Wednesday Apple Rumors: iPhones on the Cheap

by Alyssa Oursler | January 9, 2013 12:25 pm

Wednesday Apple Rumors: iPhones on the Cheap

daily apple rumors  300x180 Wednesday Apple Rumors: iPhones on the Cheap[1]Six years ago to the day, Steve Jobs unveiled a revolutionary technology[2]: Apple‘s (NASDAQ:AAPL[3]) iPhone, described as “a mobile phone that plays iTunes and surfs the web.”

And although the phone has exploded in popularity in each of its subsequent five installments, it now looks like Apple might be thinking smaller[4].

While the U.S. is iPhone-crazy[5], the company is having more issues overseas. In the third quarter of 2012, the company held less than 15% of worldwide smartphone shipments, while Google (NASDAQ:GOOG[6]) and Samsung (PINK:SSNLF[7]) continue to gain market share.

Overseas, one of the biggest barriers is price. In the U.S., subsidies from wireless carriers like AT&T (NYSE:T[8]) and Verizon (NYSE:VZ[9]) put the ticket price of the iPhone 5 at $199. The iPhone 4S, on the other hand, goes for $100 less, while the iPhone 4 is actually free with a two-year contract. Without a contract, though, the product’s price is a bit less appealing: $649.

It’s worse in emerging markets, where iPhones usually cost more than $700 per unit.

But now there is talk that Apple might debut a smaller, cheaper version of its popular product in an attempt to gain ground in developing nations. In fact, the company reportedly has been working on a more affordable iPhone for nearly two years and such a device could be debuted later this year[10], according to The Wall Street Journal.

The phone would available in the U.S. as well; reports say Apple has spoken to at least one of the top U.S. wireless carriers about its product plans. The phone is expected to go for a retail price between $100 and $150. Possible changes for the cheaper version could include a plastic shell instead of aluminum and the use of recycled parts.

As WSJ notes, the move would be a huge strategy shift for the company. In the past, Apple has “prided itself on prioritizing profits over scale and offered a relatively small number of products mostly targeted at the high end.”

The aforementioned iPhone 5 has a retail price of $649 but reportedly costs around $215 to build, according to a recent Barclays BOM report[11]. That excludes the value of warranty, manufacturing costs and logistics expenses, of course, but still leaves room for hefty margins.

“A less-expensive iPhone risks crimping the co­mpany’s profit margins,” the WSJ added. At the same time, it could also bring in new cost-conscious customers.”

As of this writing, Alyssa Oursler did not hold a position in any of the aforementioned securities.

Endnotes:
  1. [Image]: http://investorplace.com/hot-topics/apple-rumors-stock-news/
  2. unveiled a revolutionary technology: http://money.cnn.com/2007/01/09/technology/apple_jobs/index.htm
  3. AAPL: http://studio-5.financialcontent.com/investplace/quote?Symbol=AAPL
  4. Apple might be thinking smaller: http://online.wsj.com/article/SB10001424127887324391104578230060513922882.html?mod=WSJ_Tech_LEADTop
  5. the U.S. is iPhone-crazy: http://bgr.com/2013/01/07/iphone-5-sales-ios-market-share-284640/
  6. GOOG: http://studio-5.financialcontent.com/investplace/quote?Symbol=GOOG
  7. SSNLF: http://studio-5.financialcontent.com/investplace/quote?Symbol=SSNLF
  8. T: http://studio-5.financialcontent.com/investplace/quote?Symbol=T
  9. VZ: http://studio-5.financialcontent.com/investplace/quote?Symbol=VZ
  10. such a device could be debuted later this year: http://online.wsj.com/article/SB10001424127887324391104578230060513922882.html?mod=WSJ_Tech_LEADTop
  11. recent Barclays BOM report: http://www.valuewalk.com/2013/01/iphone5-costs-around-215-to-build-barclays-report/

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