Apple recently surprised many people last year when it priced the iPad mini at $329, a number roughly $100 higher than the Amazon Kindle Fire and Google Nexus 7. The same premium approach is likely to be used to successfully introduce a more “affordable” iPhone according to a new analysis.
According to Mark Moskowitz and Gokul Hariharan of J.P. Morgan, Apple is expected to sell a low-cost iPhone in the second half of 2013 priced between roughly $350 and $450. The cost is a bit higher than the number some market watchers are expecting. Rather than be disappointed by the price points, investors were told to view the iPad mini as a “winning template” for Apple’s strategy. Instead they believe a contract-free iPhone priced under $400 would be a “very attractive” product for many consumers.
An iPhone priced between the price range of $350 and $450 would also affect market trends, lowering what J.P Morgan calls the “smartphone price pyramid.” According to Moskowitz and Hariharan, mid-level smartphones don’t see much volume at the moment but Apple could change the market trends with a reasonable priced iPhone, just like the company did with the iPad and iPod in the past. According to the two of them:
Apple usually creates new demand when it steps into a price band — for example, the $300-$400 price range for tablets did not have much demand (most of the growth had been at the $499+ or $199 range) before the launch of the iPad mini. However, after the launch of Pad mini, this segment has become one of the largest parts of the market, even convincing many users to upgrade from cheaper tablets to the iPad mini.
If Apple doesn't move into the mainstream, then its ecosystem advantage (already has more than 300 million iCloud users) is likely to be eroded by Android, which is growing very quickly. The move to lower price points may come at the expense of margins in the short term, but we believe that the opportunity to expand the iOS ecosystem could pay off in the long term through non-product revenue streams.
Source: IDC, J.P Morgan via AppleInsider