Forgive me for this analogy. I’m a city girl, don’t own a car, ride the subway to work (and mostly anywhere else), and I have no clue what it’s like to shoot fish in a barrel. It doesn’t sound too difficult, though. Maybe I could give it a try on BTIG analyst Walter Piecyk** who says it would be stupid of Apple not to build a cheaper iPhone.
Now, which end of the gun goes into the barrel?
According to the common line as promoted by Piecyk, it’s utterly illogical not to sell a cheaper iPhone because there’s too much revenue at stake. You know, as in money Apple leaves on the table for other smartphone manufacturers to take.
Let me pause right there. Apple already owns about 75-percent of all the smartphone industry profits in the whole wide world (with Samsung taking up much of the remaining profits), so is Piecyk saying Apple would gain another five or 10 points of profit by building a product that costs less, so Apple could make less money on the phones that they can’t build fast enough as it is?
Yes, something like that.
Apparently, this analyst sees a massive untapped demand for a cheaper iPhone. Maybe so. I’m rather certain there’s massive untapped demand for a cheaper Porsche, or Ferrari. A lot of guys in my neighborhood would be happy to pay for an entry-level Porsche priced like a Kia, but probably couldn’t afford the armed guard they’d need to keep it from being stolen the next day.
Somehow, according to the pundits with no skin in the game, it’s stupid for Apple not to have a cheaper iPhone for China and India, where smartphones are all the rage, and where Apple is already only the #2 smartphone manufacturer. I wonder, though, if Apple built and sold a cheaper iPhone for China and India to compete with Android smart phones, what would those customers upgrade to when they grew tired of flimsy plastic, poor quality, and no upgradability?
Now, let’s look at it another way. In the U.S., Apple has thwarted the growth of Android smartphones by having an iPhone 4 and iPhone 4S to take over the bottom rung of the company’s product positioning. Why get a free Android running an OS from a couple of years ago, when you can get an iPhone for free or nearly free (with a little help from the cell phone carrier) running the latest version of iOS.
Doesn’t that make a good argument for a cheaper iPhone in countries where the cell phone carriers don’t carry the paper notes for their customers?
Some are clamoring for Apple to adopt the iPad mini strategy to the iPhone line. The iPad mini starts at $329, far less than a standard sized iPad. Presumably, Apple makes less money on an iPad mini, but makes up for it in higher sales volume.
Isn’t that what the iPhone 4 and iPhone 4S do for Apple’s product positioning in the U.S? Yes.
Unfortunately, there’s no iPhone mini for the rest of the world. Maybe Apple could build a less expensive iPhone mini and sell it only in China and India and other places where Apple cache remains high, so as not to compete with more expensive iPhone’s made for the non-developing world.
How about this idea?
Apple keeps doing what it does with the iPhone 5, iPhone 4S, and iPhone 4, but in developing countries sells a less expensive version of the older phones in the product line– not the latest iPhone. Money can be saved and the priced reduced in a number of ways. Plastic vs. aluminum. Limited memory. That kind of thing. That way, even poor folks who buy into last year’s iPhone model, even at a reduced price, have a path to upgrade to when Apple launches their latest and greatest iPhone– at normal prices.
Am I clever, or what?
**Thanks to John Paczkowski for unlocking Walter Piecyk’s recommendations from behind the BTIG Login Only site.