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

JoEw said:

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

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JoEw said:

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.

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1080p said:

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: https://www.macrumors.com/2012/09/19/iphone-5-component-costs-estimated-to-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/samsu...nokia-lumia-920-iphone-5-best-phones-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.

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xofruitcake said:

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/data/320193/000119312512444068/d411355d10k.htm

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1080p said:

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.

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xofruitcake said:

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.

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JoEw said:

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.

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gdjsnyder said:

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.

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1080p said:

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.

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