Apple has a history of pricing its budget devices well beyond the consensus on what the device “needs” to be priced at to be competitive. The iPad mini launched at $329, when analysts said it needed to launch at $249 to compete with the likes of the Kindle Fire and Nexus 7. The iPad mini is now the most popular 7-inch tablet in the world. Likewse, the iPod nano launched at $199, when analysts said it needed to cost half that to compete with cheapie MP3 players.

So the “cheap” iPhone won’t be as cheap as some would have liked. 

So people keep buying older and cheaper iPhone models and some think it is a bad thing for Apple’s bottom line. Let’s hope these guys aren’t the same who ask Apple to do a cheaper iPhone. Remember, the iPhone 4 is currently selling for 0$ on contract.

Short and sweet. Apple is doomed because they cannot create low end devices without affecting their margins (hence their profits) and the iPad mini isn’t cheap enough. Apple is doomed. 

parislemon:

A few thoughts on the latest report of a “less-expensive” iPhone by Jessica E. Lessin for The Wall Street Journal:

1) This report seems to surface every year, including by the same Wall Street Journal that is reporting the news today.

2) That said, there does seem to be more gathering momentum around the idea of a “cheap iPhone” this time around. I smell a faint hint of Apple.

3) But Apple already sells “cheap iPhones”: the iPhone 4S is currently $99 with a two-year contract and the iPhone 4 is free with the same contract. Hard to get cheaper than “free”. (But: see point 6 below.)

4) So perhaps this has to do more with perception. The current cheaper iPhones must lose some luster as they’re simply older devices at a discounted price. Maybe this new “cheap iPhone” would be a complete makeover with the same internals as the older models but with a new build to entice buyers.

5) Along those lines, I find it hard to believe Apple would simply do a “cheap iPhone” — it would have to be a different product from the flagship version in some other way. Offering various colors is an obvious approach, but I think there would have to be something else as well. There are no “cheap iPads” or “cheap iPods”, there are significantly different versions (iPad mini, iPod nano, etc) at different price points.

6) Or perhaps this is all simply meant for other markets where the iPhone does not sell as well (and subsidies matter far less, or don’t exist at all). As WSJ notes, the iPhone is still the top selling smartphone in the U.S. But that’s not the case in other markets, and China has been particularly troublesome. Apple probably doesn’t want to just cede a billion potential users to cheap Android devices.

7) But I don’t think Apple would do a device just focused on particular foreign markets. Their product lines are very simple and for the most part worldwide. I imagine that any “cheap iPhone” would be on sale in the U.S. as well. So… pre-paid?

8) I do think Apple has to be careful here. While Gene Munster doesn’t seem too worried about the margins (thinking this phone would attract users that wouldn’t normally buy an iPhone), if such a device was popular enough, it would definitely drive down Apple’s famous margins. Users, of course, won’t and shouldn’t give a shit about that, but investors will (and Apple should — the iPhone dominates their bottom line). Just wait until we see what the iPad mini does to the margin this quarter.

Point 4) et 5) are the main reason to create new and lower end devices.

First, a comment from John Gruber:

“Apple’s strategy for lower-priced phones for the last four years has been to sell one- and two-year-old models at a discount. But perhaps the glass-backed iPhone 4 and 4S (and, come next year, the aluminum-backed iPhone 5) are inherently too expensive to produce to hit certain lower price points. Maybe Apple just wants to get rid of the last remaining products using those old grody 30-pin adapter ports. But whatever the reason, this would be a significant strategic shift.”

Selling the previous two years models to address the lower end market may have worked in 2009 or 2010 but today, this strategy is showing sign of inadequacy against the proliferation of cheap Androïd devices.

I have the feeling that the iPhone 4 or 4S aren’t that cheap to produce even after two years of mass production. Creating an updated design with cheap components and cheap manufacturing needs will not only help protect current margins but would help keep the iPhone line fresh from the top to bottom. People like “new” things in new cases, new colors and new textures even if internal components aren’t state of the art.

A fresh iPhone entirely new and designed for the low end is mandatory. And only Apple can creating something great without falling in the trap of all cheap Androïd plastic devices. Not sure about this? I invite you to consider the just released iPad mini.

Apple doesn’t want to fight down. They don’t want to occupy the low end. So, I completely agree with this TechCrunch article.