Why it's difficult for Apple inc. to make a cheaper iPhone

Discussion in 'iPhone' started by Apple blogger, Feb 28, 2013.

  1. Apple blogger, Feb 28, 2013
    Last edited: Mar 1, 2013

    Apple blogger macrumors 6502a

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    #1
    The iPhone currently has 3 generations on sale each costing $450 or more .. And true a cheaper iPhone is required .. But the problem that the company faces is the production of these cheaper models. It is easy to say but Apple is not the one who does anything without thinking.

    If they try to start the production of the cheaper iPhone, the will have to increase it 3 times more than the usual. Yes! Three times more. The reason is because they can't just afford to bring out 1 new cheaper model of iPhone in one or 2 countries and make expensive for others. It will be quite unfair and would affect the sales of older generations. They need to make it universal.

    If they bring out, for example iPhone 5S the cheaper one, the demand for it will be unbelievable. No one will want an expensive one, and for that the prices of the existing phones i.e iPhone 4S ,5 would be needed to be dropped below the new iPhones price so as to equalize the prices and demand.

    Now if the new iPhone costs at a starting price of $300(which is less than the current iPhone 4 ) the 4S will have to be $200 and the iPhone 5 $250.. Assuming the cost of production of one 4S is $200,it's obvious they won't sell it at $0 profit while tremendously decreasing their profits on the iPhone 5 in one shot! They will need a back up for their profits.. Some would say the new iPhone would cover up everything .. But as mentioned earlier , the production of the new iPhone will have to be increased much more than the previous (everyone wants cheap phones).

    May be they require a cheaper phone .. But they need to start producing atleast a year in advance and much more than the existing.. They also need to reduce their profits steadily so when they launch the new cheap phone, they don't have to compromise on the profits of the old generation phones.

    For now, I think it's a good thought about a cheaper phone which is unlikely to happen but it doesn't depend on my description but a person more capable of analyzing all this better than me and for a company ..
    You can follow me at @appleincblogger
     
  2. poppers macrumors newbie

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    Feb 28, 2013
    #2
    Because Apple spend so much on R&D and marketing the product to be the next hype it drives the cost of the iPhone up. The phone will only cost maybe $12-30 to make with their slave labor.
     
  3. Skika macrumors 68030

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    #3
    Apple doesn't spend much on R&D and marketing comparing to their competitors.
     
  4. Apple blogger thread starter macrumors 6502a

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    #4
    Even if it spends , they would not reduce profits of earlier phones in one shot .. They need to do it every year little at a time.
     
  5. r2shyyou macrumors 68000

    r2shyyou

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    #5
    Source(s)?

    /rhetoricalquestion
     
  6. poppers macrumors newbie

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    Feb 28, 2013
    #6
    My Bad, let's say $167 - a nice $350+ markup

    http://news.cnet.com/8301-13579_3-57512904-37/iphone-5-may-cost-apple-$167.50-to-build-says-one-estimate/

    </actualclose>

    ----------

    r & d - massive
    Marketing - You are marketing Apple's products by reading about it, blogs such as this. It's the best department - because they are great at it.
     
  7. 617aircav Suspended

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    Jul 2, 2012
    #7
    Why would they want to make a phone that their current OS can't run on. Even the iPhone from two years ago is expensive, so how much would this newer cheaper iPhone be? They will not make a cheaper iPhone, cheap is not in apple's vocabulary.
     
  8. r2shyyou macrumors 68000

    r2shyyou

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    #8
    Yes, bad indeed.

    This isn't marketing, it isn't a blog, and "they" (aka Apple) aren't involved in this.
     
  9. 617aircav Suspended

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    Jul 2, 2012
    #9
    One in five smartphones sold were iPhones. Why does apple need to make a cheaper phone again?
     
  10. Agent-P macrumors 68030

    Agent-P

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    #10
    I have yet to find someone who can explain to me the rationale for Apple to make a cheaper iPhone. Having the older models be the cheaper version makes more sense to me.
     
  11. cynics macrumors G4

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    Jan 8, 2012
    #11
    Lol, imagine walking into an Apple store and saying "Oh this is cheap!". Everyone innn the store would fall over....

    Apples marketing is a premium product at a premium price. Whether thats true or not is a debate for another thread but they certainly dont do cheap....
     
  12. Apple blogger, Feb 28, 2013
    Last edited: Feb 28, 2013

    Apple blogger thread starter macrumors 6502a

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    #12
    Guys when we say cheap iPhones we do not mean cheap quality iPhones. Apple is one company who will never compromise on quality no matter what, that's one reason why the iPad mini(which people were expecting it to be "cheap" as in lower priced before it was launched) is still higher priced than others but lower than the usual Apple products..the next iPad mini will have a retina display which will increase the production costs but Apple will reduce their profits on it as they would have covered it this year..How would you like the same quality iPhones just a little less costlier?
     
  13. upnorth85 macrumors 6502

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    #13
    Smart phones usage is reaching saturation level in the west. In emerging countries such as China and India with a population of 2 billion, smart phone adoption is increasing in leaps and bounds. If Apple sticks to targeting western markets, it will be catering to a replacement cycle and will have growth rates equivalent to a utility. There is no reason like Samsung, Apple can not make products at different price points for different markets. The reason Samsung has become the largest smart phone company by market share is because it is willing to provide phones to all countries and all companies. Here in the US, Apple does not even make phones that can work on T-mobile's AWS network. There are 32 million customers on T-mobile. Samsung and HTC and BBRY do sell phones that work on all US wireless networks.


