Lower-cost iPhone

Very smart article from John Gruber. Also note that Gruber refers to a possible new iPhone as “lower-cost” and “lower-priced”—I don’t expect this phone to be cheap in any way.



  • BongBong

    A “mid-range” iPhone, perhaps?

    • Chaka10

      A China Mobile specific TD SCDMA 3G “5C” phone in conjunction with a 5S that works with China Mobile’s 4G launch. China Mobile’s market is a large prize. I suggest readers look through the post by Rukakika above.

      • kgelner

        That’s the smartest thing I’ve read anywhere on the topic. It will be poorly received news at first, but after they realize how well it does in China…

        • Chaka10

          “It will be poorly received news at first, but after they realize how well it does in China.” Yep. I previously posted this thought on Asymco, and didn’t get much positive response. I had also begun posting as early as April about maturation of the high-end smartphone market — specifically about how that would result in slowing first time adoption at the high-end, but would be bullish for Apple based on loyal replacement demand and positive churn (and very bearish for Samsung) –, but that didn’t seem to get much positive interest from Apple boards either…. That’s totally fine — in investment land, that’s known as “an opportunity”.

  • The Undertrader

    There’s no reason for Apple to put out a phone with horrible margins. They don’t need to. Whatever they can make that is good quality at a lower price they will charge accordingly, bringing the price down, but nowhere near the garbage crap phones other companies sell. I think what Wall Street thinks of a ‘cheap phone’ and Apple thinks of a ‘Low Cost’ phone are worlds apart.

    If you think about Android as a Toyota and Apple as a BMW, you’ll finally ‘get it’. Toyota outsells BMW and BMW doesn’t care. They don’t want low end customers. Apple doesn’t really want low end customers either. They’ll shoot for the middle if it’s cost effective, but they have a tight grip on those high end customers and, looking at the profits of companies, it’s a good strategy to continue.

    • laffe

      Because Toyota have Lexus

      • The Undertrader

        And BMW competes directly with Lexus, but in no way competes with Toyota. Should BMW go make a $14,000 crap car because Toyota does? Absolutely not. There’s no profit in it. (Unless you consider constant repairs ‘profit’)

        • vince

          BMW does have the Mini. Still starts closer to $20k so still not in the same price range as a lower end Yaris or Corolla. So your point stands.

          If you had said Mercedes, they have Smart which has cars starting at $13k.

          All nitpicking aside, I actually agree with you.

          • The Undertrader

            Yay, Glad we agree! And my used Mini was $22k. Mini’s in California start around $25k and it’s a kick ass car. ;)

        • Meaux

          Mercedes has the B-Class.

      • chriscogdon

        Toyota also have Scion!

        • Chris Licata

          Scion isn’t fancy. They cost about the same

          • chriscogdon

            Oh, I know that… Scion is the “cheap Toyota”.

          • Chris Licata

            I must admit the FR-S is sick

    • Trappist

      The argument fails. The problem is, iPhone is not a BWM; it is just an expensive Toyota.

      • Iconoclysm

        Then I guess you could just say a BMW is just an expensive Toyota too. BMW owners know the difference…just like iPhone owners.

    • Trappist

      A friend upgraded from a USD 400 iPhone 4 to USD 100 Lumia 520. Yes, he considered it an upgrade. So much for that “BMW” nonsense. You do not upgrade from a BMW to a Toyota, or if you do, you were sold something that was not a BWM to begin with.

      • Iconoclysm

        Yeah, he shouldn’t have considered that an upgrade. I have both an iPhone 5 here and an Lumia 925 and you can tell the difference in price just by looking at the screen let alone picking it up and using it.

      • wonkeythemonkey

        That’s roughly equivalent to “upgrading” from a 1997 BMW to a 2013 Toyota. The new Toyota might have more modern features than the old BMW, but it would have been even nicer to upgrade to a 2013 BMW.

