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Thread: Analyst Predicts the Low-Cost iPhone Will Boost Apple's Margins and International Sales

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  1. #1
    MMi Staff Writer Akshay Masand's Avatar
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    Default Analyst Predicts the Low-Cost iPhone Will Boost Apple's Margins and International Sales


    Although it will likely offer a lower entry price, Apple’s highly anticipated low-cost iPhone may actually boost the company’s gross margins in the smartphone sector while also increasing international market share according to a new prediction. From the June quarter of 2012 until the same period in 2013, Apple’s gross margins declined from 42.8% to 36.9%. Analyst Brian Marshall of ISI Group believes this was largely caused by Apple’s “forced” limited production of the iPhone 4 and iPhone 4S as the market has gravitated towards lower end devices.

    Marshall also sees a new low-cost iPhone, which has been dubbed the “iPhone 5C” according to rumors, as potentially carrying gross margins of about 40%, higher than the company’s current average. This implies a hardware bill of materials at around $160, and a wholesale price of about $340. In this aspect, Marshall believes that the new low-cost iPhone could prove to be “crucial” to Apple going forward. He sees the device actually improving Apple’s overall margins and also driving market share gains in international, emerging markets where cheaper smartphones are preferred.

    As of right now, the iPhone has a higher rate of penetration in developed regions where smartphone subsidies with two-year contracts are the norm. Marshall estimates that Apple’s rate of penetration was about two times greater in the U.S. than the international markets in the June quarter. In addition to this, the analyst noted that Apple has “glaring holes” in its global carrier partner base, most notably China Mobile, which is the largest wireless provider in the world with about 740 million subscribers. Another key missing partner is Japan’s NTT DoCoMo, which has about 62 million subscribers.

    As of right now, Marshall remains hopeful that Apple will be able to ink deals with the aforementioned major carriers in the near future, giving the company access to a larger number of potential customers. The ISI Group remains bullish on AAPL stock, reiterating its “strong buy” recommendation with a price target of $600.

    Source: ISI Group via AppleInsider

    Twitter: @AkshayMasand

  2. #2
    iPhoneaholic Jj2345's Avatar
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    Why do I have a feeling this "low cost" iPhone will be the only iPhone apple will unveil next month

  3. #3
    What's Jailbreak? laju8's Avatar
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    Why do u guys think that it will be low cost?

    What is your definition of low cost?

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    iPhoneaholic Donnutt's Avatar
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    I think if apple introduces a low cost iPhone it will be very damaging. Apple has never made a "cheap" product and if they start now, they will be slammed for making an inferior product.
    There are already "cheap" iPhones. All the previous generations.

    I'm still holding out on the hope that they will not do it.

  5. #5
    iPhone? More like MyPhone StuG III's Avatar
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    I think if apple introduces a low cost iPhone it will be very damaging. Apple has never made a "cheap" product and if they start now, they will be slammed for making an inferior product.
    There are already "cheap" iPhones. All the previous generations.

    I'm still holding out on the hope that they will not do it.
    Me too, but it's going to happen.

    Why do u guys think that it will be low cost?

    What is your definition of low cost?
    I'm thinking about $20 cheaper than the regular 5S

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