Pegatron Chairman Says Lower-Cost iPhone Will Not Be Cheap

[Alfuh]

$450 to some people is actually a lot of money - and is classed as the high end range of smartphones. iPhone 4 is shocking with iOS7 so that's why their designing a lower cost iPhone - hell it might even only run iOS6.

Just because $450 is a lot of money to people it does NOT mean it is at the high end range of smart phones $450 would put it at the mid range ... the high end range is $600-700 as a start price. Models with more storage go up accordingly.

Also there is no way that they would release this phone with iOS6. One of Apple's call to arms has been that Android is fragmented by having users stuck on old operating systems. They would never, ever release a new product with an older version of iOS.

I think that this phone will likely start around $399 with a higher storage option at $499. On contract it would probably be either $0 or $49 for entry level and $99 for higher storage ... obviously just guessing, but the price points make sense and would fit into the existing product line up

 

[Noctilux.95]

I still don't understand the need for this. We already have this as the iPhone 4 and 4S, and soon the iPhone 5 will be in this category once the 5S is released. Why waste resources designing an entirely new product when they already have older iPhones they sell for less with no additional costs to build.

Because human nature prefers newer shiny object than handy me downs like the iPhone 4/4S.

 

[umbriell]

Simply because Apple need to compete in the low to mid cost Android market for iOS to remain competitive.

When will apple compete in the high end market is my question? Now would have been the ideal time for a 5 in. screen and significantly faster overall experience. It's going to be a big decision to wait another year to upgrade with the hopes of getting the right amount of screen real estate.

 

[Noctilux.95]

I still don't understand the need for this. We already have this as the iPhone 4 and 4S, and soon the iPhone 5 will be in this category once the 5S is released. Why waste resources designing an entirely new product when they already have older iPhones they sell for less with no additional costs to build.

Because it's human nature to prefer newer, shiny object than handy me downs like the iPhone 4/4S.

 

[pgiguere1]

Did anybody really expect Apple to sell an iPhone nearly at cost like some other OEMs are doing?

The new lower-cost iPhone will inevitably cannibalize sales of the high-end iPhone to some extent. No way Apple would lose sales of a very high-margin product to those of a very low-margin product. Remember, their goal is to make more profits, not less.

It's like when people expected the iPad mini to cost $199 to "compete" with the Nexus 7/Kindle Fire again. Be realistic. Apple has a lot to lose considering their current average margin. They will not sell anything near cost that will cannibalize high-margin products, ever.

They can lower their margin a little but not that much. Building a $300 phone that isn't a POS with the kind of margin Apple needs is simply impossible. People would expect something that compares to an iPhone 4S. A $350 16GB Nexus 4, which Google sells pretty much at cost, can't even match an iPhone 4S in several key aspects (image quality, battery life, UI performance, camera, build quality).

 

[4TheLoveOfTech]

If the smartphone market basically only consisted of Apple (like it did a few years ago), then I'd agree with you.

But these days Apple are not just competing with themselves - they're targeting Android, Nokia, etc with this new model.

There's definitely a mid-range market of people who aren't looking to buy the most expensive phone on the market, but who also aren't interested in buying last year's phone model. Currently that market goes straight to Android and that's who Apple are trying to target here.

So let me get this straight.

The original plastic iPhone wasn't cheap because it was plastic but it was cool.
Then Apple stopped making plastic phones and Samsung entered the market and their top end flagship phones which are selling for as much off contract as the iPhone 5 are cheap plastic junk.

Now Apple is going to make a Cheap. Sorry Mid Range Plastic phone but it's not going to be cheap because it's plastic.

Got it.

So by this forums logic Samsung and ALL the other high end flagship phones that are made of plastic are not cheap poorly made garbage because Apple is going to do it again.

Yeah baby. Plastic for everyone. Pigs are flying and the new Cheap. Sorry, Plastic iPhone will be an innovative magical marvel for the industry.

Tim Cook is brilliant.

 

[fertilized-egg]

I agree with an earlier post... when the iPhone 5s comes out, this "cheaper" model will just replace the iPhone 5. It will just be the iPhone 5 guts in a plastic shell.

I think an iPhone 4S replacement is more logical especially with the old 30 pin in it. Also by now they must've gotten really good at making those A5 chips which should help to keep the cost down.