        Also, an iPhone 4 isn’t a $400 phone any more. It’s now free with contract on most U.S. carriers, so the price comparison is more complicated than you’re making it out to be.

  • Adriano Geletes

    Interesting thoughts by Gruber! I do also believe Apple is going to kill the iPhone 4, not sure about the iPhone 4S*. The iPhone 4S is still a pretty nice Phone, has a good camera, enough power to run iOS7 smooth and it has a beautiful design. If they kill the whole iPhone 4 line, they kill one of the most remarkable designs in mobile device history! I don’t believe Apple is going to exclude Siri from the low-cost iPhone. They need Siri on every single device in order to get it out of beta in the near future (especially in languages like Mandarin etc.). But if they do, they might do it in favor of a Mac coherent fragmentation (5C = Mac mini/ MacBook Air, 5 = MacBook, 5S = MacBook Pro, future iPhone 6 with 4,5″ Display = Mac Pro Retina 15″, future iPhone 7 = Mac Pro).

    My thoughts on prize and specs: iPhone 5C: 8MP camera, HD front-rear camera, different colors iPhone 5S: 10 MP camera, finger print sensor, three color options (silver, black, bronze-copper not gold) iPhone 5C (16/32/64GB) = 429$/529$/629$ iPhone 5 (32/64GB) = 499/599$ iPhone 5S (16/32/64/128GB) = 679$/749$/829$/899$

    *I know a lot of people who love the 3,5″ Retina display. For most of my female friends the 4″ is too big for their hands, they can’t reach the Home and Power button with one hand.

    • Adriano Geletes

      Other price options: iPhone 5C (8/16/32GB) = 399$/499$/599$ iPhone 5 (32/64GB) = 529/629$ iPhone 5S (16/32/64/128GB) = 679$/749$/829$/899$

    • The Undertrader

      Am I the only one that things the fingerprint thing is a complete waste? I totally could not care less about a fingerprint sensor. That’s like adding a trash compactor to a car. Sure, I could use it, but why would I?

      • Adriano Geletes

        Security issues (stolen iPhones etc.), Passbook, Payments, Enterprise solutions, get access to different department/labs in a building/company/university/hospital, medical solutions, open/start your car with your iPhone (keyless, something where Apple wants to go). I think it will be a huge success if there will be an API for using the sensors so that third party developers can develop amazing apps. But what I’m really hoping for is Apple releasing some cool accessories for the iPhone/iPad in 2014 which only will be working through fingerprint (private sector).

        • macbrewer

          Already in iOS 7, you can’t reformat a device unless you have the unlock code. Stolen iPhones will be useless.

      • JacobSyndeo

        It’s to help keep your phone secure without having to enter your passcode every single time. It’s much harder to trick a fingerprint sensor than to trick a face recognition system. (For the latter, all you need is a Facebook profile picture!)

        • The Undertrader

          Sure, I get all that, but then my daughter can’t use my phone or my wife, or whatever. I guess maybe if you could store multiple fingerprints per phone it could be useful. Otherwise, just for my 4 year old, I’d have to turn it off.

          • Adriano Geletes

            You’re right! That should be an option. Or maybe you can choose by a list of apps what you can and can not access with or without fingerprint sensors. So your daughter can unlock your phone, play some games or listen to music, but cannot access the app store to download a bunch of games, turn on your car, delete any work files etc.

          • Gryphon

            How about this? If it recognizes your fingerprint, it unlocks. If it doesn’t, it brings up the PIN screen. In other words, it’s part of the PIN lock, not a standalone lock, and simply let’s you past your own PIN more conveniently.

          • Adriano Geletes

            To put in one word, we all love to hear: Yep! Would love to see the animation Apple is going to visualize the sensor scanning your fingerprint.

          • Jonas Ensby

            Hopefully there will be no animation, or just a very swift one, because if scanning the finger takes longer than a second, it’s a bust.

