Why is it difficult for Apple inc to make a lower cost iPhone

[Apple Blogger]

[CAUTION: When I say cheap it does not mean cheap in quality]

The iPhone currently has 3
generations on sale each costing $450 or more .. And true a cheaper iPhone is required .. But the problem that the company faces is the production of these cheaper models. It is easy to say but Apple is not the one who does anything without thinking.

If they try to start the production of the cheaper iPhone, the will have to increase it 3 times more than the usual. Yes! Three times more. The reason is because they can't just afford to bring out 1 new cheaper model of iPhone in one or 2 countries and make expensive for others. It will be quite unfair and would affect the sales of older generations. They need to make it universal.

If they bring out, for example iPhone 5s the cheaper one, the demand for it will be unbelievable. No one will want an expensive one, and for that the prices of the existing phones i.e iPhone 4S ,5 would be needed to be dropped below the new iPhones price so as to equalize the prices and demand.

Now if the new iPhone costs at a starting price of $300(which is less than the current iPhone 4 ) the 4S will have to be $200 and the iPhone 5 $250.. Assuming the cost of production of one 4S is $200,it's obvious they won't sell it at $0 profit while tremendously decreasing their profits on the iPhone 5 in one shot! They will need a back up for their profits.. Some would say the new iPhone would cover up everything .. But as mentioned earlier , the production of the new iPhone will have to be increased much more than the previous (everyone wants cheap phones).

May be they require a cheaper phone .. But they need to start producing atleast a year in advance and much more than the existing.. They also need to reduce their profits steadily so when they launch the new cheap phone, they don't have to compromise on the profits of the old generation

For now, I think it's a good thought about a cheaper phone which is unlikely to happen but it doesn't depend on my description but a person more capable of analyzing all this better than me and for a company ..
Addition:

The iPad mini which was supposed to be a low cost iPad is still at a price higher than its competitors .. They have significantly reduced the starting price but its still a high-end ..
No quality compromisation is seen..
If they can achieve the sand thing with the iPhone then there is a ray of light that without compromising on quality they produced an elegant iPhone..

 

[jclisenby]

Apple uses quality components and advanced manufacturing techniques to make iPhones to desired specifications. It wouldn't make sense to run a cheaper quality device when their emphasis is on quality and experience. Plus, the majority of people won't go for a cheaper iPhone that's handicapped in terms of performance and quality.


Tappin and Talkin from my iPhone 5

 

[NolansVlogs]

Apple has always been a high end company, there not gonna make a cheap iPhone, besides the rumored iPhone mini, with might not happen


NolansVlogs

 

[Rodney Zimmerman]

Anyone who has bothered to ever open an iDevice knows what it's like on the inside. I repair them daily. Name an "I" and I've been inside it.
The parts, the tolerance, and the technology is staggering. Why is it difficult to make a lower cost iDevice?
The answer in the most simple form is this. Apple is in business to make money. The elaborate answer is much more... well elaborate.
To lower cost, you lower standards. This lowers component quality and craftsmanship. As of the iPhone 4 for example the glass is
gorilla glass. A chemically altered glass allowing for high damage resistance while staying incredibly thin. So lets cut
corners there and go back to the 3 series iDevice and use the regular glass. Ever drop one? I repaired one yesterday (glass replacement)
that simply fell from a counter onto a tile floor. Average height, what....36 inches? Looked like it was smacked with a hammer.
I personally dropped my moto razr from about that height onto pavement getting out of my jeep and only walked away with 2 barely
noticeable scratches, dead center of screen of course. Same gorilla glass as the 4 series iDevice. Frankly I'll never own another phone without
gorilla glass.

Yeah I own a Motorola. I'm a droid fan. So anyhow there's a great example of (imho) why Apple can't start lowering cost.
Frankly when I did own an iPhone I'd never have settled for a cheaper model made with inferior materials.
Were I to buy one now I'd expect to pay for it because it's a quality device. You want cheap phones, there are plenty.
Don't expect to ever see an iDevice among them. You want a quality cheap iDevice? Check ebay. Course you may
have to buy it broke then pay someone like me, or worse Apple genius personnel to fix it. Not dogging the Genius guys
just saying that can be a lot more than what I charge. But that's an entirely different thread.

Regards.

 

[metllicamilitia]

I'll make it simple, it's business logic, not good or true logic, but business logic. A cheaper iPhone is cheaper, that's less money. End of discussion. Even if more iPhones at a lower cost will yield more profit in long run, it doesn't matter, the iPhone will be cheaper, that's less money. Business logic looks at the sales tag, not the overall net profit. That's why Apple won't make a cheaper iPhone.

 

[that_maynard]

I currently own a Samsung S3, it is very light, but it almost does feel cheap compaired the the i5. Not as quite as much $ up front, but you can tell in the build quality that Apple does make a solid phone.

