How Low Will Apple Go on the iPhone 5C?
Apple's new iPhone 5C will sell at an unsubsidized price between $330 and $400, analysts said today, even as some questioned whether the change in the company's lower-priced strategy would pay off.
Wed, August 14, 2013
Computerworld — Apple's new iPhone 5C will sell at an unsubsidized price between $330 and $400, analysts said today, even as some questioned whether the change in the company's lower-priced strategy would pay off.
The long-rumored lower-cost iPhone -- dubbed the iPhone 5C, perhaps for "Color" -- will probably roll out in about five weeks, after a Sept. 10 unveiling alongside the full-priced successor to the iPhone 5, experts agreed.
But how Apple prices the iPhone 5C and what's inside -- that's where the experts were at odds.
"The rumors we're getting from the supply chain is that it's the same as the iPhone 5 but in plastic," said Carolina Milanesi of Gartner in an interview. "In other words, there will be no difference between the iPhone 5C and the iPhone 5 in performance."
Analysts have argued that Apple needs an all-new lower-priced iPhone to compete with hard-charging Samsung and countless cheap models from others, rather than continue to rely on selling older models at cheaper prices. The goal: Keep its growth in line with Wall Street's expectations by broadening the potential pool of buyers.
Android-based phone sales have exploded over the past year, with much of that growth in the lowest-priced ranges, where devices sell for $200 or even under $100. Apple won't -- or can't -- compete there, but by going lower, it can leverage its still-powerful brand and pick up sales in markets where it's now weak, in particular countries where carriers rarely subsidize purchases.
Apple could try to go head-to-head with Android at the lowest prices, but Milanesi said it was unlikely. "Could they make something that costs $99 and sell it for $199? Maybe. I don't know," she said. "But if they did, it would not be the same kind of phone, and it would give developers problems."
Whether such a phone had a smaller screen, one with lower resolution, or both, adapting apps would be yet another burden on developers, which Apple wants to avoid, what with Android breathing down its neck in app download volume and app revenue. "If they radically changed [the specifications of the iPhone 5C], it wouldn't help the app ecosystem," Milanesi said. "And it might not be able to sustain the newest iOS. Then it would be similar to the Android situation, where the market is fragmented with multiple versions [of the OS]."
Instead, Apple's iPhone 5C will be a mid-priced device, the analysts concurred.
Brian Marshall, a Wall Street analyst with the ISI Group, estimated the bill of materials, or BOM, of a hypothetical 8GB iPhone 5C at $205, $45 of which was credited to non-hardware costs like licensing and warranty. According to Marshall, that would let Apple sell the device for $339 at a 39.5% margin.