What the heck was Apple thinking with the iPhone 5c?

Discussion in 'iPhone' started by benji888, Sep 15, 2013.

  1. benji888 macrumors 65816

    benji888

    Joined:
    Sep 27, 2006
    Location:
    United States
    #1
    I'm not a professional, but, I've been watching Apple for years and I have to say, it looks to me that Apple made a very smooth long-term business decision concerning the iPhone line with the 5c & 5s. Keep in mind, the smart phone market is a global market, don't just think about what they need to do for us Americans, they sell a whole lot and could sell a whole lot more to other countries also. So, here's my opinion about the iPhone lineup, where it was, where it is, and where it will go.

    First off, rumors were spread of a low-cost iPhone coming this fall. Why would we hear this, when Apple was not doing it? Simply put, to create a public emotion for this, to drive the stock prices down when it didn't happen. (BTW, now is a good time to buy Apple stock for long-term investors). Did I buy into this? Yes. But, the more I read in the last weeks leading up to the Sept. 10 Apple special event, the more confused I got as to where 5c would fit in, and what would be discontinued.

    Let's start off by showing what has been happening with the iPhone lineup through the years (of course they each have processor and other upgrades, but to keep it simple here, just cell ability and memory options shown):

    iPhone (original) 4GB/8GB/16GB EDGE/GPRS data

    new: iPhone 3G 8/16GB adds 3G data support
    discontinued: iPhone (original) (couldn't do 3G data)

    new: iPhone 3GS 8/16/32GB
    dropped in price: iPhone 3G 8GB only

    new: iPhone 4 8/16/32GB 1st iPhone to offer CDMA option
    dropped in price: iPhone 3GS 8GB only

    new: iPhone 4S 16/32/64GB comes in all-in-one GSM/CDMA model, only one side of cell chip activated depending on carrier. Unlocked=GSM for US & other supported countries.
    dropped in price: iPhone 4 8GB only
    dropped again in price: iPhone 3GS 8GB (although offered for $49 on contract, this was the first iPhone to be offered free on contract, depending on AT&T's mood.)

    Until Sept 10th:
    new: iPhone 5 (first LTE iPhone) 16/32/64GB
    dropped in price: iPhone 4S 16GB
    dropped again in price: iPhone 4 8GB (eventually $0 on contract)
    (discontinued: iPhone 3GS)

    Apple never intentionally had a low-cost iPhone, to put it simply, what they have done is just put last year's model down a notch in price and keep selling it, keep producing it, but in one memory size, to reduce production costs.

    So, if Apple were to follow their old business model for iPhones, then we would have a new 5s, the iPhone 5 would step down to middle position, $100 less, one memory option, and the 4S would become the entry-level iPhone by default. But, this is not the case, Apple was rumored to be developing two new iPhones for release at the same time.

    iPhone 5, Apple adds LTE
    Ok, then, let's go back a bit. First off, the iPhone 5, last September, was Apple's first LTE capable iPhone. It was presumed to be delayed because the prototypes had battery drain issues. It also had limitations on what countries/carriers it was compatible with (they even did a little hardware update for Tmobile in April of this year, so they would be compatible with all of Tmobile's GSM). They would have had to change the iPhone 5 to make it work with China mobile and others that it does not work with. This would not be a simple changing the cell chip kind of thing, a year later, AT&T has much more LTE available, and qualcomm has had time to come out with a new lineup of cell chips.

    With the LTE limitations of iPhone 5, and, new LTE/cell chips that work with more carriers/countries, likely lower in power consumption available, was one of the factors that pushed Apple to make a new business-model type decision for the iPhones, for now and the future. This was driven by the need to have more than one LTE iPhone working with China and other emerging smart phone markets, otherwise, the 5s would be the only LTE option in those markets.

