Here’s why a cheaper iPhone wouldn’t make sense

WSJ Cheaper iPhone 2013

Wall Street Journal’s report yesterday that Apple is secretly working on building a less expensive iPhone to compete with the cheap Android devices that are selling like hot cakes in emerging markets struck me as odd. This rumor has been flying around for years — that Apple would eventually expand the iPhone line with an iPhone mini of sorts that would be less functional but more affordable. Now I could be wrong about this, but I just don’t think a cheaper iPhone makes sense for Apple or even for us.

The main reason WSJ used for a cheaper iPhone is that it could compete with those cheap, plastic Android smartphones and gain some market share. That would be understandable for many other companies, but Apple has never been about gaining market share. Ever. Apple loves big profit margins, and if it can make a substantial amount of money off of a product that has a small amount of market share, there won’t be any complaints.

Building upon that, there’s not a whole lot of money that can be made from making a cheaper iPhone. Cheaper almost always means smaller profit margins. Apple could have easily priced the iPad mini at $299 to smoke the competition even more than it is now, but for an even greater profit, the price was bumped $30 to $329. A $299 price point — hell, even $249 — would have definitely meant more market share, but $329 means more money. It’s all about the money.

Apple would have to find some magical way to create an iPhone with an extremely low price and have it not suck. And by magical, I mean a way that doesn’t sacrifice on quality. Apple doesn’t make shitty products. The iPod shuffle sells for just $49, but it’s built with high quality materials and plays music with a distraction-free UX. Stripping down an iPhone wouldn’t be that simple because the iPhone packs far more technology into it. Apple has never been willing to make a crappy product just so it can sell for less. If that was the case, there’d be a lot of slow, plastic, sub-$600 MacBooks on the market today.

By the way, did you notice something about the iPad mini’s launch as an expansion to the iPad line? Apple stopped distinguishing between generations. The first-generation was called iPad, second was iPad 2, and the third and fourth were… iPad. Again. That’s because naming each generation poses a branding problem for when you want to expand the line. The iPhone’s name, however, continues with its generational differences. Apple can’t have an iPhone 5, iPhone 4S, iPhone 4 and then an iPhone mini-ish-plastic-slower-insert-confusing-model-name-here. People would be utterly confused. There’s an iPad and an iPad mini. Simple. The biggest reveal as to whether Apple will expand the iPhone line is if the 7th-generation model is just called “the new iPhone.”

What it comes down to is this: I’m not saying that Apple definitely won’t release a cheaper iPhone, but if it ever does, it’ll be because Apple found a way to make a good amount of profit with minimal sacrifices. It won’t be solely because Apple feels the need to claim low-end market share. There’s not a doubt in my mind that Apple has explored the possibility though. It frequently explores a wealth of possibilities — if you don’t believe me, visit patentlyapple.com. Actually executing the idea profitably and sensibly is the challenge.

  • Mr. Clark

    You should probably take a business class or two, because you seem to lack a basic understanding of even the fundamentals. Apple’s pricing on the ipad mini was set specifically to the point that they felt would be the optimal intersection of profit margin, saturation, and cannibalization. To say they didn’t make it 299 only for the extra per device profit at the expense of market share is simply incorrect. On the contrary, they felt that the extra $30 would be the perfect amount to retain essentially the exact same amount of sales, with a higher pwr device profit. To say apple doesn’t care about market share is a laugh. EVERY company cares about market share, it’s just the balance of market share with per device profits. If apple wants to reign in emerging markets, they will have to find a new balancing point. In other words, they will have to price the device high enough to make a good profit, but low enough to actually sell any units. They could make a milliondollars per device, but without any sales, they won’t make a dime. Get it?

    Now the real question is could they make a quality enough product at a price point that will make them money, but at the same time not be out of reach of consumers.

  • Anonymous

    They already make a cheaper iphone. Its called the iphone 4 & 4s. The phone you get if you want an iphone but cant afford the iphone 5.

Back to top ▴