A cheap iPhone 5x? Fuggedaboutit!
So, there's a new iPhone coming next month and the Apple tech press is tripping over itself trying to determine what form the new phone is going take. A fair number of prognosticators are predicting a cheaper Apple phone.
That's because they say Android is gaining market share at a rapid rate due in large part to its inexpensive smartphones, and Apple has little choice but to compete. As Android expands with its low-cost devices the story goes, the sheer size of its market will eventually overwhelm Apple if it doesn't do something drastic soon to reverse the trend.
It's a compelling argument, but it doesn't feel like Apple's way of doing business to me.
Apple has never been one to bend to conventional wisdom. It would be a bit like a sports team making a move every time the hooligans on talk radio screamed for a new manager or a trade. You can't run a business based on what the howling masses tell you or you'll be out of business in a quick minute.
If you want a case in point, consider back in 2008 when the economy was tanking and conventional wisdom said people couldn't afford to buy expensive Apple products. Apple would have to respond to the market and produce a much cheaper MacBook, and for months there was a rumor of an $800 MacBook. In fact, Piper Jaffray analyst Gene Munster was quoted in TUAW as saying, "If Apple chose to exclude a sub-$1,000 notebook, their stock would suffer more than from any margin impact such a device would have."
The new Macs came and went and there never was an $800 MacBook. And Apple didn't suffer.
Which brings us back to the can't-miss cheap iPhones. Are they this year's $800 MacBooks? I can't be certain because of course nobody knows, but based on past experience, I would say we aren't likely to see a cheap iPhone 5x. (Or 5C, as the rumored name goes.)
Instead, we will very likely see a continuation of Apple's current strategy. It will offer earlier versions of the phone for less money. Today, for instance, on AT&T with a two year contract, you can get iPhone 4 for .99. You can get a 4S for $99.99. Starting next month when the 5S or 6 or whatever they choose to call it comes out, the 4S and the 5 will become the cheaper options.
Maybe they can then take the iPhone 4 and sell it for pennies on the dollar in emerging markets. People will be thrilled to have an iPhone for cheap money -- even one that's far behind the latest technology -- and Apple doesn't have to compromise to give its customers a range of price points.
Apple has never bowed to prevailing thinking and I don't expect them to start now. The markets may be changing, but going down market isn't going to improve Apple's position. If anything, they need to produce something that wows the market at the high end and the rest will take care of itself.
If they can't achieve that, they really could be in trouble in the phone market, and it's not because of a lack of cheap product. It's because they will have lost the other end of the market where, up until now, they have thrived.
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