    Apple also needs to take control of their entry level iPhone, instead of relegating it to the 2-year old phone. Right now, the iPhone 4S has taken the entry level position by default. But, more on this in a bit.

    iPhone 5c/5s
    We hear, inside the iPhone 5c is nearly identical to the iPhone 5, except, it uses these new cell chips and a little bigger battery. We've also seen rumors that seem to indicate the 5c & 5s have shared logic board designs. Each offer 4 models with 5 configurations, both compatible with the same countries/carriers: http://www.apple.com/iphone/LTE/ All of this leads me to think that Apple reworked the innards of the iPhone 5(c/s) in such a way as to make it more modular. I'm guessing, and can't wait to see ifixit tear downs, the cell chip configuration is interchangeable between 5c & 5s. This is one way to improve compatibility, maintain battery life, along with easier production.

    While the 5s is a new & improved model iPhone, and sits in it's place of flagship model, where does the 5c come in? Is it just a replacement for the iPhone 5? If so, why plastic, why not just make the iPhone 5 compatible with more carriers?

    As I stated above, Apple needs to define it's entry-level category of iPhone instead of relegating that position to the oldest iPhone. It would appear, and again, I can't wait to see ifixit tear downs, that Apple has created a new simpler design that will be easier to produce and keep up with demand, while being easier to change as well.

    It's not necessarily about fitting into price points, but about ease of production while maintaining quality expected of Apple products.
    Before the glass iPhone 4, Apple had two plastic-backed iPhones, not necessarily by choice, but because they were unable to get the 3G GSM phone signal to get through the original iPhone's mostly aluminum back, the 3G & 3GS. Apple eventually found a way to get the antenna on the outside and wallah, glass iPhones (Steve J. loved glass…the first version of Mac OS X was intended to have a glass look to the GUI, the Apple stores have large areas of glass, like no other, etc., (I like glass too, but, not for a phone I might drop), and I'd be willing to bet that he had something to do with iOS 7's "frosted glass" design beginnings as well.) Plus, other countries price points don't necessarily fall where we might think.

    So, what I am getting at, is that Apple has learned some things along the way, and now it was time to create the full line-up of iPhones instead of just following old patterns, continuing to sell the 2-year old model, having to force-fit the new iOS for it to keep it going.

    iPhone 5c
    It would appear that Apple designed an iPhone that is much simpler to produce, plastic, but not cheap, better in every way than the older 3G/3GS plastic iPhones, and a modular internal set-up that can be updated more easily. I mean, the iPhone 5 had 3 models/4 configurations, now they have 4 models with 5, so, production has to be refined. I think part of what they have done is an interchangeable cell chip module. I also think they have designed a production method that can be more easily changed for new models. This is key to refining the production process and to cover more ground in the global smart phone market. Now they have two smart phones, one that is easy to produce & sell while maintaining the Apple/iOS experience, the other is a top-level standard setter. Also, not everyone will care about the top-tier extras on future iPhones.

    You see, what will happen next year (2014) is, there will be a new iPhone 6, the 5s will go down to the middle slot, one memory option, the 5c will go down a notch into the entry-level position, where it will stay. They could still offer two memory options here. There it is! Apple's entry level iPhone 5c! ;) They will discontinue the 4S. …The following year (2015) they could discontinue the 5s, update the 5c, but use the same type of back and process to produce them. Get the idea?

    2014 iPhone lineup guess:
    iPhone 5c 16/32 GB
    iPhone 5s 16GB (or perhaps 32GB)
    iPhone 6 16/32/64GB (or perhaps 32/64/128GB)
    (& maybe one more)

    iPhone 5s, iPhone future
    What the 5s will do is pave the way for the future by bringing mobile shopping to a new level, with iBeacons (and without NFC), and more computing power w/64-bit architecture (which also brings it closer to OS X for Mac), and they've done some things to attract more business customers (free iWork apps). (See these articles: http://www.businessinsider.com/apples-touch-id-fingerprint-scanner-and-e-commerce-2013-9
    http://www.businessinsider.com/iphone-ios-new-features-for-business-2013-9
    http://www.businessinsider.com/two-ios-7-features-for-business-2013-9)

