Apple to release cheaper plastic iPhone this summer?

The rumor that just won't die has Apple releasing a cheap iPhone as early as June

Technology trends and news by Faith Merino
February 11, 2013
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And the cheap iPhone rumor lives on. Only this time, there’s an actual date being identified. Brian White, analyst at Topeka Capital, said in a research note Monday morning that Apple is planning on releasing a low-end iPhone as early as June of this year.

The new iPhone will reportedly cost $300 without a contract. By comparison, if you want an iPhone 5 sans contract, you’re looking at a starting price of $649.

If the rumor is true, it sounds like Apple plans on sacrificing its characteristically high design standards, since the body of the iPhone is rumored to be made out of plastic instead of aluminum and glass.

If you recall, The Wall Street Journal ran a story back in January reporting that Apple was working on a cheaper iPhone, according to sources, who also said that Apple would save costs by using cheaper materials and recycled parts to make the low-priced iPhone.

For all of Apple’s sanctimonious touting of the iPhone’s superior design and materials (let’s not forget the infamous “7-inch tablet will be dead on arrival” rant), it’s like the company is doing an about-face. First a 7-inch tablet, and now a cheap iPhone to compete with other low-end phones? But there’s the rub. If Apple wants to stay competitive in the smartphone market, it has to dumb it down a bit.

And that’s how Google and other players are toppling the Apple fortress. As Apple is forced to compete with low-priced smartphones and tablets, it’s forced to sacrifice some of its margins.

In a research note from Bernstein Research last month, analyst Toni Sacconaghi pointed out that cannibalization would be a significant risk for a low-priced iPhone.

“We believe that the principal reason that Apple has not introduced a lower priced iPhone to date is that the company has been unable to develop an offering that it believes is distinct and compelling and that won't cannibalize the current iPhone, the company's proverbial golden goose.”

Sacconaghi pointed out that cannibalization of the iPad by the iPad mini probably isn’t such a threat since the margin differential isn’t very large. The margin differential between a reduced priced iPhone and the full-priced iPhone, however, could be much more dramatic, potentially wiping out all the profitability of introducing such a device.

There’s a lot to lose. Apple accounted for 44% of the high-end smartphone market in 2012. But the high-end market is expected to lag this year, while the $300-and-below smartphone market is expected to grow. 


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