What does a low-cost iPhone mean for Apple?

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There has been many words written regarding a new, “low-cost” iPhone over the past few days. All evidence currently suggest this iPhone model will have similar dimensions to the current iPhone 5, but with a rear casing made of plastic in several vibrant colors. One such leaked image suggests this new model will be called the iPhone 5C. The “C” standing for color, presumably.

None of this sounds particularly unreasonable, but it also doesn’t set well with me. First, as one rumor suggested, would this iPhone model now act as the cheaper “$99” model in Apple’s current three-tier pricing structure? Would this mean the new iPhone 5S, or whatever they decide to name it, outright replaces the iPhone 5, and the iPhone 4S is moved to the free spot, and the iPhone 5C is positioned in the middle of it all? That’s an aggressive shake up of pricing structure we’ve come to know over the past half decade.

So lets say that the above outlined scenario does indeed happen. To me, it’s a move toward the bottom. Much like how other PC manufacturers have rushed to make the cheapest machines they can, while Apple has continued to make the higher-end more profitable computers. These PC makers, such as Dell, are not doing as well as they used to.

This move to make a cheaper iPhone echoes the move to make less expensive iPods during the mid–2000s. The biggest difference there, was that with a lower cost came a specific purpose. The iPod shuffle- perfect for active people who just wanted a selection of music. The iPod mini and nano acted as a smaller, more portable and more affordable alternative to the iPod (classic), but at the cost of internal storage. The iPod classic acted as the workhorse, driving innovations that would later come to the other models. It wasn’t until the iPod touch was interpreted after the original iPhone, that this iPod hierarchy began to break down and become overshadowed.

The iPod touch has always, at least to my mind, played the role of “low-cost” iPhone. Granted, it doesn’t have the cellular capabilities of a phone, but everything else is there. For the price, and lack of contract, that is the trade-off customers made. And it has become the most popular iPod in the lineup.

This brings us back to the iPhone 5C. From everything we’ve heard so far, this suggests that this new iPhone will be cheaper just for the sake of being cheaper. It will not fit a specific set of needs as the different iPod lines did. It will likely house the pervious generation tech, in a casing that isn’t as nice and is cheaper to produce. The colors will likely be a big hit both here in the US and abroad and give potential customers something new to consider. I would wager that Apple’s expansion into China, India and other similar markets are the main reason for the creation of this cheaper iPhone.

This all troubles me, because, as far away from reality as it may be, it triggers something in the back of my head that suggests Apple is out of ideas on how to expand the iPhone market and they feel that the only way to sell more or to make more money is to reduce the cost of manufacturing, specifically materials. Apple has almost always made the sharpest products possible at a certain price point. That’s not to say that the iPhone 5C, which no one has touch yet, let alone been allowed to speak about it, will feel cheap or crummy. By it opens the door to that low-end commodity thinking at Apple which is currently hurting the rest of the industry.

In a nut, the point I’m trying to make, is that this could boost profits for now, and for years to come, but it could end up backing Apple into a corner later down the road. Years from now, when they are expected to hit a certain feature set and can’t because customers have come to expect a certain price point, the company is then faced with the bad decision of dropping those hypothetical features, or raising the price. This is a position you don’t want to be in as a manufacturer. I suspect this very scenario is why other mobile handset manufacturers are experiencing trouble these days.

I think the lower-cost iPhone has the potential to be a great device. What concerns me is the possible change in the line of thinking at Apple that it might take to make a low-end device. And once the moves are made to reach this market, it seems that the race to the bottom can’t be far behind.

(Image: MacRumors)

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  • satyam bhatt

    hi i m compliantly agree with u Mr Alex Jordan, it’s not about reaching more customer with low cost product, it’s not about share holders demand to make big screen or low cost model. it’s about low confidence on own product for future, in 2007 no company is near to apple in touch screen technology , but by far samsung coming on edge of apple technology. by taking back step it’s show’s physiologically back fire on long term fight with there own technology. ios 7 : on what the earth apple coming on this update saying the achievement ? when ppl showing of there achievement based on some one else idea , then it’s not steve’s apple. ios 7 : it’s all bright ios , apple says 10 hour battery life for iphone ios product, but in real life usage u have to charge it after 4 hours of usage, and top of that full bright and white ios ? c’mon and top of that 80% of new IOS features are belongs to cydia developers. apple is having huge patent list and by far they have future in there hand.but after 2 years of iphone 4 if apple are only focus on bright and white ios and ios which 80% is totally depend up on cydia developer then it’s shows that steve job is gone be last successful inventor in apple.