Will we ever see a iPhone unlocked for 300-350 dollars?

[JoEw]

Do you think Apple will appeal to the unlocked crowd? I think apple could still meet their high margins and make a great (not amazing) iPhone with a price point of 300-350 US Dollars. Thoughts? I know so many people who are using unlocked pay as you go carriers now and they can't afford a 650 dollar unlocked iphone 5 or 530 dollar 4s. It doesn't make sense that Apple could dominate this market without losing their high margin. Dropping the iPhone 4 to 300 would do the trick, it can't cost that much to produce after almost 3 years.

[takeshi74]

No one can tell the future. Seems unlikely.

Originally Posted by JoEw

it can't cost that much to produce after almost 3 years.

As always, cost to produce isn't the only concern. No business would make it if they sold products for what they cost to produce -- not without some other supplemental revenue stream.

[Mrbobb]

NEVER.

But you can get that from secondary markets if you are patience and don't insist on cosmetic perfection, which judging by latest Apple QA, ur not losing much.

We are talking about last year's model right? If you are referring to the current model, perhaps you haven't heard Foxconn is complaining the new i5 is HARD(er) to make.

[BugBytes]

The cell networks need to make their money too...

[1080p]

No incentive to slash profit margin when you are having record sales year after year.

[cheezeit]

Try eBay/cList. Unlocked 4S lnib are like 300-400

[JoEw]

Originally Posted by 1080p

No incentive to slash profit margin when you are having record sales year after year.

There is always room to achieve even higher sales.. Any economist knows if you take a smaller margin but sell a lot more devices your going to make up for that smaller margin by simply selling a lot more devices Anyway I guess Apple isn't worried about not selling as many iphones as simply making money off them. But my friends at this moment have no choice but to go to Android alternatives.

[onthecouchagain]

The iPhone 4 is currently selling unlocked for $450 dollars.



So even if there is an unlocked iPhone at $300-350 dollars, Apple would probably cripple it with equal-to or worse specs than the current iPhone 4 selling for $450.

[1080p]

Originally Posted by JoEw

There is always room to achieve even higher sales.. Any economist knows if you take a smaller margin but sell a lot more devices your going to make up for that smaller margin by simply selling a lot more devices Anyway I guess Apple isn't worried about not selling as many iphones as simply making money off them. But my friends at this moment have no choice but to go to Android alternatives.

People don't choose Android simply because "it's cheaper." Usually it isn't cheaper. Galaxy S3 is still $650+ off contract. Sure the Nexus is cheap, but Google has barely sold 400,000 units of Nexus 4. (Probably due to supply issues.) The Nexus lineup is cheap because Google is subsidizing the products themselves (breaking even on devices) to increase use of it's services. It's an investment on their part to learn more about you and sell more effective ads to advertisers.

But... let me get into this economic argument with you.

For the sake of this argument... let's say Apple wants to cannibalize the sales of Galaxy S3. We'll use your price suggestion of $350 unlocked for iPhone.


iPhone 5 costs $199 in parts. (I am not even going to count the costs of R&D, assembly, packaging, shipping, advertising, retail...etc.)
SOURCE: http://www.macrumors.com/2012/09/19/...-begin-at-199/

iPhone 5 CURRENTLY COSTS $650 unlocked. (16GB Model)

Let's guess that iPhone 5 will sell 50 million units and Samsung sells 40 million Galaxy S3's. (Random numbers loosly based on: http://nvonews.com/2013/01/03/samsun...hones-of-2012/ )

At $650 subtract $199 in parts. So $449 is profit.

$449 multiplied by 50 million iPhones is $22,450,000,000!

$22.5 BILLION in profit for just iPhone 5.


Now let's take your suggested $350 price point and subtract $199 in parts.

That is $149 in profit per iPhone.

Now let's say... at $350, Apple will sell more iPhones and cannibalize the most popular Android phone Galaxy S3. Let's say Apple steals 30 million sales from Samsung because they are "soooo cheap now."