 

[KaterinaM]

I think that Apple sells not only just phones, it sells its brand which isn't cheap. If to calculate the real cost of the iPhone part it will be much lower than we see in the stores. To have Apple is to be upperclass. That's what costs a lot.

 

[needsbanning]

This is Mike from the tech team, doing a post to test reporting posts.

 

[Just_Me_D]

I think that Apple sells not only just phones, it sells its brand which isn't cheap.

Fair enough

If to calculate the real cost of the iPhone part it will be much lower than we see in the stores.

True. Check out THIS article from September of last year.

To have Apple is to be upperclass. That's what costs a lot.

Upper class? An argument can be made that certain people view it as a status symbol, however, if we are to believe that "to have Apple is to be upperclass" then I would argue that a great deal of people are 'pretending' to be upperclass...

 

[cardfan]

The current iphone sells for 649-849. Carriers subsidize 450 of it in the form of 2 yr contracts with us paying out the nose.

How in the world would Apple be able to make any decent margin on an iphone priced at 300?

Obviously, the ipod touch is making their required margin at 299 or they wouldn't be selling it.. It looks great, is retina, 4", and would make for a nice phone. Apply a little engineering to it and it's not far fetched they could stick a 3G chip in it. Usually products with cellular capability are 130 more. So 429 for a cheaper iphone.

Just call it the ipod touch with phone. It could go down in price as volume ramps up. I don't see it cannibalizing the flagship iphone because most buy it at 199 subsidized. The beauty of it is that it gets branded as something else, not an iphone. But a premium ipod touch.

 

[jclisenby]

Short answer: It's not difficult, they just don't want to.


Tappin and Talkin from my iPhone 5

 

[YorkieRay]

It astonishes me that so many of Apple's customers are so willing to defend and support the company's profitability.
In relation to it's size, Apple must be the most profitable company on the planet. The iPhone must be the most profitable consumer product ever. At the last count, Apple's bank balance was over USD130bn, which makes this one company richer than many small nations.
At the company where I work, they have issued an app for staff to be able to access the firm's social networking service. There is only one version of the app available, it's for the iPhone.Those staff who are unable or unwilling to buy the most expensive phone on the market are excluded from mobile access. An iPhone is more about the ecosystem, not the device. Customer's should be able to buy an iOS device at a lower price, whether it is made by Apple or not.
The iPod Touch has the same screen as the iPhone and runs the same os. The iPhone has a faster processor, GPS, a better camera and a better case. A 64GB iPod Touch costs USD399, a 64GB iPhone 5 costs USD849. I am truly puzzled at exactly what you get for that extra USD450 in the iPhone and why it is worth it. That's more than the original cost of the iPod Touch! Apple could make a new phone based on the specs of the iPod Touch.
The iPhone is now 6 years old and should be regarded as a mature product, but there is still only one current model available along with two older versions of the same. The 4 and 4S models had cost Apple nothing additional in R&D and little more in marketing costs. A newer phone would have cost more.
Apple's shareholders have made their claims for their cut of the cash pile and I think that customers should be doing the same. Apple should be providing greater choice and value for their customers. With USD130bn in the bank taken from their customers, you cannot say that they cannot afford to.

 

[cardfan]

It is astonishing and it's a great thing (for Apple) to get 450 from the carriers. All I know is that I wouldn't do anything to ruin that magic money machine. An affordable off contract iphone? That's something you think about and then think about again. I can see why Apple hasn't decided.

It's like the tv industry being happy with cable revenues and cautious with companies like Apple. Why mess with internet subscriptions? Because they don't want to risk their current revenue streams.

 

[anon(4698833)]

Personally, i think the iPhone is a bargain for what it costs (even considering the end result of a contracted phone through AT&T)...this phone does everything, it took the place of my point and shoot camera, MP3 player, GPS, cell phone and in some cases my laptop...all in one attractive, fast and reliable device. I remember spending $500 on a piece of sh*t nokia phone back in the day that couldn't do a tenth of what this phone can do, and you can own all of it for chump change.

What are you people wanting as far as cheap goes? $100? $200? These prices OFF contract? Get real...if you want a cheap smart phone, Android is installed on plenty that you can get for next to nothing, go buy one of those, and relay your experience compared to the iPhone in that regard. You truly do pay for what you get...and while getting something cheaper should always be the aim of the consumer, being absolutely ridiculous when it comes to the expectation of cost is just silly.

And as far as a cheaper model...why diminish the brand? The phone is a luxury item, they arnt striving to attract the lower class buyers like a large market car company, the market doesn't need the quintessential Ford Focus of cell phones.

Just to put it out there, this isn't me defending the companies profitability, this is me defending my thoughts as to the value of what i get from the iPhone vs. what i pay for it. I'd pay $100-$200 MORE than the current cost of the phone and still be satisfied with it...fortunately i don't have to, i get it for less money than i personally think it's worth.

