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Does Apple really need to make a cheaper iPhone for China and India?

Karen Haslam | Jan. 18, 2013
Why are China and India of such importance to Apple, and is it really necessary for the company to produce a budget iPhone to grab market share in these territories?

No. Apple doesn't care about market share. What matters is quality.

Senior vice president of Apple marketing Phil Schiller recently told the Shanghai Evening News that Apple would: "Not develop cheap smartphones in order to grab market share".

"Some manufacturers use cheap smartphones to replace feature phones, but this is not Apple's product development direction," he said.

No. The big priority is to sign up China Mobile

The one thing that would really make a difference to Apple in China is if it could sign up China Mobile as a network partner. The company has been in talks previously with China Mobile about selling the iPhone. The carrier has more than 700 million customers, and without China Mobile, Apple's growth in the country will always be constrained. RBC Capital Markets analyst Amit Daryanani expects that Apple will finalise the deal with China Mobile in early 2013. However, IDC projects that China Mobile won't offer the iPhone until 2014, after the carrier is expected to launch its commercial 4G LTE network.

No. It could damage Apple's brand

Apple is trusted for producing quality products that are reassuringly expensive. Apple has never sold a "cheap" anything. It is a premium company that believes in charging a premium for its products.

To produce a low-cost product is contrary to late Apple founder Steve Jobs' vision. Steve Jobs strategy was to offer a small number of products, focus on the high end, give priority to profits over market share, and create a halo effect.

The Apple brand is associated with quality. Apple products are aspirational. If the company lost that association it would find its popularity waning.

No. It could damage Apple's margins.

This is why investors got worried when the budget iPhone rumour broke. Even Apple bull Piper Jaffray's Gene Munster cut his target for AAPL, claiming that a less expensive iPhone will reduce Apple's margins.

Apple doesn't have to sell the most iPhones in order to make the most money from the smartphone market. It's profitability that matters, to Apple at any rate.

No. Apple should avoid becoming too mainstream

If everyone owned an iPhone Apple wouldn't be cool anymore. In the early days Apple was cool because it "Thought Different". Then because Mac users were cool while PC users were fuddy-duddy. Then just plugging iPod earbuds into your ears made you cool. Now the iPhone is becoming so popular that youths are said to be turning their nose up at it. The irony of the Apple Samsung court battle is that Samsung some how came out looking like the underdog, and that may have done wonders for its image.

Apple needs to go back to the Think Different mentality. People don't want to follow the herd.


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