There Will Not Be a Cheap iPhone
The consensus is that Apple will launch on cheaper version of the iPhone. So stated, I don’t think that will happen.
A reason does exist for Apple to make a cheaper option available. The 4S and 4 models are not cheap enough to sell well to people on unsubsidized, no-contract plans. They are excellent, capable phones that run the latest version of iOS. Apple designed them to be the best they could produce at launch, not to be cheap.
So, the market for a cheaper iPhone is there. Apple, however, has a long history of not giving the customer what they want–doubly so when the customer want merely a cheaper version of an existing product.
It’s hard to spend $1000 on a laptop these days, but Apple’s cheapest laptop costs that much. The business case for making a cheaper Macbook exists, but they don’t.
That isn’t to say Apple won’t sell things at cheap price points. The iPod Shuffle is less than $50.
Notice though that the Shuffle is not the logical result of de-content-ing an iPod, dollar by dollar. Instead, it’s an ultra-portable, benignly simple music player built from the ground up to be portable and simple. It is in no way a poor-man’s iPod. The poor man’s iPod isn’t offered by Apple. It’s made by SanDisk. In fact, most Shuffle buyers probably already own another iPod or iPhone.
Given Apple’s history, I do not think they will offer a cheaper iPhone. They may, however, offer a new phone intended for a different kind of customer looking for different things in a phone. And this new phone might indeed be cheaper than the existing iPhone.
A new Apple phone might have a bigger screen or double the battery life or a physical keyboard or be wearable or not a smartphone or something else entirely. It will not, however, be a down-market version of the iPhone.
Photo credit: Wikimedia Commons
Readers of The Armchair CEO will recognize this post as an advance prediction. The purpose of this is so that if I am wrong about this and then later right about something else, I can’t pretend I was right about the one thing and never wrong about this thing. We have a tendency to forget our not-so-prescient predictions.Report
Kudos for making a concrete prediction and documenting it publicly.Report
For a while, I thought it was a mistake for Apple to try to go downmarket, when it first started looking like they might do it. Largely for the reasons that you state. But, the more I read about emerging markets, the more it made sense to me. The question, I guess, is whether or not the emerging-market needs can be met through recycled old phones.
Which brings a question of the extent to which old iPhones can do what even low-brand new ones can. I admit that I don’t know enough about the Apple ecosystem to know if that’s the case. In terms of functionality (specifically, which apps you can run), how much does it matter what version of iOS you are running? How easy or difficult is it to install a new iOS on an old phone if transitioning a device from the US to China? Is the difference in screen resolution a problem?
Thoughts?Report
Old iPhones, in general, are awesome, and frankly make it difficult to justify the newer models at this point. It’s relatively rare that new features aren’t propagated back to older models. Siri’s unavailability on the 4 is the only exception of any significance.
how much does it matter what version of iOS you are running
I can say this: when I had my 4, I would much rather have had the iOS upgrade that came with the 4S than actually getting a new 4S handed to me. Over the past three years, the software upgrades have swamped the hardware upgrades in terms of what they can deliver to a user.
How easy or difficult is it to install a new iOS on an old phone if transitioning a device from the US to China?
I don’t know for sure, but I would guess it’s almost certainly trivial. The “hard” part would probably just be canceling your US contract and signing up with a Chinese carrier. Upgrades happen through the device itself online, and I don’t think it would scream bloody murder just because your carrier is different.
Is the difference in screen resolution a problem?
The 4 and 4S have the same resolution. The 5 is taller and therefore a bit different. The width, on the other hand, is the same. I haven’t seen word from any developers complaining about this though.
With respect to a low-cost iPhone, I think it’s possible they might maintain the same resolution but with a bigger screen. That would give them a non-Retina product that could use the same apps without modification.Report
I’ve found old iPhones to get pretty laggy as the OS upgrades come in. If you manage to stay in the stock OS or even just one OS version ahead, you’ll be good to go*. However, I think 4S owners that jump to iOS 7 will experience frustrations. Also, many of the software upgrades they provide have always been version limited. Adding video recording in iOS 3 was a purely software update, but only the 3GS could use it.
The reason that providing a downmarket product makes sense is because there is inherent value in the network effects. My in-laws don’t need a whiz bang phone, but if they get onto iOS, it becomes more valuable to my wife and I because of free text messages through iMessage.
* This is based on my 3G and iPhone 4 experienceReport
However, I think 4S owners that jump to iOS 7 will experience frustrations.
If, perchance, someone were an iOS developer and had advance access to the iOS7 content someone might have a differing opinion. The base 4 might, for instance, be described as “a little pokey” but the iPad2 and 4S (and subsequent models) would, by inference, be deemed acceptable even in the non-optimized beta form.
