Cheaper iPhone Rumors Hit CES
It’s been a big week for tech companies at the Consumer Electronics Show. Apple unveiled several new gadgets and more than a few new ideas. One rumor that was floating around the show was that Apple was working on an iPhone that can compete at lower price points. This was exciting news for everyone, especially stockholders, so the rumor persisted.
The upside, should this become reality, is that Apple could take on its competitors in price point across several markets. This has never been a focus of the company; in fact most people are accustomed to the idea that any Apple product is going to be among the most expensive available. This was accepted because more often than not the Apple product in question was also top-rated in all categories as well.
The iPhone has not had the market penetration that Apple had hoped for. The iPad tablet took off and dominated its market immediately and still has over 76% market share as of January 2013, but the smartphone market is owned by Android with over 52% of the market. If this is due in part to pricing issues then this could be a strong step towards closing the gap in the market. There are many Android phones that are cheaper than the iPhone, and with Apple’s current expansion in China the cheaper model might take off like gangbusters.
The downside to this new pricing possibility is obvious. Apple hasn’t competed on price in decades and the current success of the business is tied directly to this. By catering to the high-end consumer Apple has been able to ignore most concerns over the cost of the products they produce. This means that the focus has been innovation and discovery. Instead of trying to figure out a way to make the cheapest possible iPod the company went ahead and made the device obsolete by creating the iPhone and I imagine there wasn’t a second thought given to that.
This dedication to innovation is the legacy of Steve Jobs, and a powerful one it is. Do you think Steve Jobs wanted to compete in any marketplace on price point? To answer that question all you have to do is ask what the first thing Steve did when he returned to Apple in the 90s. He walked in the door, scrapped every computer line the company was working on, and put out a funny looking PC that look like a bright purple plastic ball that cost more than 90% of the PCs at the time. This was the move that pulled Apple out of the mud and started them on the path to being a market leader and trend setter.
So the question becomes do we want Apple to figure out a way to make the same product they make now cheaper? Will it hurt the sales of the higher end models? And worse will this cheaper iPhone hurt the long-term vision of the company and slow down the innovation that it’s become known for? The downside is much worse than it may at first appear.
In this case more market share might not equal higher profitability, and there is evidence that high-end pricing models can dominate the smartphone market. 26% of all smart phones in the United States are made by Samsung, and the lion’s share of these is from the Galaxy family. The iPhone pricing model has always been very close to the Samsung Galaxy so it would seem it’s not the higher prices they is slowing market penetration. If the divide is in the OS then it’s possible that if Apple went insane and released an Android iPhone they might actually destroy the world with it.
Since this is just a rumor we have to treat it as such but I hope Apple pays close attention to what the analysts are saying about the possibility. We need Apple to blaze new trails and be an idea leader. Let someone else figure out how to make it cheaper, that’s a waste of vision.