FEATURE
Bonus Chapter Budget iPhone
RUMOR ROUND-UP The rumors so far have centered on the idea that Apple needs to release an iPhone that will be cheaper to buy outright – somewhere around the $300/£200 range – to compete with other phone manufacturers such as Samsung. To offer a device that cheap, Apple would likely have to make some sacrifices on build quality. >
The iPhone 5 uses expensive materials
One way Apple could save money is by building the casing out of polycarbonate plastic, which is exactly what Samsung uses to build most of its smartphones. A leaked image of the possible case from Tactus.com seems to show an iPhone built with a plastic rear. While it may not have the same premium feel as the aluminum and glass that the iPhone 5 uses, it would still be extremely sturdy and resistant to drops and scratches. >
The leaked plastic case from Tactus
Using a plastic shell would also allow Apple to easily create different colored versions. Rumors suggest that it’s currently testing a variety of shades, including navy blue, pale blue, gold orange, white, gray, pink, and green. We imagine some of these are probably just for research purposes and instead it’s more likely that we’ll see the same colors used on the Pod touch. >
The iPod touch is available in five colors
Apple also makes the iPod nano and shuffle in a range of colors
Leaked images also seem to show that the device would be similar in size to the iPhone 4/4S, meaning that the device would stick to the smaller 3.5-inch display, rather than the 4-inch screen of the iPhone 5. Using the older screen size means it would be less expensive to produce, especially as that screen size has been manufactured for five years and has likely incurred some A smaller screen cost savings along would save money the way. >
Processing Power
To save even more, Apple could use a cheaper processor – probably an altered version of the older A5 unit – which is what it currently uses in the iPad mini. By not having to design a brand new processor or pay for any extra factory setup, Apple would save plenty of cash in overall production. >
Using an old processor helped bring the cost of the iPad mini down
To further save money, Apple could reuse the camera unit that is currently built in to the iPhone 4, which has a 5-megapixel sensor. This would result in photographs of a lower quality but they’d still be good enough to pass muster. Again, this means that Apple would save on costs incurred by production of the device as well as reusing existing components. > The older camera is still good enough for most
As mentioned in News, Tim Cook was interviewed at D11 in May 2013 and was asked about why Apple only sells one iPhone. Cook stated, “We haven’t so far, that doesn’t shut off the future” – an unusual response from Apple which likes to keep its cards close to its chest.
Supply and demand
Apple has recently started using a secondary supplier called Pegatron. So far, Cupertino has relied on Foxconn for all its production, but by moving to two suppliers Apple should be able to produce more products at once. So with the current rumors covered, let’s take a look at why Apple may or may not want to make a cheaper iPhone. >
BUDGET iPHONE: FOR As it stands, most people get an iPhone by signing a contract with a network supplier and getting an iPhone for a subsidized price. For the latest device you’ll likely pay an upfront cost, usually about $199/£149, and then pay a certain amount every month to use the network’s services. If you were to buy the iPhone 5 outright, the This Samsung cheapest option device costs is $649/£529. The just $150/£98 least expensive iPhone is the >
4 model, which you can get for $450/ÂŁ319, but this is still substantially more than the rumored $300/ÂŁ200 target.
Worldwide growth
People on lower incomes or in developing nations are unlikely to be able to afford an iPhone, which means they turn to the wide array of other devices that are available for less. >
Image Š Dainis Matisons
Smartphone penetration is expected to grow especially in countries such as China
Apple may see this as a missed opportunity: for every phone sold to another manufacturer, it loses a sale and isn’t getting someone locked in to its ecosystem of music, films, and apps. If there was suddenly an iPhone that you could buy outright for around $300/£200, Apple would begin to appeal to the lower end of the market. It may even aim for the same price as the iPad mini, which currently retails for $329/£269. As global smartphone sales continue to grow, Apple might miss out on a whole section of sales unless it releases a more affordable unit.
iPod decline
A cheaper device could also boost profits as iPod sales continue to fall
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year-over-year. As most people want one device that stores their music as well as providing access to the Internet, apps, and games. Despite the iPod touch being available, it doesn’t seem to have stopped the bleeding of sales. >
iPod sales have fallen every year since 2009
Traditionally the touch has been used as a cheaper alternative to the iPhone as a gift but offers most of the same functionality, apart from the actual phone connection. However, we imagine that most parents want to be able to contact their children and buying the latest iPhone seems like an expensive luxury, even if it’s the device their children want.