    My point, the choice Apple has is to increase market share by targeting more countries, more price points or continue with the current strategy. The market clearly has made the assessment, that with the current strategy, the revenue growth rate for Apple will be much lower going ahead an the multiple PE for the stock has gone down. Time will tell, if the stock market's assessment of Apple's strategy and revenue forecast is correct or not.
     
  14. Apple blogger thread starter macrumors 6502a

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    #14
    Samsung can afford giving cheap phones because it leads in other sectors where apple doesn't sell like TV, Washing machines , A.C , and you name them.. They can afford to waste money on a phone which doesn't work. apple on the other hand has limited products so they can't loose out on any and they have to make products which work... Samsung just more well established
     
  15. mateo124 macrumors regular

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    Oct 15, 2011
    #15
    If people are willing to buy the phone at the "expensive" price, then why sell a cheaper iPhone? Now if no one bought iPhone's, then they would drop the price. Which they do, when the new iPhone's come out, the older model's price gets dropped.
     
  16. dejo Moderator

    dejo

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    #16
    Care to elaborate? Why is a cheaper iPhone required?
     
  17. CEmajr macrumors 601

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    #17
    It's suggested that these cheaper iPhones would be for places like India and China where the majority of people are not willing to pay for expensive iPhones.
     
  18. Apple blogger thread starter macrumors 6502a

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    #18
    Sure, the iPhones have taken over in the USA totally but only this year , Samsung which has copied apple(no offence) sells its phone lower than the iPhones .. They say they get all the functionality which IPhone has at a lower cost,we iPhone users know very well the difference between ours and theirs.. But as I quoted earlier cheaper doesn't mean bad quality , iPad mini is cheaper than the normal and it's preceder will also be around the sane cost , the iPhone which is priced at $649 if was priced at $349 it would just be better for everyone, and they need not worry Samsung taking over elsewhere.. That's y a cheaper phone is needed
     
  19. Zwhaler macrumors 603

    Zwhaler

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    #19
    There's still four to go! :D:rolleyes:
     
  20. ucfgrad93 macrumors P6

    ucfgrad93

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    #20
    No it is not. Please don't mistake your opinion for fact.
     
  21. upnorth85 macrumors 6502

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    #21
    This year China will be the largest smart phone market in the world with 240 million users. Smart phone growth in sales forecast in some of the emerging markets in 2013 are (Brazil 40%, Russia 30%, India 60%, China 29%). The market share of Apple in all of the above countries is on average in single digits. Clearly unless Apple like its competitors is willing to offer its product are more price points, Apple will have limited market growth. Remember, the iPhone sale also leads to purchases on itunes etc. It is likely that home grown manufacturers due to the larger base will eventually dominate western markets too. This has happened over and over in the case of microwave ovens, air-conditioning units, refrigerators etc.

    If Apple is happy with a growth rate slightly above that of a utility from a replacement cycle in the smart phone saturated markets in the west, then it can continue to focus on stagnant developed markets. The stock price is clearly betting that going ahead Apple smart phone growth rate will be much lower than in the past. Samsung clearly is following a very different strategy of meeting price points in all countries. So the question is how many people or what percentage of the market segment is willing to to buy the phone at the "expensive" price? What is cheap can be out of reach in some countries and the purchasing power in each country is different. It is common for manufacturer's to sell a toned down version of their product in developing countries. The Honda Odyssey sold in some countries in much smaller in size compared to the one sold in the US.
     
  22. unagimiyagi macrumors 6502a

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    #22
    It is well known that Apple has the highest profit margins in the industry, by far.
    They could easily make a cheaper iPhone. Easily. They could even cut the price of their current ones by $200 and still make money.

    But they won't b/c they want to be perceived as a premium brand, and b/c they only have very few models of phones, they are dependent on hardware sales to fuel the company's profits. They can't go after all segments of the market. They aim at the upper middle class and elites for the iphone. It's not a phone for the budget market, which is a large chunk of the market.

    Apple also has stock holders to please, and they look at things like average profit per phone, etc. If Apple were to knock off the price of the iphone by $150 or so, and bring it back down to earth, their financial reports might not look as great. They'd had to move alot more units, and it's a gamble that apparently they are not willing to take with their flagship phone.

    It's a complex formula but rest 100% assured, it's not b/c Apple can't make a cheaper phone. It's b/c they refuse to. There's no technical reason, and anything you hear from Apple about "we can't compromise" and "it's not as simple as just substituting plastic for aluminum" etc is just patently untrue. If anything, a plastic phone would actually be sturdier and more durable than the soft bendable scratchable dentable aluminum that they use in the iphone 5. I for one, if they did not compromise on the screen, would be highly interested in an iphone at a cheaper price point.

    Apple has the right idea, though--you want to sell last year's models at budget prices. That's a win win for everyone. I'd rather have a slightly used BMW than a brand new state of the art Hyundai. And Apple can say that they won't sell a Hyundai. They'll sell older BMWs, but they are a BMW dealer through and through.
     
  23. 617aircav Suspended

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    Jul 2, 2012
    #23
    What would suggest apple omit from a cheaper iPhone, and yet make it apealling? They can't sell a cheaper iPhone and keep the same standard as the iPhone 5. And what happens to the 4s?
     
  24. 725032 Guest

    725032

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    #24
    Apple needs to concentrate on the quality of the products they already produce before they start making new ones.
     
  25. Ste Nova macrumors 6502

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