Apple eyeing low-cost $199 iPhone for release this Fall – Report

Wed, Feb 20, 2013

News, Rumors

In an effort to drive business in emerging markets like China and India, Apple will reportedly offer a more affordable iPhone this Summer, this according to Piper Jaffray analyst Gene Munster.

“We believe a lower priced iPhone will be a positive for AAPL shares for two reasons,” Munster explained. “First, despite its lower margin, it should accelerate gross profit growth given the size of the low-end market (we estimate $135B in 2013); second, investors have historically bought into AAPL ahead of major new product releases.”

Of course, this isn’t the first we’ve heard of Apple release a more economical iPhone model. And as for concerns regarding gross margin, the more economical may be cheaper, but it will also be comprised of cheaper materials. The takeaway is that Apple’s gross margins may not be affected as greatly as some have been speculating.

By taking available pricing in six international markets — Germany, UK, France, China, Brazil and India — Munster was able to come up with a snapshot of the low-cost segment. He notes that the lowest priced iPhone, the iPhone 4, is still 133 percent more expensive than the global average for a low-end smartphone, suggesting Apple is only skimming the top of the market.

As for Apple’s other handset models, the iPhone 5 is 19 percent more expensive than comparable flagship handsets from rival manufacturers, while the iPhone 4S is 48 percent more than mid-range devices. This means that Apple’s biggest gap in pricing is between seen in the low-end segment.

The real prize in Apple’s efforts to maintain its unprecedented growth is China, and securing a deal with China Mobile, the world’s largest cell phone carrier with upwards of 700 million subscribers. Many China Mobile subscribers, however, aren’t well-to-do which is why Apple is likely exploring a low-cost iPhone model in the first place.

Munster anticipates Apple will release a $199 iPhone this Fall and that they may sell upwards of 37 million units by the end of 2013. Looking ahead to 2014 and 2015, those estimates jump to 96 million and 170 million units respectively.

via AppleInsider



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