Cheap iPhone

Cheap iPhone

Cheap iPhone May Be On The Horizon

On Tuesday, January 8thth, the Wall Street Journal reported that Apple was working on a cheap iPhone for release later this year. Immediately, the Internet was ablaze with “will they, or won’t they” speculation. Two days later, on January 10thth, Reuters cited Apple Marketing Chief, Phil Schiller, in an interview given to the Shanghai Evening News, as saying that developing cheaper smartphones was not a direction Apple was pursuing. However, by the next day, the Shanghai Evening News had changed its report, causing Reuters to publish a retraction. The amended report eliminated references to a cheaper smartphone. Of course, this just added fuel to the already well-stoked fire, started and maintained by the always-active Internet rumor mill.

When it comes to Apple making “cheaper” devices, I’m reminded of an Apple earnings call on October 10, 2008. Steve was asked about if Apple was planning on entering the (then) hot netbook market. His reply:

“I think what we want to do is deliver an increasing level of value to these customers.”

“There are some customers which we chose not to serve,” he added. “We don’t know how to make a $500 computer that’s not a piece of junk, and our DNA will not let us ship that. But we can continue to deliver greater and greater value to those customers that we choose to serve. And there’s a lot of them.”

“We’ve seen great success by focusing on certain segments of the market and not trying to be everything to everybody. So I think you can expect us to stick with that winning strategy and continue to try to add more and more value to those products in those customer bases we choose to serve.”

If you read the reworked Phil Schiller interview, it’s essentially the same message.

It’s important to remember that this doesn’t mean Apple’s not building a cheaper iPhone. Steve Jobs would always say Apple wouldn’t do something, and then change his mind. In the same conference call, he was asked about producing a smaller iPad.

“No tablet can compete with the mobility of a smartphone, its ease of fitting into your pocket or purse, its unobtrusiveness when used in a crowd.”

“Given that all tablet users will already have a smartphone in their pockets, giving up precious display area to fit a tablet in our pockets is clearly the wrong tradeoff. The seven-inch tablets are tweeners, too big to compete with a smartphone and too small to compete with an iPad”.

It was revealed that other executives in Apple were pushing for the development of the iPad Mini, and that Steve was open to the idea. For all intents and purposes, the iPad Mini is a smaller replica of the iPad 2. Apple was able to make the same product in a smaller form factor due to advances in LCD and battery technology.

Currently, one can buy an iPhone 4 for $0, with carrier subsidy, and the iPhone 4S for $99. Using the iPad Mini/iPad 2 argument, one could consider these as the “cheaper” iPhone: the previous generation at (much) lower prices. Unfortunately, it’s hard to convince buyers that getting a newly manufactured iPhone 4 or 4S is buying a “new” iPhone. As consumers, Apple has conditioned us to want the latest and greatest.

Is a Cheap iPhone Coming?

So what’s my take away from all this?

  • Apple is researching how to make the current iPhone cheaper
  • A “cheaper” iPhone, already exists
  • Selling the “cheaper” iPhone is more about messaging than technology
  • (Pure Speculation) The “cheaper” iPhone is not targeted for the US market, but for China and emerging markets.

This is a guest post from Kevin Kim.

Kevin Kim is a founder and partner of AppOrchard LLC, a premium enterprise app developer. A graduate of Carnegie Mellon University, he was first exposed to the NeXTStep computer (the ancestor of today’s iPhone) while a programmer at the Pittsburgh Supercomputing Center and has been hooked ever since. His career has spanned finance, government, biotech and technology, including Apple, where he managed the Apple Enterprise Services team for the New York metro area.

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