 

[tgp]

I don't see any need for Apple to produce a cheaper phone just to get iPhone in more hands. Apple makes money on hardware, and a cheaper phone would likely be less profit per device. Google's business strategy is totally different. They don't make money on the little bit of hardware they do sell. Google ultimately makes money from the user data collected via Android, which means they need to get Android phones in as many hands as possible. A low cost device could profit Google as much as a high end expensive device.

 

[anon(4698833)]

I don't see any need for Apple to produce a cheaper phone just to get iPhone in more hands. Apple makes money on hardware, and a cheaper phone would likely be less profit per device. Google's business strategy is totally different. They don't make money on the little bit of hardware they do sell. Google ultimately makes money from the user data collected via Android, which means they need to get Android phones in as many hands as possible. A low cost device could profit Google as much as a high end expensive device.

Bingo.

 

[sting7k]

It astonishes me that so many of Apple's customers are so willing to defend and support the company's profitability.
In relation to it's size, Apple must be the most profitable company on the planet. The iPhone must be the most profitable consumer product ever. At the last count, Apple's bank balance was over USD130bn, which makes this one company richer than many small nations.
At the company where I work, they have issued an app for staff to be able to access the firm's social networking service. There is only one version of the app available, it's for the iPhone.Those staff who are unable or unwilling to buy the most expensive phone on the market are excluded from mobile access. An iPhone is more about the ecosystem, not the device. Customer's should be able to buy an iOS device at a lower price, whether it is made by Apple or not.
The iPod Touch has the same screen as the iPhone and runs the same os. The iPhone has a faster processor, GPS, a better camera and a better case. A 64GB iPod Touch costs USD399, a 64GB iPhone 5 costs USD849. I am truly puzzled at exactly what you get for that extra USD450 in the iPhone and why it is worth it. That's more than the original cost of the iPod Touch! Apple could make a new phone based on the specs of the iPod Touch.
The iPhone is now 6 years old and should be regarded as a mature product, but there is still only one current model available along with two older versions of the same. The 4 and 4S models had cost Apple nothing additional in R&D and little more in marketing costs. A newer phone would have cost more.
Apple's shareholders have made their claims for their cut of the cash pile and I think that customers should be doing the same. Apple should be providing greater choice and value for their customers. With USD130bn in the bank taken from their customers, you cannot say that they cannot afford to.

It's not Apple's fault your company doesn't make a version of that app for Android, WP8, BB10, etc.

Why do you single out the most expensive iPhone? The 16GB is $650 off contract. Most Android phones in the same league as the iPhone are $500+ off contract too; hardly cheap.

And TGP is right on with his post.

 

[col_bris]

I could not agree more great statement great post tgp

 

[YorkieRay]

Personally, i think the iPhone is a bargain for what it costs (even considering the end result of a contracted phone through AT&T)...this phone does everything, it took the place of my point and shoot camera, MP3 player, GPS, cell phone and in some cases my laptop...all in one attractive, fast and reliable device. I remember spending $500 on a piece of sh*t nokia phone back in the day that couldn't do a tenth of what this phone can do, and you can own all of it for chump change.

What are you people wanting as far as cheap goes? $100? $200? These prices OFF contract? Get real...if you want a cheap smart phone, Android is installed on plenty that you can get for next to nothing, go buy one of those, and relay your experience compared to the iPhone in that regard. You truly do pay for what you get...and while getting something cheaper should always be the aim of the consumer, being absolutely ridiculous when it comes to the expectation of cost is just silly.

And as far as a cheaper model...why diminish the brand? The phone is a luxury item, they arnt striving to attract the lower class buyers like a large market car company, the market doesn't need the quintessential Ford Focus of cell phones.

Just to put it out there, this isn't me defending the companies profitability, this is me defending my thoughts as to the value of what i get from the iPhone vs. what i pay for it. I'd pay $100-$200 MORE than the current cost of the phone and still be satisfied with it...fortunately i don't have to, i get it for less money than i personally think it's worth.

I'm really confused now. Somebody elsewhere on this site called the iPhone "the phone for the masses", but you say it is a "luxury item".
There is no way that they should make a phone for under USD200, that is just plain crazy.
As I indicated earlier, Apple could make a phone with say the same specs and build quality, plus GPS and an SD card slot for cheaper memory expansion, as the iPod Touch that would still be around half the price of an iPhone 5. I'm sure that such a phone would appeal to many customers.
Your kind of snobbery in referring to "lower class buyers" is one of the reasons why I will never get an iPhone.

 

[YorkieRay]

It's not Apple's fault your company doesn't make a version of that app for Android, WP8, BB10, etc.

Why do you single out the most expensive iPhone? The 16GB is $650 off contract. Most Android phones in the same league as the iPhone are $500+ off contract too; hardly cheap.

And TGP is right on with his post.

I used the 64GB version as a direct comparison with the same memory. You didn't inform me about exactly what Apple provides for that extra $450 though. Does anyone know what Apple gives on an iPhone 5 over an iPod Touch that adds up to and is worth that extra USD450?