Wrapping up
Not only would a cheaper iPhone model be a perfect present for these younger users, it would also introduce them to Apple’s ecosystem. They would then be more likely to buy other Apple products, including expensive iPhones, iPads, and laptops, as they grow up themselves. Apple has just released a new version >
of the iPod touch but with fewer features, such as no rear-camera, showing Apple isn’t afraid of selling a product with poorer specs and lower cost to cover more price points and appeal to a wider audience. The new iPod touch is Those in a much plainer affair
favor
The reasons in favor seem very compelling and Apple is leaving behind a big chunk of money, but why might it not want to target the low‑end?
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BUDGET iPHONE: AGAINST By making a cheaper device Apple would face a few challenges that may dissuade it. First off, a less expensive model means less profit per device sold compared to the more expensive models. The iPhone 5 This would contribute costs $649/£529 to a fall in overall profit margins that could damage its stock price. The release of the iPad mini has eaten into Apple’s overall profit from iPad sales, with most analysts believing that around 65% >
of all iPads sold are the smaller, cheaper model. With Apple currently riding high as one of the most profitable companies of all time, earning less revenue feels like a step backwards. Another risk is that instead of the budget iPhone supplementing sales as a second option, it may well replaces sales of the current premium device. Being able to save money, even at the expense of better features, would be too tempting for most to turn down when it comes time to upgrade at the end of a contract. If the number of more expensive devices were to fall significantly, Apple would face a huge downturn in overall profit, something that shareholders do not want to hear. >
The last problem we see is somewhat intangible to measure, but releasing a ‘budget’ product may tarnish the image Apple has created for itself as a premium device maker, and the prestige that comes with that moniker. Suddenly being perceived as a ‘normal’ electronics company may cause devotees of the company to migrate into the arms of waiting rivals. It’s a long shot but it has been known to happen, and once public perception shifts it’s often hard to turn it back around. >
Recent news has been negative towards Apple
Apple does have a history of managing this though, as the release of the iPod nano was seen as catering to the ‘budget’ crowd but still carried a signature design that negated any concerns. Expect the same again if we see a cheap iPhone. > The nano ended up being extremely successful
Image © Wolf Gang
WHAT COULD IT LOOK LIKE? Here are some artistic renders of a possible device from different sources: Based on the Tactus shell, blog 9to5Mac produced ten different colored versions. They look quite credible and wouldn’t be out of place in Apple’s current lineup. >
The 9to5Mac concepts have been backed up by a recent leak, believed to be straight off the factory line. The image below come from Techdy and shows just the empty case. This version does have the same screen size as the iPhone 5 at four inches. > The leaked case looks highly credible
This image comes from Twitter user @SonnyDickson and shows some colored options
Using the leaked color cases, designer Martin Hajek took his designs one step further and placed them on a mock-up of Apple’s website. The budget iPhone now looks a lot more likely and at home amongst Apple’s other products.
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FINAL THOUGHTS It’s believed that Apple has already produced 1,000 versions of the budget iPhone for testing, with it likely to go into full production around the end of July for a September 2013 launch, along with the next premium iPhone.
This year?
We’re leaning towards this being released this year, but it could be delayed until 2014. Apple will look to shift its products away from only high-end customers to improve sales to the low-end and developing nations. It may take a hit on upfront profit but look to make it back through increased iTunes and App Store traffic and purchases. >
As we get closer to September, if this turns out to be true, expect more case leaks and blurry photos. But as usual, we won’t know for certain until Apple makes that all-important announcement. n
Which iPhone will take the stage next?