          • Adriano Geletes

            I was think of fast and simple, but at the same very beautiful animation. Definitely not longer than a second!

          • mdelvecchio

            im sure apple is aware of that.

          • Chris Licata

            There would have to be a fall back system. Windows XP had that way back when so it’s a no brainer

          • wonkeythemonkey

            That would be useful if the fingerprint scanner is actually faster than entering 4 digits. I’ve not found that to be the case with fingerprint scanners in the past, but perhaps the latest technology has advanced to that point.

          • Agarun Ilyaguyev

            Who says it’ll be mandatory? The current passcode lock sure isn’t. In fact, a good portion of people’s lock screens aren’t passcode protected.

          • mdelvecchio

            why not give them your PIN? theyre not going to FORCE you to use it, you know…

          • Zing

            You allow your four-year-old to have access to your phone whenever they desire? That seems odd.

            For the rest of us who don’t leave our phone lying around and give our toddlers permission to grab it at will, we would just unlock the phone, then hand it over.

      • darlaj

        You haven’t ridden in a family van, have you?

      • mdelvecchio

        if it works well it would save me a lot of time from re-typing my PIN all the time, to prying eyes.

      • TheRealCBONE

        Apple has a pitifully devoted legion of unpaid and paid developers that will wring every possible usage out of this thing. At least one of them will be useful and cheap. The vast majority of them will be stupid and expensive, making you wonder who was stupid enough to give them money for that waste of time, money, and effort.

        The part that should interest the consumer is that you won’t pay extra for it. Use it if you want to and never use it if you don’t. Hopefully they don’t try to cram it down our throats by weakly grafting it onto everything.

  • Gryphon

    Gruber fails to mention that the $130 upcharge includes the GPS. Correct me if I’m wrong, but it takes both a data connection AND reliable location to enable turn-by-turn directions. Omitting the GPS would cut costs on the 5C, still allow Siri to function in other ways, and provide a reason for the 5/5S.

    • http://policydiary.com/ John S. Wilson

      Are you suggesting Apple would sell a brand new phone n 2013 that doesn’t have a GPS chip in it? Seriously?

      • Gryphon

        It is a bit absurd. So is Apple making a plastic product for the first time in how many years? They need to make a phone that 1) has all the current features, 2) is cheaper than the 4, 3) can be made with higher margins, and 4) doesn’t cut into sales of the premium line. If they do it, the pundits will pass it off as a derivative example of Apple’s lack of innovation, but if they succeed, it will be very innovative indeed.

        • Adriano Geletes

          I don’t think they would sell an iPhone without a GPS chip. I believe they have perfected the assembly process for this “plastic low-cost” iPhone so that their margins are still higher than from any competitor without excluding main features.

          • Gryphon

            In retrospect, I think you’re right. I’m old enough to still think that things like GPSs and digital cameras are expensive, when they are now completely mundane. Heck, the GPS is probably already part of an integrated chip, so thought withdrawn.

            I’m still stuck on not cannibalizing high end sales. Is a plastic case enough? Will they go with a 4″ non-retina display? That would allow the phone do the same things as the high end phone, just not as “nicely.” Who knows? I’m looking forward to the press event.

      • lucascott

        Not sure that is legal

  • http://www.engadget.com/ Jon Fingas

    I will say, if you’re going to do cheap… look at how Nokia handles it, at least on the Lumia 620.

    It’s not fast, it doesn’t have much storage, but virtually everything it does is done well — especially for $250. It’s still responsive, it has decent cameras and it feels great to hold.

  • Rukakika

    I don’t know what “emerging market” country you guys live in, but Apple will sell products for a much higher price in “emerging markets.” (I live in Mexico) That $399 US phone will be about $600 US here, at least. How is that cheap and how is that reachable by people with third-world country wages? You US people don’t think much about it, but Foxconn wages are actually the norm. Where I live, unskilled workers make $20 – $30 US A DAY and skilled workers, like factory managers, start at $15,000/year US. What mass market exactly is going to buy these $600 “low-cost” iPhones? Rich people here already own iPhones, and they will continue to do so. Others have Androids and Blackberries (which are very popular because of the lower priced plans available from the cellular monopoly).

