by Jin S. Kim
Jessica E. Lessin, The Wall Street Journal:
Apple Inc. is working on a lower-end iPhone, according to people briefed on the matter, a big shift in corporate strategy as its supremacy in smartphones has slipped.
The less expensive iPhone has always been the previous iPhone model. For example, the less expensive iPhone right now is the iPhone 4S, which you can get for US$99 with a new two year agreement. The least expensive iPhone is the iPhone 4, which you can get for free with a new two year agreement. When the iPhone 5S comes out the iPhone 5 (without the ‘S’) will become the less expensive iPhone, and the iPhone 4S will become the least expensive iPhone. At least that’s how Apple has worked on lower-end iPhones since the original iPhone.
This year might be different since the iPhone 5 has a Lightning connector instead of the 30-pin connector. I don’t think Apple, after it starts selling the iPhone 5S, wants to sell a whole bunch of iPhone 4S’s with the old connector when the price goes to zero. So maybe Apple is working on a stripped down free iPhone 5. An 8GB version perhaps?
“At first, non-smartphones were popular in the Chinese market, now cheap smartphones are more popular and non-smartphones are out,” Schiller added later. “Despite the popularity of cheap smartphones, this will never be the future of Apple’s products. In fact, although Apple’s market share of smartphones is just about 20%, we own the 75% of the profit.”
Cheap smartphones are popular in China. Not-so-cheap smartphones are, too. Let’s assume the top 10% of the Chinese population of 1.35 billion can afford iPhones. That’s 135 million, which is probably popular enough—and profitable enough—for Apple to focus on serving.