Were one to be such a person and not wish to violate any signed agreements to the contrary one would likely not get too far into the details of such a discussion.Report
I didn’t remember any huge introductions of lag with my 4 when I updated the OS. Then again, if the lag was sufficiently subtle with each release, I might not have noticed it. I did play with someone’s 5 recently and being amazed at how much faster it was then mine. Unfortunately, it’s kind of hard to judge subjective experiences across time. I remember feeling the 4 was fast when I first got it, but was that because it was an earlier version of the OS or my expectations were lower or both?Report
I’ve thought of the Shuffle as Apple’s way of evangelizing its brand. All, or at least nearly all, of Apple’s other physical products are seemingly intentionally set at a prestige-level price point (and corresponding profit margin).Report
There are plenty of people who buy them to work out. I think I read somewhere that it is the only iPod that Tim Cook actually uses, which makes sense if you already have an iPhone.
I think there is even a waterproof one on Amazon that swimmers like.
I think they just saw a little niche they could fill and filled it.Report
What your basically saying is that Apple is intentionally branding itself as an upper-middle class or upper class good like luxury cars rather than something more affordable as a business strategy.Report
I would say “premium good” rather than “upper class good”. I think they think even lower-middle class people ought to be using their products. They know that will miss out on much of the market that way that is highly price sensitive, but those aren’t the kinds of consumers they want to have anyway.
I’d say Apple wants customers who are willing to pay for what they want regardless of their income levels.
Remember the kid who sold his kidney to buy an iPad: http://www.telegraph.co.uk/news/worldnews/asia/china/9191325/Chinese-boy-sells-kidney-to-buy-iPad.htmlReport
Oh dear, thats a bit much too materialistic for my ethics.Report
I like the term “aspirational good.” Apple products are something to which you aspire. Not so much because they’re all that much better than the alternatives, but because they signal something to the rest of the world about who you are and would like to be.
The problem for Apple is that there are only so many people who will continue to aspire in the face of When the iPod or the iPhone were the only products of their kind, people could continue to rationalize paying the premium. Now that you can buy all sorts of smartphones that do exactly what iPhones do, that number is going to shrink in the developed markets. And in order to have the same sort of cache in the developing world, you have to be firmly anchored in the U.S. and Europe.
Put another way, Apple’s whole business model seems based around keeping people on an eternal treadmill of elevated price points and planned obsolescence. Sooner or later people start to realize that they’re being played for suckers and jump off the treadmill.Report
I agree that Apple’s whole strategy is to make themselves a producer of over priced status goods kind of like the people who make the $38,000 hand bag Oprah wanted to buy.Report
Apple’s goods have a bit more utility and durability to fall into the category of over-priced status goods. They might be hyped up a bit but I’ve fond that the Apple products I purchased can last for years if you treat them well.Report
You can also make a Toshiba or Sony produced product last for years even if you don’t treat it well. It used to be in my grandparents’ day that things were built to last for your entire life. Fullerbrush had a lifetime warranty on all of its products. If an apple product can’t be made to last at least ten years than it is indeed overpriced.Report
It’s worth pointing out that an iPhone 5 and a Samsung Galaxy S4 have the exact same retail price.
I find their computers overpriced, but a lot of people prefer their OS.Report
As others have pointed out, part of the problem with “the low-cost iPhone is the one from last year” is that Apple tends to optimize its development for the most-recent generation, and everything else can just deal with it. And Apple specifically refuses to permit OS downgrades.Report
The policy also makes a lot of assumptions about how costs decrease over time.Report
It’s hard to spend $1000 on a laptop these days, but Apple’s cheapest laptop costs that much. The business case for making a cheaper Macbook exists, but they don’t.
The only computer Apple builds that is competitive on price with comparable units is the Mini, which is pretty much a niche market. When I bought mine six years ago, I had an unusual list of features I needed: one small/tiny box, some *nix, ability to run a VM that would boot Windows, not an all-in-one with display/keyboard/mouse. Virtualbox on Linux (I’ve been a Linux user since ’92) was still a little iffy but VMWare’s Fusion on OS X had been out long enough to be stable. When I priced other hardware that matched the Mini, they were just as expensive, even if I bought parts and did my own assembly. I’m not sure that I could beat the Mini today without going the ARM route, which wouldn’t support the Windows requirement.Report
I think of the Mini like the Shuffle. It is priced at a lower price point, but I don’t see people who can’t afford Macbooks saying “well, let me buy a Mini instead.”
Incidentally, I also think the Mini is also probably not intended for people to save money. It’s (like the Shuffle) probably a person’s second, third, or fourth machine they have around.Report