    If you don’t trust my price assessment, go to Apple’s website store and price something in the US and then switch countries. I am going to be spending some time in Spain shortly, and the iMac that’s $1999 US in the US store is $2800 US there, where wages are much lower than the US.

    Talk all you want from your US bubble and how Apple should make these cheap phones for the poor foreign unwashed masses. These phones won’t make a dent at all in “emerging markets.”

    • Chaka10

      Folks, this is why we read from time to time news stories about Chinese tourists buying (or trying to buy) half a dozen iPhones at a shot while on vacation in the US, why there’s an active market for stolen phones and why resale prices on eBay are so high for used iPhones.

    • unhinged

      One issue here is that the advertised US price is ex tax and other countries in the world require advertised prices to include tax. Folks from the US know to add the taxes applicable to their state to the advertised price, those of us in other countries don’t. :/

      • orthorim

        It makes a big difference in countries with high taxes. 20% VAT in Europe for example.

    • marcoselmalo

      When you are doing your price comparisons, are you remembering the 20% mark up for VAT? That said, I’ve found that pretty much all electronics are more expensive in Mexico. Flagship Android devices are just as expensive, and the low cost ones are used as feature phones because they are so underpowered and are not running the latest versions of the OS. (Example: saw a few Android phones for sale at TelCel running Eclair.)

      Also, I’m not sure which Mexico you’re in. Most people I know don’t use monthly plans. They use prepaid.

      • Rukakika

        Really people? I live in México so I know how it works. IVA (VAT) is 16% in México and the same in Spain and everyone includes it in the price except for Sam’s Club because they apparently don’t have to ;-) Apple’s electronics are still almost always priced considerably higher here than in the US. Should be the other way around, I would think. Same for CDs. Why is a CD that’s $14 in the US more than $20 here? And they wonder why people pirate.

        At any rate, you’re missing the point. It doesn’t matter if the flagship Android phones are just as expensive. The article is about Apple providing cheap phones for emerging countries, and my point is that a $500 iPhone is not going to do that. The cheap Androids are the ones making the gains, as carriers like Telcel and Movistar practically give them away because, my guess is, they’re practically given to them. They are Android phones running late version Android, Jelly Bean, but they’re still giving them away for nothing. When Apple can accomplish that, then they’re going to gain market share.

        • Adriano Geletes

          So what is it that you are suggesting? Build an iPhone for less than 100$ and give it away for free?

        • orthorim

          Apple has a long history of overpricing in some markets. It’s annoying – Europe used to be like that, and for some products it still is.

          If they’re that competitive in the USA, why can’t they be elsewhere?

          I mean the answer is yes they can if they want to. 10 years ago Apple stuff was significantly more expensive here in SE Asia than in the US; a few years ago they changed that and now it’s the same, and competitive with all the Android makers.

        • mdelvecchio

          ah, so Apple should give away their hardware, despite being a hardware company, because thats what the telecoms do with their cheaply made handsets w/ free android software.

          right.

          • Chaka10

            I don’t think that’s his point. I think he’s suggesting that going after EMs with a broadly distributed “cheap” iPhone doesn’t make any sense.

        • marcoselmalo

          So, what is the import tariff? Mexico has no free trade agreement with China (the country of origin, which is what they base the tariff on).

          Seems wrong to blame the companies doing the importing when it’s Mexico’s trade policies that are at fault.

    • orthorim

      Central/South America seems to have very unfortunate tax laws that make electronics expensive. Stupid, but who’s going to stop them?

      I live in SE Asia, another emerging market, smart phones here cost about the same as in the USA, give or take. And people certainly are buying them in droves here, everyone who can afford it has an iPhone or high end Samsung, and everyone else is making do with those $200 – $300 Android devices.

