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The one thing that hasn’t leaked about the next iPhone is the only thing that matters

September 5, 2013
September 5, 2013

On Sept. 10, Apple is expected to announce a new iPhone and a (rumored, but essentially confirmed) “cheap” iPhone 5C. The price of the forthcoming “iPhone 5C” will determine its success in both the US and China, and will tell us a great deal about which market Apple is prioritizing, says mobile analyst Benedict Evans.

It’s widely perceived that the 5C is Apple’s attempt to hold onto existing market share in the face of an onslaught of cheap Android phones, and also to grow market share in more price-sensitive emerging markets. The tradeoff for consumers is a less capable phone, but given the dearth of compelling features in newer phones, for many people it might not matter.

The older iPhone 4, sold at a discount, is already popular in emerging markets, which is probably all the evidence Apple needs that there is demand for a cheaper iPhone. The price of that phone will, however, determine a great deal, says Evans:

What price would Apple choose for a genuinely cheaper phone? There are four brackets worth looking at:

$100-$150 – this is where budget Chinese manufacturers are starting to deliver usable dual-core 3G Android phones

$150-$200 – the upper end of what is possible to sell to the unsubsidised prepay market – which is half the planet

$200-$400 – almost certainly out of reach without subsidies but a solid mid-range smartphone price range

Over $400 – similar price to the existing discounted two-year-old model, but with more up-to-date technology, possibly higher margins and probably an easier marketing sell than the ‘old’ phone

Evans’s ultimate conclusion is that the new “cheaper” iPhone will be priced somewhere between $300 and $450, which isn’t much less than the $450 Apple currently charges for the iPhone 4. But each end of that price spectrum represents a compromise: Too low, and Apple sacrifices profits in the US market, where phones subsidized by cell carriers make prices below $400 look the same to people as phones that are right at $400. And if the price is too high, it represents Apple sacrificing potential market share in China, where phones are bought separately from mobile plans, and every yuan counts.

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