    One last thing...Bigger iPhone?
    While I have never given way to the bigger means better (thinking from between your legs instead of your brain), and don't know what happened to the smaller is better mentality that we used to see in electronics… I do also think Apple has paved the way for a larger screen iPhone. I'm hoping to see iPhone 6 come in two sizes: 4" & 4.8" 4.8" being thinner than the other iPhones, the thinnest smart phone on the market. (I doubt Apple will go larger than approx. 5"). Both will have the same features, but the larger one will be thinner and have a larger battery, longer battery life. I don't think they will produce or sell nearly as many of the larger screen, but, maybe it'll have 128GB option, 4" would only go to 64GB. As far as how to do this retina-screen resolution-wise, IDK. It might not be smart to use the same resolution as the 4" and have larger pixels, but, the iPad mini is essentially the iPad 1 & 2 screen in a smaller size. Apple is expected to come out with a retina iPad mini next year. However Apple implements the iPad mini retina display will be an indication of how they might go from 4-4.8" in reverse.
     
  2. Tthomas612 macrumors 65816

    Tthomas612

    Joined:
    Aug 24, 2013
    Location:
    Lexington, Ky
    #2
    Very very good informative post OP. I couldn't agree with you more. As Apple has been selling more iPhones but profit margins were lower. The 5C makes up for that.
     
  3. user-name-here macrumors 65816

    Joined:
    Aug 31, 2013
    #3
    You need to end things with a summarizing paragraph highlighting the points you are making.

    Right now I'm reading though it for the 3rd time to see what points you are trying to make and it's like I'm looking at a "Where's Waldo?" picture.
     
  4. greg555 macrumors 6502a

    Joined:
    Mar 24, 2005
    Location:
    Canada
    #4
    Good analysis overall but a summary would help. (Fixing "wallah" to voila would help my OCD.)

    I almost avoided this thread because of the title however.
     
  5. nippyjun macrumors 65816

    Joined:
    Jul 26, 2007
    #5
    The price of the 5c is such that it won't canabilize 5s sales too much and/or is cheaper to make and has higher margins then the 5s.
     
  6. Joesmith13245 macrumors regular

    Joined:
    Sep 15, 2012
    #6
    A summary is for people who can't retain information & more formal publications... this is a user forum and will gladly cut the OP some slack.

    OP. I agree with most of your post although I'm not sure it will be a successful business model long-term. Only time will tell.
     
  7. Kurso macrumors 6502

    Joined:
    Sep 10, 2013
    #7
    The iPhone 'c' model is there to keep the ecosystem in sync. When the iPhone 6 comes out there will be an iPhone 6c. This way they won't have so many people left behind on the iPhone 5 form factor.

    It lets them keep more people in sync as form factors change.
     
  8. QuarterSwede macrumors G3

    QuarterSwede

    Joined:
    Oct 1, 2005
    Location:
    Colorado Springs, CO
    #8
    As I understand it the 5 is too expensive to produce to maintain the profit margin they like so a cheaper plastic model was introduced.

    Why did it take a tl;dr post to say the same?
     
  9. MJD Dawg macrumors 6502

    Joined:
    Apr 27, 2009
    Location:
    Junction of the Pacific, Juan de Fuca & NA Plates
    #9
  10. Glassman macrumors member

    Joined:
    Feb 21, 2006
    #10
    what were they thinking? we can make more money!

    they're about to start selling on China Mobile, so they need TD-SCDMA/TD-LTE support in more than just their current flagship which calls for a redesign anyways

    they need to support more LTE bands popping up across the world than at the time of iPhone 5 launch

    they see the amount of people buying the year or two old models, so obviously those customers are not after the latest greatest, but there's an opportunity to make bigger margins if the production costs are brought down

    color is hip with certain demographics that happen to lie outside those seeking flagships, so they can create more demand, perhaps sway lots of people who would otherwise reach for the 4S into getting the cool new 5C instead, all while juicing healthier margins

    what they certainly didn't think is that they're in anyway forced into competing in a lower price segment and continue eroding margins, quite the opposite - 5C is their play to recover margins that managed to slide a bit in the past
     
  11. megnieu macrumors newbie

    Joined:
    Sep 15, 2013
    #11
    Actually, the iPhone isn't as popular in other countries at you would think.
     
