An 'iPhone E' for 'Emerging'
Mark Gurman
Gurman, first with some historical context for a "cheaper iPhone":
Ever since the original iPhone went on sale, there have been calls for a less expensive model. But it’s not something Apple has pursued aggressively. Its first attempt at making the device more affordable was cutting the price of year-old models by $100 when new versions debuted. Apple then rolled out the iPhone 5c in 2013, but that model was mostly just the prior version wrapped in colorful plastic — at the same $100 discount.
Apple tried again in 2016 with the iPhone SE. The $399 price was an improvement — hundreds of dollars less than the higher-end models — but the design soon became outdated. Today’s SE costs $429, which isn’t much of a bargain considering its lack of features. Chinese brands like Xiaomi, Transsion and Oppo are offering models with bigger screens and multiple cameras for $150 a pop.
I actually loved the iPhone 5C – it was undoubtedly the most "fun" iPhone that Apple ever created. It let Jony Ive go back to his candy-colored iMac roots. Alas, it didn't work. Perhaps because it was too close in price to the more powerful "premium" iPhone models. The iPhone SE gave users a bigger discount, and clearly the strategy worked better as the device is still around and apparently getting another refresh next year. But it's still not "cheap" in the way that it would need to be in order to yield strong sales in emerging markets.
If Apple wants to get serious about emerging markets, it should develop a an iPhone more in the range of $250. Now, that’s not something Steve Jobs would probably do, but going downscale could be what the company needs right now.
Apple could get the cost down by using an all-screen LCD approach — rather than the costlier OLED display on current iPhones — and reduce the number of cameras. The device would sport an older but still capable chip, and perhaps a plastic shell (that still retains Apple’s industrial design). And the company could limit sales of the phone to emerging economies.
This would require a shift in thinking. Apple would have to forget about its vaunted profit margins and simply chase revenue and market share. The move could help build the company’s brand in the developing world, and Apple could eventually upsell those consumers to pricier devices. Along the way, more of them will get hooked on Apple services and apps.
I'm not sure it actually requires that big of a shift – more like one along the lines of what Apple is doing with Walmart to sell the M1 MacBook Air. With news of falling iPhone sales worldwide, last week, I wrote:
In all seriousness, there are a few interesting trends in this data. First and foremost, Apple faces some very real issues on the global stage. Apple has always struggled in emerging markets because of their price points, and Chinese firms like Transsion are happy to take advantage. Apple's hope, one assumes, is that as the markets mature, the allure of Apple products converts cheaper smartphone users into "premium" ones, as has been slowly happening in India.
But these Chinese players seem increasingly savvy, moving far more nimbly than Apple does with different types of form factors, such as foldables. And Xiaomi's use of their electric car to create a new type of halo effect is fascinating. And (sadly) not something Apple is going to be doing anytime soon!
You have to wonder if Apple might not take a page from their recent Walmart/MacBook Air playbook and partner with various players in emerging markets to sell older (and most importantly, cheaper) versions of the iPhone exclusively. There's some brand risk there, but again, using unique channels to do this seems smart.
The most interesting aspect of the Walmart/Apple deal is that it's not just a thinly veiled strategy to clear out inventory, it's a full-on partnership to continue producing an older Apple product to sell exclusively in this channel. That's perhaps most similar to Apple selling "last year's iPhone" at a $100 discount, but again, doing this away from Apple's own channels allows them to go lower in price without worrying too much about the effect on their premium brand.
With that in mind, a "cheaper" iPhone wouldn't have to be a "stripped-down, lousy product" to use Steve Jobs' words. It could simply be an older product sold exclusively in emerging markets (either through Apple or partners).
Currently, Apple sells (starting price points):
- iPhone 15 Pro: $999
- iPhone 15: $799
- iPhone 14: $699
- iPhone 13: $599
- iPhone SE: $429
So what if Apple simply sold an iPhone 12 for, say, $250 (or the equivalent in an emerging market)? It's not the $150 price point that some of the Chinese brands offer, but this is still Apple. And to that end, most importantly, they're not making some new, stripped-down iPhone, but instead producing an older model that was very much "insanely great" at the time of its launch.
The hiccup in this is that Apple would have to re-start production for such a model, namely the A14 chip (both the SE and 13 feature the A15 chip). But they could simply do this going forward and not ramp down the older production lines – which, again, seems to be the playbook with the M1 MacBook Air – or shift production to a country where it would be cheaper to produce non-state-of-the-art chips, which is something Apple is already working on in the name of diversification away from China.1
The bigger issue there may be that developers would need to keep supporting older hardware for longer. But Apple could take on this burden through iOS, I imagine.
I just don't think anyone, including Apple, needs to overthink this. Simply sell a three year old model exclusively in a few emerging markets. Sure, the profit margins wouldn't be as good, but the trade-off is getting a toe-hold in such markets, stopping worldwide market share decline, and upselling the now all-important services.
The only real question would be how to brand such an iPhone. In my scenario above, the "iPhone 12" would feel pretty stale. There's a lot you could do here. "iPhone E" (Emerging), "iPhone W" (iPhone Worldwide), "iPhone Classic" (Apple would never do this, but fun!), or simply "iPhone"? Newer, more expensive models could retain the iPhone number scheme, while this cheaper variant could keep it simple for those emerging markets...2
1 This is, of course, even more complex than I'm suggesting because it's not just older CPUs that need to be produced, but other internal components as well. Perhaps it makes sense to do a mix of some older elements and some newer ones, assuming Apple could make them fit in older iPhone bodies...
2 I mean we do have to do away with the iPhone number naming scheme at some point, right? Once we're beyond "iPhone 20" it's all going to seem a bit silly, no?