It's been pretty much confirmed that Apple will be launching what has been described as a low-cost iPhone, but a new report points out why this low-cost iPhone might actually be a mid-range iPhone.
Apple is the master of introducing new Apple devices that have lower specs than its other higher-end offerings, but Apple still manages to offer and sell those devices at a premium. Apple does not like to ever use the phrases low-end, low-cost, budget, cheap, or the like to describe a lower-end device. When Apple announced the iPad mini, it brought a smaller, lower-priced iPad to the market to compete with other smaller-sized tablets like the Nexus 7 and Kindle Fire HD, but it did not enter at similar price points.
Apple faced major criticism for introducing the iPad mini at a starting price of $329, while other popular smaller tablets start out at $199. Apple proved the critics wrong and the iPad mini is a huge success for the company. The iPad mini is, in fact, so popular that it has reportedly overtaken sales of its larger sibling.
It is now believed that the so-called low-cost iPhone might end up being more similar to Apple's iPad mini plan. Gokul Hariharan and Mark Moskowitz, analysts at J.P. Morgan, believe Apple will launch the "mid-end" iPhone following what it did when it announced both the iPad mini and the first iPod nano. Apple was able to charge a higher price than competing products because it believed its design and features warranted the price. Consumers didn't seem to have a problem with paying a little more for a device with Apple's iconic design expertise instead of similar, cheaper competing devices.
All Thing Digital points out why the low-cost iPhone might not ship with a price tag of $150 - $200, but possibly more like $350, due to statements made by Apple CFO Peter Oppenheimer during Apple's most recent earnings call:
"We are managing the business for the long term and are willing to trade off short-term profits where we see long term potential. The iPod is a great example of this. When we launched it in 2001, its margins were significantly below the margins of Apple as that time. Four years later, the iPod and iTunes music store comprised half of Apple's revenues and inspired us to build the iPhone.
Now the iPad mini is another great example. We have priced it aggressively and its margins are significantly below the corporate average. However, we believe deeply in the long-term potential of the tablet market and think that we've made a great strategic decision."
It sounds like Apple could possibly follow up with a mid-range iPhone instead of a low-cost iPhone. Consumers shouldn't worry that the smartphone will cost them $350. Carriers will sell the smartphone at a lower cost when signing a new two-year contract. Carriers currently offer the 16GB iPhone 5 for $199, while Apple sells the 16GB iPhone 5 unlocked and contract-free for $649. The new smartphone could cost $99 or possibly less when it finally goes on sale sometime this year.