So Apple sells 80 million iPhone 5's at a $149 profit.

That's $11,920,000,000 in profit.

How is that better for Apple?

Also... this whole thing banks on the assumption that Apple's competition WON'T lower their price too... which they would have to in order to compete... thus causing Apple not to cannibalize any product and not get the increased sales figures they were trying to get.

Also... many people don't choose Android for price anyway. Many are Google users. Many like open source. Many like the customization options.

[AutoUnion39]

Hell no. If you want one at that price, go to CL. Its very easy to find one at that price.

If they did sell them at that price, the quality would take a nose dive and people here will be bitching about how crappy their iPhone is built. Cant have it both ways. Good quality and cheap price don't go together

[xofruitcake]

Originally Posted by 1080p

People don't choose Android simply because "it's cheaper." Usually it isn't cheaper. Galaxy S3 is still $650+ off contract. Sure the Nexus is cheap, but Google has barely sold 400,000 units of Nexus 4. (Probably due to supply issues.) The Nexus lineup is cheap because Google is subsidizing the products themselves (breaking even on devices) to increase use of it's services. It's an investment on their part to learn more about you and sell more effective ads to advertisers.

But... let me get into this economic argument with you.

For the sake of this argument... let's say Apple wants to cannibalize the sales of Galaxy S3. We'll use your price suggestion of $350 unlocked for iPhone.


iPhone 5 costs $199 in parts. (I am not even going to count the costs of R&D, assembly, packaging, shipping, advertising, retail...etc.)
SOURCE: http://www.macrumors.com/2012/09/19/...-begin-at-199/

iPhone 5 CURRENTLY COSTS $650 unlocked. (16GB Model)

Let's guess that iPhone 5 will sell 50 million units and Samsung sells 40 million Galaxy S3's. (Random numbers loosly based on: http://nvonews.com/2013/01/03/samsun...hones-of-2012/ )

At $650 subtract $199 in parts. So $449 is profit.

$449 multiplied by 50 million iPhones is $22,450,000,000!

$22.5 BILLION in profit for just iPhone 5.


Now let's take your suggested $350 price point and subtract $199 in parts.

That is $149 in profit per iPhone.

Now let's say... at $350, Apple will sell more iPhones and cannibalize the most popular Android phone Galaxy S3. Let's say Apple steals 30 million sales from Samsung because they are "soooo cheap now."

So Apple sells 80 million iPhone 5's at a $149 profit.

That's $11,920,000,000 in profit.

How is that better for Apple?

Also... this whole thing banks on the assumption that Apple's competition WON'T lower their price too... which they would have to in order to compete... thus causing Apple not to cannibalize any product and not get the increased sales figures they were trying to get.

Also... many people don't choose Android for price anyway. Many are Google users. Many like open source. Many like the customization options.

heh heh, why not spend some time in Apple quarterly earning statement before building your financial model. If you get the wrong data in, you will get the wrong conclusion. When you sell a device, there are tons of cost associate with it that is above and beyond the part cost. Inventory cost (parts and completed products), rework cost, warranty cost, shipping cost, distribution cost (you know Walmart, Best Buy of the work need some profit and money to pay their sales people too), marketing cost, engineer cost, legal cost (getting the phone approve in every country will take a lot of money too) etc. etc. Apple last Q gross margin is 40%, engineering + markeeting + SG&A is about 9%. and then you threw in the tax. Enjoy the 10K... Iphone in general has 50-60% gross margin, Ipad has 23-32%, Ipad mini has gross margin that is at best high teen and may be lower...