Would apple ever release something that didn't have a good profit margin?

Probably not. That's like asking if Microsoft will give away Windows and Office for free or cheap or if Google will give away advertisements for free. Among the current products Apple TV has a pretty slim margin I believe.

 

[SILen(e]

The reason for the "cheaper" iPhone will probably not be to sell them for less than the older models Apple is selling right now or the iPod Touch 5th Gen 32GB - but the lower manufacturing costs.

It's probably much cheaper for Apple to use iPhone 5 hardware and put it in a plastic case than keep selling the iPhone 4S at 450$, due to more complicated manufacturing of the 4S.

This will probably be even more true for the next year, when we would get a 450$ iPhone 5, which has high manufacturing cost due to the glass inlays (digital camera equipped systems matching inlays to perfectly fitting cases etc...).

The iPhone 5 case is too expensive to manufacture to sell a device with it for 450$, so the cheaper models will switch to a cheaper build quality.
Perhaps even the 550$ model will switch to the new cheaper cases.

 

[umbriell]

If the smartphone market basically only consisted of Apple (like it did a few years ago), then I'd agree with you.

But these days Apple are not just competing with themselves - they're targeting Android, Nokia, etc with this new model.

There's definitely a mid-range market of people who aren't looking to buy the most expensive phone on the market, but who also aren't interested in buying last year's phone model. Currently that market goes straight to Android and that's who Apple are trying to target here.

This is right. But to compete globally $300 equivalent is probably the highest end of the target that works.

My question remains what is left to distinguish the 5s from the "iphone light"?

The screen size is the same. Dimensions are ostensibly the same. If the innards are going to be similar too then why wouldn't everyone buy this phone instead of the 5s?

 

[M-O]

I never understood the obsession with a lower-cost version of the iPhone.

When the 5S comes out, the lower-cost versions will be the 5 and 4S.

This has worked just fine in the past, I don't see why Apple would put much of an effort behind another product to fill the same gap.

because they want to get rid of 3.5" screens and 30-pin dock connectors.

----------

Shoot me down all you want guys, but I think it'll be a maximum of $299.
Apple needs a phone at this price level to become fully competitive, and it'll really shut-up people who constantly kick Apple over pricing.

the iPod touch (w/camera) is $299. add cell radios, antennas, vibration motor, earpiece, and mouthpiece...

i don't think they'll get it under $299 no matter what material it's made of.

My guess: $449 (free on contract)

 

[Shanpdx]

$450 to replace iPhone 4S

iPhone 4S parts + 4" Inch screen - LTE (yes you heard it) = iPhone Lite.

It is always better to go with used iPhone 5.

 

[theBB]

So let me get this straight.

Now Apple is going to make a Cheap. Sorry Mid Range Plastic phone but it's not going to be cheap because it's plastic.

You've added the stuff after "because" yourself, so if the logic seems confusing, you could try reading more slowly and maybe make a simple flowchart with a pencil and paper.

 

[JeffLubowski]

My point was that you can already get a $450 unlocked iPhone 4. So why would apple need to redesign an entirely new iphone and sell it at the same price as their "lower end" iPhones they already have for sale at that price (iPhone 4 and 4S)

They could just go a little cheaper and there you have it.

I think the point of this new phone is to get off the selling old phones routine. Instead, Apple will likely offer three distinct phones, a high-end, 4 inch model, a high-end, larger phone, and this new mid-range phone. Simplifying like this should cut down on costs and make updating a lot easier. Each year one phone will get redesigned and the others will get spec bumps and other minor modifications.

 

[iZac]

I still don't understand the need for this. We already have this as the iPhone 4 and 4S, and soon the iPhone 5 will be in this category once the 5S is released. Why waste resources designing an entirely new product when they already have older iPhones they sell for less with no additional costs to build.

Many consumers don't want a phone design that they've seen flooding the market for the last 2 and a half years. Apple can (and may likely) be selling the same technology as the 4S/5, while giving consumers a fresh design that they haven't seen before.

From what we've seen, this design looks to be an evolution of the 3GS and we've seen Apple perform the same trick trick with the iPod nano / shuffle.

Discontinue loved design.

Wait.

Re-introduce loved design with improvements.