  12. benji888 thread starter macrumors 65816

    benji888

    Joined:
    Sep 27, 2006
    Location:
    United States
    #12
    Yeah, I felt it needed a summary at the end, but I guess I wanted to get this posted, and move on. I'm sure if I had submitted this for an article to an editor they would have said the same. But, this is a rumor forum, not MacWorld Mag or whatever. I could have read this out loud to someone and added a summary, taken out some things I know I said twice, but, this is kind of practice, and I"m trying to say, "hey, I bet it's modular inside" before we actually see an ifixit teardown.

    The headline came from the fact that I had a totally different idea about the 5c 2-3 weeks before the announcement. Then I posted comments of what I thought, people debunked me, then more rumors came out, more stuff I read over time (new & old rumors), (as my on-call job was limited, so I had time), I began to realize I was wrong. Part of what was wrong with my reasoning before was that I thought Apple would axe all 30-pin connector idevices this year. It would have made more sense in my head to make the 5c a non-LTE entry-level phone, get rid of the 4S (4S does not have LTE), keep the iPhone 5. But, then I saw the iPhone 5's LTE is not compatible w/China's version of it. Which led me to more reading....

    That's too simplified...there's more to it than Apple just making a "cheaper plastic model"...if it was just about making a plastic back iPhone they would have done this a year ago. My point is that, I think, when we see ifixit teardowns, we will see a modular design inside both new iPhones, with interchangeable cell (LTE) chipsets, ones that are used in both phones. That could not be achieved if they kept last year's iPhone 5. (The smart phone market is expanding in other countries. The LTE in iPhone 5 is not compatible with some of those, so they had to change it anyway.) I was trying to point out that there are several things going on here, not making a cheaper phone, but streamlining the manufacturing and production process, and having more than one LTE iPhone for those markets. This also sets things up for a reusable form factor for the entry-level iPhone. It's possible the 5s is designed physically in such a way that they can continue to make these as is after two more new iPhones come out, and just put the 5s innards in the 5c form factor, and now it's an entry-level iPhone that's easier to produce. (Maybe.)

    Yeah, this is part of what I was saying. I can't be 100% sure if it will remain a middle model or fall to the entry-level next year. But, as I already stated, I think 5c will bump down to entry-level when they bring out the iPhone 6. We'll have iPhone 6, 5s, 5c. Then 2015 iPhone 6s, 6, 5s/6c?, the 5s/6c being the same form factor as 5c. A form factor they will keep for more than a couple years. But, the reason I didn't put that in is because the question here is, will the entry-level iPhone be a 5s refitted to the 5c form factor, fingerprint sensor and all intact, or will it be an iPhone 6 minus fingerprint sensor and other top-tier hardware?

    Ultimately, there may be some gaps in my theory. I don't know quite where iWatch will fit, and not sure about a bigger iPhone. I think they would do, say iPhone 6 (4") & (4.8"), only differences, 4.8" would be thinner, larger battery, perhaps larger memory options, but both would have the same capabilities.

    BTW, if anyone reads those article links I posted, think about it, the 5s didn't really have a big "wow" factor...I think It's as if Apple pulled out the Ace card, but, it's still face down. No one seems to think the fingerprint sensor is a big deal. ... iBeacons. ... 3-6 months from now it'll be more understood, and, 2 years from now we'll look back and see it was a game-changer (as someone else says too, see comment #2:http://forums.macrumors.com/showthread.php?t=1636825). Also, with free iWorks and such, they have more to offer businesses as well. In the end, the 5c is more of a global marketing thing.
     

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