Rumor Mill: Cheap iPhone in 2014—Gene Munster

Analyst Gene Munster often has some crazy ideas. Earlier this week he suggested an Apple Television device for next year, today it’s a solution to the problem of tiny marketshare in growing markets like India and China—a cheap iPhone.

Business Insider published Gene Munster’s thoughts this morning—Apple Will Launch A Cheap iPhone In Two Years—and outlines the essential problem like this:

In the U.S., if you buy a new iPhone 5 it costs $200 because the carrier is footing the majority of the bill for you. You pay $200, but Apple collects ~$600. That carrier covers that $400 gap, and hopes to make the money on your data charges.

That system doesn’t work in places like India and China. And that’s why Apple’s market share is tiny in those countries.

If it doesn’t want to lose access to the next three billion smartphone buyers, it needs to solve this problem.

So lots of us will go for the $200 phone, subsidized over two (or three here in Canada) years by a carrier, that model doesn’t work everywhere, India and China being the two places this falls down. Sure Apple is selling devices there, but not in the volumes they’d like to, would an iPhone that is just $200 period fix that problem? Maybe, but that’s isn’t the biggest challenge Apple would face:

If Apple is going to sell a $200 phone, it’s going to take a major change in corporate philosophy. But, the company has a new CEO in Tim Cook. He might think different about Apple’s pricing. From BI

It isn’t just the margins that would have to change, it’s the whole build process. According to estimates it costs $167.50 to make an iPhone 5, that doesn’t consider shipping, marketing, packaging, and other costs. So the cost of an iPhone 5 is probably close to $200, but you can’t sell devices at cost and survive, you have to make a profit on each one.

I think this is where Apple is going to face a challenge in terms of innovation, build quality, components, and, yes, company philosophy. Would a $200 iPhone have a plastic case? Would it be non-Retina? Would it use a micro-USB port?

I believe that Apple could pull it off, but it is going to be a matter of company will, and while this is certainly a business challenge Apple is facing, I think Apple is facing greater challenges with iOS 6-7 and the design malaise that we’ve seen recently. Those issues will need to be fixed first before Apple can hit this challenge head on.

Can Apple pull it off? And the bigger question—should they?

Antique coffee mill by McKay Savage from Flickr

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Categories: Apple Rumors

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  • Tyler

    I love your website. I used to make tech videos but then stopped when I realized they were only repeating the info her lol. But great website

    • http://trishussey.com Tris Hussey

      thanks Tyler!

  • Tyler

    **here

  • http://www.facebook.com/profile.php?id=100000360595524 Tudor Alexandru

    This will never happen because Apple is a premium brand, comfortably dominating the premium priced phone, tablet and PC markets. Steve Jobs would roll over in his grave before any “cheap” Apple product would hit the shelves in any country, Tim Cook or whoever’s gonna be in charge.

    • http://trishussey.com Tris Hussey

      But is Apple willing to leave money on the table and ignore HUGE markets to do that. I agree, they are a premium brand, but they might have to adapt to survive.

      • http://www.facebook.com/profile.php?id=100000360595524 Tudor Alexandru

        I agree they’ll have to adapt to survive, but I don’t think they’ll do it by compromising on design or build quality.

    • http://rounak.me/ Rounak Jain

      could Apple’s entry into the smaller tablet space be seen as their willingness to address the cheaper market?

  • Tyler

    I personally don’t think apple will sabatoge it’s name and premium record just to appeal to a extra market…

  • miles

    errr…. the iphone 3G has no mini connector and it is made of plastic