This is fiscal 2012 report (10/11 to 9/12)

http://www.sec.gov/Archives/edgar/da...411355d10k.htm

[1080p]

Originally Posted by xofruitcake

heh heh, why not spend some time in Apple quarterly earning statement before building your financial model. If you get the wrong data in, you will get the wrong conclusion. When you sell a device, there are tons of cost associate with it that is above and beyond the part cost. Inventory cost (parts and completed products), rework cost, warranty cost, shipping cost, distribution cost (you know Walmart, Best Buy of the work need some profit and money to pay their sales people too), marketing cost, engineer cost, legal cost (getting the phone approve in every country will take a lot of money too) etc. etc. Apple last Q gross margin is 40%, engineering + markeeting + SG&A is about 9%. and then you threw in the tax. Enjoy the 10K... Iphone in general has 50-60% gross margin, Ipad has 23-32%, Ipad mini has gross margin that is at best high teen and may be lower...

This is fiscal 2012 report (10/11 to 9/12)

http://www.sec.gov/Archives/edgar/da...411355d10k.htm

Did you not even READ what I posted? Maybe you skipped over the part where I said, "I am not even going to count the costs of R&D, assembly, packaging, shipping, advertising, retail...etc."

It was a CRUDE example to show that Apple has no incentive to lower their price. It is not meant to be any type of factual financial statement about Apple.

[xofruitcake]

Originally Posted by 1080p

Did you not even READ what I posted? Maybe you skipped over the part where I said, "I am not even going to count the costs of R&D, assembly, packaging, shipping, advertising, retail...etc."

It was a CRUDE example to show that Apple has no incentive to lower their price. It is not meant to be any type of factual financial statement about Apple.

You cannot use Iphone 5 cost to start your analysis. There are plenty of Android smartphone selling in China an other developing country for $100-150. So it is possible to build a smartphone and make money at 300-350. But the question for Apple is whether the resulting mid priced smartphone will fit the corporate image. And you have to examine every cost associate with build, delivering and servicing a mid priced point smartphone to determine if a 300-350 phone can be profitable.

You won't see LTE in $300-350 priced point smartphone, the body will be plastic, the processor will be the cheapest one that can do the job. 512M ram is what will be inside. You won't see direct shipping to home. Everyone will have to pick it one from distributor and may be not even in Apple store. The storage option may start at 8G. The camera will use different sensor. The speaker will be different. The lcd screen may not be LPTS. We definitely won't have in cell touch screen. The list go on an on. The target phone has to be designed with cost reduction in mind. May be the warranty will only last 90 days. And if you don't have a view of the cost of the phone form start to delivery, you won't be able to determine if it is feasible for Apple to build a 300-350 priced smartphone with decent gross margin.

My 2 cents is that Apple has to tackle the mid price smartphone market if they want to continue to grow their earning and has a healthy ecosystem outside of US and Western Europe. In developing countries, $600 unlock smartphone is way too expensive. $300-$350 are barely doable for majority of the population in developing world.

[JoEw]

Originally Posted by xofruitcake

You cannot use Iphone 5 cost to start your analysis. There are plenty of Android smartphone selling in China an other developing country for $100-150. So it is possible to build a smartphone and make money at 300-350. But the question for Apple is whether the resulting mid priced smartphone will fit the corporate image. And you have to examine every cost associate with build, delivering and servicing a mid priced point smartphone to determine if a 300-350 phone can be profitable.

You won't see LTE in $300-350 priced point smartphone, the body will be plastic, the processor will be the cheapest one that can do the job. 512M ram is what will be inside. You won't see direct shipping to home. Everyone will have to pick it one from distributor and may be not even in Apple store. The storage option may start at 8G. The camera will use different sensor. The speaker will be different. The lcd screen may not be LPTS. We definitely won't have in cell touch screen. The list go on an on. The target phone has to be designed with cost reduction in mind. May be the warranty will only last 90 days. And if you don't have a view of the cost of the phone form start to delivery, you won't be able to determine if it is feasible for Apple to build a 300-350 priced smartphone with decent gross margin.