It'll also let Apple have two product tiers, with new designs every year instead of two.

Furthermore, as others have mentioned, a $0 down on contract is far more appealing to a consumer with less disposable income.

 

[theBB]

Pegatron might have a rough estimate of the cost and could guess a margin on top of it, but would not really know the sale price. In any case, there is no way Pegatron's upper management would comment on the possible sale price or quality of an upcoming, unannounced product of a customer, let alone one of Apple's.

 

[Shanpdx]

Cheap means NO LTE

That is it. how many developing world has LTE?

We know apple, this is great way to up sell

 

[Chupa Chupa]

I'm surprised he would publicly acknowledge the project. Apple can't be too pleased he did.

It seems like there was a little something lost in translation when he read the rumors pages calling the iPhone "cheaper" and took it for meaning a POS and wanted to clear the record. Oops.

The reality is if this phone sell for $399 or $499 unlocked it's cheaper than what new iPhones usually sell for. If I had to guess this "cheaper" iPhone is going to be exclusively for the prepaid market. It's not going to compete with the $99 previous model post paid iPhones.

 

[flux73]

I still don't understand the need for this. We already have this as the iPhone 4 and 4S, and soon the iPhone 5 will be in this category once the 5S is released. Why waste resources designing an entirely new product when they already have older iPhones they sell for less with no additional costs to build.

We don't know for sure that this incurs additional costs. After all, it looks like the screen will be the same as the iPhone 5's. The only "new" thing would be the plastic shell which would be easier and cheaper to manufacture than the glass and metal of the iPhone 4/4S. In fact, the rumors are that the "cheap" iPhone will have higher margins than the iPhone 5.

 

[szw-mapple fan]

When does apple price anything cheap?

When hell freezes over.

 

[Tiger8]

Not cheap huh? Maybe $ 500 price point start (unsubsidized), if its get cheaper it would eat the ipod touch market. (Maybe)

$500 is too high, too close to the 5's future price ($550). They can go with $450 maybe.

Either way, the iPhone did eat a LOT of the iPad market, so even if they go with $399, should be ok

 

[petsounds]

It's hard to "double-down on secrecy" when even the chairman of a manufacturer of your products can't keep his mouth shut. Jobs would've just fired them for that insubordination, cost be damned.

 

[!GS51!]

i think when iphone 5s will come out...the iphone 4/4s and 5 will be gone and together with this new iphone will share the store.

No way, there is no way that the 4S and 5 be gone from the market that would be stupid really stupid. The only device that will leave the market is the iPhone 4 to make room for the 4S,5,5S.

 

[4TheLoveOfTech]

No way, there is no way that the 4S and 5 be gone from the market that would be stupid really stupid. The only device that will leave the market is the iPhone 4 to make room for the 4S,5,5S.

The 4S has the 30 pin connector. It will likely be replaced with the new Cheap Plastic Phones with lighting connector.

 

[chrisbru]

I think an iPhone 4S replacement is more logical especially with the old 30 pin in it. Also by now they must've gotten really good at making those A5 chips which should help to keep the cost down.

Let's get one thing straight right now... Apple will not release a new device with a 3.5" screen, 30-pin dock connector, or old versions of iOS.

If this thing comes to fruition, I imagine it being a slightly tweaked 4S internals, no rear camera, a lighting connector, 4" screen, and iOS 7.

Ways it could be cheaper, but I'm not sure about:
*A5 chip, die-shrunk
*8gb capacity
*Non-retina screen

 

[blasto2236]

I think a lot of people are missing the whole point of this endeavor, assuming Apple even goes for it.

As many have rightly pointed out, in the US and other developed areas, they already sell older models at a lower cost, or for absurdly low subsidized costs. However, the majority of the developing world (namely China) do not have carriers that offer subsidies at all.

My theory is that they will continue to use the "sell the old phones for cheaper" model in developed countries, and this low-cost iPhone would only be sold in places like China where carrier subsidies do not exist.

China is a huge market, that mostly belongs to Android and crappy knock off phones. If Apple could make an affordable phone, and ONLY sell it in those countries, it's a win-win for Apple. I think in that case they might actually be willing to trade margins for market share. Get people entrenched in that ecosystem, and they're more likely to stick with you.