      There’s also a mid range from $300-$400 – really nice phones from Sony and Samsung in this price category.

      If the 5C arrives at $300 it’ll be a huge hit. At $399, I expect it to sell about as well as the iPhone 4 (old model), so reasonably well but not disrupting the low end. For $300, Apple would be back in the game. Apple is doing well in high end phones but low end is not great, and an old model iPhone 4 still costs nearly $500. That’s too much and I am surprised they’re selling as many as they do.

    • David V.
      If you don’t trust my price assessment, go to Apple’s website store and price something in the US and then switch countries. I am going to be spending some time in Spain shortly, and the iMac that’s $1999 US in the US store is $2800 US there, where wages are much lower than the US.

      I’ve lived in Spain before, and while it’s true that paid salaries were usually significantly lower in Spain (and France, where I spent more time) when only taking conversion rates into account, “disposable buying power” was not (on average). When I moved to the U.S., I was giddy at the prospect of tripling my salary, but I quickly came to the realization that the cost of living was more or less proportional overall (though unevenly distributed: health care in the U.S. is crazy; groceries are more expensive, but more or less proportional; tech stuff is less expensive; transportation is just different; etc.). In the end, I don’t think I really increased my living standards with the move.

      I agree with your overall point, though.

  • Agarun Ilyaguyev

    There’s a difference between “cheap” and “low’er’ cost” ( emphasis on the ‘er’). As long as they have any bit of common sense left – and I believe they have plenty – Apple will not release anything analogous to netbook of smartphones (aka. ‘cheapo’ POS, with nothing but compromises, designed with nothing but cheapness in mind). However, a new, unique lower tier model to replace 4 and 4S, which would be refreshed in tandem with flagship model(s), makes a lot of sense. For one, customers won’t feel as if they’re getting an “old” model. Secondly, it will sort of “defragment” user experience by getting rid of old size/aspect ratio device displays and the ugly, gargantuan 30-pin connector.

  • lucascott

    I still believe that all this is is basically an 8 and 16 GB iPhone 5 to get all the models on the lightening connector.

  • Tvaddic

    The iPod Shuffle was cheap, granted I don’t think Apple will make something comparably to that, they made some lower quality products to control all price points.

  • Adriano Geletes

    If they kill all of their 3,5″ iPhones, maybe they are going to delete all the apps that haven’t been updated in a long time (iOS7 requires UI elements for iPhone4 and 5 screens) so they can get rid of some low-quality apps!? Maybe not now, but in a year with the release of iOS8!? That would rise the bar towards high quality apps – hopefully. There needs to be done something and they have to get of some “free” apps, because nearly 50% of all apps are for free. No developer in the world can live and develop high quality apps without earning money. Two friends of mine are just using Android because of “everything is free”! I hate this kind of mentality. I don’t want the App Store going more into this direction.

  • Shawn

    I agree that anyone that thinks there will be an unsubsidized iPhone for less than $200 is a fool. If they made it to $299 I would be positively amazed. I think the $349 or $399 price is more realistic (if in fact this lower cost phone exists at all).

    • orthorim

      I think they need to hit about $329 – and not $399. $399 would make the 5C a reasonable deal, but the low-cost-phone-killer that they should make.

      I wander around the mall here in SE Asia and there’s a wide array of devices at around $330 (converted) that look very nice. They have large vibrant screens, good hardware design, and they look almost as good as the real high end models that cost 2x as much.

      This is the obvious target for Apple. Make an iPhone that plays in that price category and they will sell massive numbers.

  • TheRealCBONE

    I don’t think 5C will be the name then. People will assume the C stands for cheap or cheaper. It will just be cheapER than the more expensive 5S. Not cheap period.

  • http://www.about.me/jfmartin67 JF Martin

    Apple never did cheap. They try to do best at a price point they think they will attract valuable customers.