My 2 cents is that Apple has to tackle the mid price smartphone market if they want to continue to grow their earning and has a healthy ecosystem outside of US and Western Europe. In developing countries, $600 unlock smartphone is way too expensive. $300-$350 are barely doable for majority of the population in developing world.

Thank you.

[gdjsnyder]

Originally Posted by xofruitcake

You cannot use Iphone 5 cost to start your analysis. There are plenty of Android smartphone selling in China an other developing country for $100-150. So it is possible to build a smartphone and make money at 300-350. But the question for Apple is whether the resulting mid priced smartphone will fit the corporate image. And you have to examine every cost associate with build, delivering and servicing a mid priced point smartphone to determine if a 300-350 phone can be profitable.

You won't see LTE in $300-350 priced point smartphone, the body will be plastic, the processor will be the cheapest one that can do the job. 512M ram is what will be inside. You won't see direct shipping to home. Everyone will have to pick it one from distributor and may be not even in Apple store. The storage option may start at 8G. The camera will use different sensor. The speaker will be different. The lcd screen may not be LPTS. We definitely won't have in cell touch screen. The list go on an on. The target phone has to be designed with cost reduction in mind. May be the warranty will only last 90 days. And if you don't have a view of the cost of the phone form start to delivery, you won't be able to determine if it is feasible for Apple to build a 300-350 priced smartphone with decent gross margin.

My 2 cents is that Apple has to tackle the mid price smartphone market if they want to continue to grow their earning and has a healthy ecosystem outside of US and Western Europe. In developing countries, $600 unlock smartphone is way too expensive. $300-$350 are barely doable for majority of the population in developing world.

Dude..1080p was just giving an example to show why it's not beneficial to Apple to sell a lower cost unlocked phone, he wasn't giving a full blown analysis, I don't know why you are thinking he was intending to.

If Apple wanted to tackle the mid-priced phone arena they would have kept the 3GS around and sold it for $350 unlocked. But they didn't, and probably because of performance issues because of the 3 year old hardware. I know what Apple says can always be taken back, they do like doing that, but I believe Ive or Schiller had previously stated that they don't go into designing a phone for a specific price point, they go in trying to make the best phone possible. Apple can't make a "best" phone possible that they'd be able to make $350 unlocked. It would be exactly what it would be - a mid-range option. Apple will not, and does not need to go into this market. The are doing just fine with their high-end market as is.

[macingman]

Originally Posted by JoEw

There is always room to achieve even higher sales.. Any economist knows if you take a smaller margin but sell a lot more devices your going to make up for that smaller margin by simply selling a lot more devices Anyway I guess Apple isn't worried about not selling as many iphones as simply making money off them. But my friends at this moment have no choice but to go to Android alternatives.

Regarding the economics you tried to involve. You are wrong. High demand pushes up the price in order to reduce demand in order to not have a shortage of stock which is not good for anyone.

[LostSoul80]

The subsidiary market is too well established to make a change anytime soon.
Besides, lots of people are, and have been, buying unlocked iPhones without complaints. I don't see the point in making a similar price drop.

[xofruitcake]

Originally Posted by gdjsnyder

Dude..1080p was just giving an example to show why it's not beneficial to Apple to sell a lower cost unlocked phone, he wasn't giving a full blown analysis, I don't know why you are thinking he was intending to.

If Apple wanted to tackle the mid-priced phone arena they would have kept the 3GS around and sold it for $350 unlocked. But they didn't, and probably because of performance issues because of the 3 year old hardware. I know what Apple says can always be taken back, they do like doing that, but I believe Ive or Schiller had previously stated that they don't go into designing a phone for a specific price point, they go in trying to make the best phone possible. Apple can't make a "best" phone possible that they'd be able to make $350 unlocked. It would be exactly what it would be - a mid-range option. Apple will not, and does not need to go into this market. The are doing just fine with their high-end market as is.

