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  • Cheaper This and Cheaper That

    February 16th, 2011

    Over the years, Apple has been urged time and time again by customers and media analysts to build cheaper gear. When they respond at all, the answer is usually the same. Apple won’t build junk, and they cannot find a way to cheapen Macs, for example, without sacrificing quality and features. At the same time, Apple is regularly labeled as a luxury electronics maker, choosing only to play in the high-end and high-profit sectors.

    That doesn’t mean less-expensive Apple products aren’t being made. Just weeks after Apple executives, during the quarterly conference call with financial analysts in late 2004, pooh-poohed the idea of a low-cost personal computer, the Mac mini was introduced. Then it was $499; now it’s $699 in a new form factor offering probably just as much bang for the buck. As cheap PCs go, it’s not cheap, but certainly affordable for people who might just want a second computer, or simply can’t afford to pay more for their primary PC. It also leverages most existing input devices and displays, so you don’t have to pay for replacements.

    At the same time, Apple owns a lion’s share of the market for PCs above $1,000. The Mac’s overall market share is growing way ahead of most other industry players. Those who actually look to a personal computer as a long-term investment and actually do the math are apt to come to the conclusion that a Mac is actually cheaper to own. The initial purchase price is just part of what you’ll pay over a two or four year lifecycle.

    On the iPod front, Apple went all the way. You can’t call a $49 iPod shuffle expensive by any means. Nor, for that matter, is the 64GB iPod touch, which retails for $399. When you compare both to completing products, you’ll see Apple plays fair and square, in large part because they buy billions and billions of dollars of parts in advance from the major vendors, and thus benefit from economies of scale. Having fewer models and design variations also means that parts can be shared. Consider how the A4 processor powers today’s iPad, iPhone 4, iPod touch, not to mention the Apple TV.

    Moreover, few dare to suggest that we need a cheaper iPod.

    As I wrote the other day, almost from the original introduction of the iPhone, Apple has been urged to build a cheaper model. Yes, at a subsidized price of $199 and $299, the iPhone 4 costs the same as other top-of-the-line smartphones. Yes, there are cheaper models, and those two-for-one sales, but from an end-user standpoint, the iPhone 4 is not expensive.

    While the $49 iPhone 3GS represents a useful entry-point for iPhone purchasers, having a 2009 model in 2011 has to put off some customers who would rather buy a genuine 2011 product from someone else. I’m sure Apple realizes that, and with intense competition from the Android OS, RIM, HP (courtesy of its Palm subsidiary) and apparently the new Nokia/Microsoft alliance, surely they want to find a way to boost sales.

    That brings us to the rumors of an iPhone nano, or whatever Apple might choose to call it. One set of speculation has it that Apple will simply shrink the existing iPhone form factor, and shave production costs as much as possible, to reach an unsubsidized price of $200 or $300. That, in effect, means a free phone for anyone signing a wireless carrier contract. Suddenly, customers will be able to choose a regular feature phone, a cheap smartphone from one of another of manufactures, or a genuine iPhone.

    However, a tinier display threatens to seriously hurt the user experience. A 3.5-inch screen is already too small for some of you. My wife, for example, finds it awkward enough to have expressed a strong interest in the next iPad.

    Another possibility is that the cheap iPhone might have more in common with the iPod shuffle. In other words, a tiny case, a minimalist or non-existent display, offering little more than telephony, a basic contact list, along with voice dialing and Bluetooth compatibility for hands-free devices. For people who already have an iPad, or are considering one, and don’t need a pocket-sized personal computer, it may be just the ticket. Today’s basic feature phones are difficult to use if your needs stretch much beyond making and receiving calls. A typically minimalist Apple interface on a tiny screen might be more than enough phone for tens of millions of people who buy regular handsets nowadays.

    There’s no doubt Apple could build such a device inexpensively, and probably sell huge numbers, way above the figures tallied by today’s iPhone. It would stab all the other handset makers in the heart. Why accept a free LG, Nokia, Samsung or whatever, when you can get a genuine Apple iPhone without paying extra? You wouldn’t even need a data plan, because it isn’t a smartphone. Just the cheapest minute bundle you can find.

    And imagine buying the iPhone “shuffle” from one of those prepaid cell companies, such as Boost Mobile or Cricket Wireless. Pay $30 and get an iPhone at no extra charge!

    Skeptics might say, with justification, that an iPhone that doesn’t run apps is going to hurt the software market, but if sales go to people who won’t buy apps anyway, maybe it won’t matter.

    But I don’t think any of you would dispute the likely possibility that Apple already has loads of different iPhone prototypes in their test labs. More to the point, regardless of the form factor, when stories about a shrunken iPhone appear in such publications as the Wall Street Journal, home of favored tech reviewer Walt Mossberg, it’s very likely the report was fed by Apple. Time will tell!



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