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  • iPhone on the Cheap?

    July 29th, 2016

    The common argument is that Apple’s gear is too expensive, that cheaper products would greatly expand the market and swat Android, Windows and other competitors. Yes, that’s the theory. But through all these years, Apple has largely avoided the cheaper stuff. Well, maybe the Macintosh Performa, in the days before Steve Jobs returned to the company, but they failed to make a meaningful improvement to the Mac market share, or Apple’s revenue. There were so many models with little or no difference, you needed a cheat sheet to figure them out.

    Sort of the way such companies as Dell and HP continue to market their wares.

    Now it so happens that Apple has actually delivered a fairly inexpensive product over the years, and that’s the $49 iPod shuffle. Sure, I realize there are cheaper music players, but it doesn’t matter. The iPod had its run and hardly matters anymore even though you can still buy them.

    The iPhone has always played among high-end smartphones, in the same relative price range as competing gear from such companies as Samsung. Yes, it’s real hard to believe that there are expensive smartphones from Samsung, but it’s true. However, more often than not, a wireless carrier will discount even a Samsung Galaxy, so you get a two-for-one deal. Not that iPhones aren’t discounted, but Samsung appears to do it from the very day a new product is released. It’s a concession that most customers don’t want to buy them at full price.

    Well, the critics want Apple to play in the low-end sandbox, with cheap iPhones to compete with $100 smartphones from Asia. But you have to wonder how any company can derive a profit from such cheap gear, even if it’s made of the lowest cost parts and assembled with minimal quality control. If you pay for junk, that’s what you get.

    In fairness, there are affordable smartphones priced above the entry level that do deliver decent performance and reliability. But that performance level is probably that if a premium smartphone of several years ago, and even there, Samsung isn’t going to derive much in the way of profits. What profits are earned are mostly due to the sale of Galaxy-class gear.

    Before March of this year, Apple’s usual method to sell cheaper iPhones was to continue to offer models from two years earlier. They traditionally sold for $450 retail, free with a two-year contract. Well, at least when the carriers offered such deals. But even the monthly payments are fairly low.

    Now as Apple moved to bring iPhones to China and India, the critics suggested that few could afford to pay $450 for a smartphone. Despite those objections, sales have done fairly well overall, although revenue in China  is lower nowadays due to the financial headwinds.

    Regardless, when the iPhone SE came out, Apple sort of broke the mold. Before it arrived, the cheapest iPhone was a 2012 5s at the $450 price. As a two-year-old gadget, it was a pretty good deal. Performance was decent, it had Touch ID, and many of you preferred the four-inch display. The current iPhone 6-family models may just be too large for many pockets and purses, and are certainly less convenient for one-handed use.

    So Apple came up with a brilliant idea. Take the basic case of an iPhone 5s and stuff it with most of the parts of the iPhone 6s. All right, there’s no 3D Touch, but I suspect many of you won’t care. So you got most of the elements of the larger iPhones at the $399 starting price of the iPhone SE.

    Now maybe a $50 price reduction doesn’t seem to be an awful lot, but it’s also true that the iPhone SE has been a surprising success. Sales are restricted by the fact that Apple has been struggling to meet demand. So there was indeed a need not just for a cheaper iPhone, but one with the smaller display. This is a market not well served by the competition that usually concentrates on displays of five inches and more.

    To me, it’s too small, but that doesn’t matter. The fact that it has current parts means it can hang around for another couple of years and maybe hit a price point of $299 or even less some day. By the time it gets there, the costs of production will have hit a point where Apple can still earn a decent profit, at a level far higher than any other smartphone maker.

    While some critics suggest that Apple is losing out because people are buying cheaper iPhones in greater qualities than expected, that’s not so. To Apple, a sale is a sale, and if they move more product, they make out better in the end. Indeed, the lower price may help attract more customers from other platforms. The smaller display is also more convenient for some, and, again, Apple is filling a market niche that the competition tends to treat as an afterthought, filled mostly by low-end gear.

    I am not the target audience for an iPhone SE, but when my wife finally gets around to requesting a replacement for her iPhone 5c, Apple’s cheapest iPhone may just be what she chooses.



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