I don't know if you work in electronic industry or not. Having an old design is not necessary the cheapest way to tackle cost problem. Old parts cost a lot more as it get out of the natural production cycle. If you have an old dot matrix printer (like the one in car dealership), finding the part will cost you arm and a leg now.

It is all good to say that you design the best phone but if you earning start to decline (and I think Apple earning will start to decline yoy in 2Q13. There is already a rumor this morning with an analyst doing a channel check and Iphone 5 production look to be down 20%+ in 1Q13). The fast roll out that Tim Cook pursued for Iphone 5 (100 countries in 4Q12) move a lot of sales from 2Q13 / 3Q13 to 4Q12 / 1Q13. And the 2Q13 and 3Q13 sales is looking dismay (i.e. yoy delcine) right now.

And even if you just look at the ecosystem problem, Apple has to tackle the mid-priced point smartphone. Samsung is very big in Asia with the pen based input stuff. Apple will forever be locked out from pen based input users. Unless Apple is willing to give up all the developing market, they have to figure out how to increase sales in those region since a lot of apps will region specific.

My objection is that the analyst start with Iphone 5 cost and it is only based on BOM. Nexus 4 is losing money like crazy because it is a high end phone selling at mid-priced point (nexus 4 has an LTE chip in the phone and it does not support LTE). If Apple produce a mid-priced phone, it has to change the business model from top to bottom in order to generate a decent margin. All the business practice that everyone enjoy so much up to this point cost a lot of money and they won't be able to afford it with mid-price smart phone.

[isephmusic]

problem ???

[hafr]

Originally Posted by 1080p

Did you not even READ what I posted? Maybe you skipped over the part where I said, "I am not even going to count the costs of R&D, assembly, packaging, shipping, advertising, retail...etc."

It was a CRUDE example to show that Apple has no incentive to lower their price. It is not meant to be any type of factual financial statement about Apple.

Well, not to disrespect your previous logic or anything, but how do you reach the conclusion that the price elasticity of the iPhone 5 would be -0,77? Generally, these kind of products (high end electronics) are considered to have a high price elasticity...

----------

That being said, I think that a far more important thing for Apple than making a cheaper phone would be to allow people to roll back to iOS 3, or at least 4, to breathe "new life" in their 3GS's and make them last for another two years.

In short, they need to loosen up a bit when it comes to planned obsolescence. But of course, they won't.

[upnorth85]

The US market is saturated as is most of the western countries. The growth markets are in emerging economies such as China, Brazil, India etc. Samsung provides smart phones at various price points. The only way Apple can ride the growth markets is by covering additional price points by also selling a much lower priced budget iPhone. In the absence of this, the stock will behave like a utility stock not a growth stock. Because growth will be predominantly from the replacement cycle in western countries. It is thus imperative for Apple to cover a larger share of the market. Even Mercedes provides low end cars. The car companies do such as Toyota and Honda do it through their wholly owned premium brands under Lexus and Acura.

[Toltepeceno]

I would not claim it will not happen. Remember many claiming there would not be an ipad mini or 4" iphone 5?

[aneftp]

iPhone is apple's cash cow right now. In September 2007 less than 3 mo the after the original iPhone $499/599 release. Apple got rid of the 4Gb iPhone and sold the 8gb iPhone for $400. That stimulated sales significantly.

So Apple could sale iPhones for $399 unlocked if they wanted to. But they are making a hugh profit at the $650 msrp (carriers probably get a small discount say 10% off).

If Apple sees further competition from Samsung they may have to re examine their pricing strategy. As of now. Samsungs msrp and their actual selling price to the carriers are significantly discounted. Sprint CEO says the iPhone cost 40% more than any other phone they carry including the top of the line Galaxy phones.

We can all do the math. That means carriers are getting the S3 around $400-450 in bulk and iPhones around $600 in bulk from Apple.

[corvus32]

BestBuy sells the 3GS unlocked for $380, as well as the no contract Virgin Mobile iPhone 4 for $350.