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There is no doubt that if Apple is able to place an iPhone costing between $149 to $199, which is without a contract with a service provider, then many smartphone buyers will jump at the offer. With a cheaper iPhone, Apple can easily make deep inroads in countries like India and China where many users opt for lower-priced devices and prefer to use the prepaid model. As of now the market for low cost prepaid devices is completely dominated by Nokia, Android devices and to a certain extent even by RIMs BlackBerry Curve. With a cheaper iPhone, Apple could find itself capturing the smartphone market, just as its iPod dominates the handheld music device segment.
Right now the bulk of Apples sales are happening in advanced markets like USA, Europe and others, where customers dont mind paying more than $600 for their devices or they tend to go in for devices subsidised through long-term contracts with service providers. A cheaper iPhone model could make the company the dominant vendor globally. There have been rumours to the effect that a cheaper iPhone could be in the works and it could hit the market as early as the initial months of next year. Apple has been at the forefront of the most of the landmark innovations of the cell phone industry, but its global market share was just 3.4% last year, according to IDC. The low market share is due to the iPhones being priced very high.
Apple has been enjoying some of the largest profit margins, on a per-device basis as compared to any other electronics manufacturer. The sale of iPhones is critical for the company, as they generate up to 39% of the revenue. A cheaper iPhone would offer much less profits per device. However, it still makes sense, as with a much higher sales volume, Apples profit on the whole would go up sharply. The iPhones, which are today looked upon as the rich mans toys, would become a working class phenomenon. In countries like India and China, where there is room for a phenomenal growth in smartphone usage, the cheaper iPhone could sell in millions.
According to some reports, the cheaper iPhone that is currently in the works could be somewhat smaller than the present day iPhone. It will have edge-to-edge screen that can be manipulated by touch. There is the provision for a virtual keyboard and voice-based navigation. Apple is also said to be working on a technology that will make it much more easier for its devices to be used across multiple networks. However, it is also possible that the device would be of the same size and features like iPhone 3G and still sell at much lower price. Apple might be able to sell the device using processor, display and other components similar to those used in the current model, as the price of components tends to drop over time.
Apple is also said to be working on a Universal SIM, which will allow its iPhone users to pick up the GSM network of their choice without having to switch SIMs. A built in Universal SIM will not only be convenient for the users, it will also have the effect of lowering the price of the handset. By minimising the hardware form factors, while keeping the features intact, Apple could price its devices at much lower price. Instead of targeting only the high end users, the company would be going after the 100% market. The pressure on the other smartphone makers would be ratcheted up as never before. However, there are many supply side constraints that Apple needs to overcome if it wants to peruse its ambition of being the smartphone maker of the masses.
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