t understand why nobody mentions the obvious: the point of the 5c was not to increase sales, it was to increase margin on the “cheaper” phone. In the past, Apple just discounted the prior model when introducing a new one, and suffered poor margins on the discounted model.
This time, they improved the margins on that discounted model first. Seems kinda obvious.
You gave yourself the wrong name! Should be SmartDude!
And they can simply lower the prices as they see fit. The 5C could very well be the $300 gray-market Phone for the emerging markets in 2-3 years’ time.
It’s also a supply chain move. Building a phone around a plastic shell and steel frame saves money AND time. The 5c does not have production bottlenecks that might hamper availability at launch.
The CNC-machined aluminum shell for the 5/5s is purportedly a lot more expensive and time consuming to make, and was a major factor in the supply constraints that affected the iPhone 5 at launch. Keeping the 5 in production would have meant splitting production capacity with the 5s. Even though the 5s has also had its share of supply constraints, reports I’ve seen indicate that availability is nowhere near as tight as it was with the 5 at this stage. And I think that moving the middle priced iPhone over to the 5c has kept supply levels for the 5s higher than they might have otherwise been.
You are right, but there is one other purpose of the 5c (besides better margins). People now think of it as a brand new phone. It will be more palatable to people than “last year’s model” because they will consider it a new phone. And Apple is actively marketing it. Brilliant!
(I think the smartest people will go for the 5s, but certain people may be deciding between a $99 iPhone and a $99 Android. The Android options are probably considered “brand new” phones, and the 5c will fare well in these comparisons because it is also considered “brand new”.)
It would not surprise me if the profit margin on the C is greater than the profit margin on the S.