‘Apple must’ be ‘very afraid’

'Apple must' be 'very afraid'

Those cheap semi-smartphones hitting the market should be terrifying to Apple, argues Joe Wilcox at Beta News. He reckons the increased sophistication of devices in the $120 mark are the biggest threat yet to the iPhone, quoting IDC: “Markets like China and India are quickly moving toward a point where sub-$150 smartphones are the majority of shipments, bringing a solid computing experience to the hands of many.”

Now what’s true about this is that these cheap smartphones comprise a growing part of the market; what’s also true is that the deeper subsidies being made available on these devices reflects the depth of competition between handset makers trying desperately to scale market share at the cost of profits; another truth is that the level opf subsidy offered by carriers on these devices in preference to subsidizing iPhone represents how carriers want to retain control of their industry.

Apple isn’t so worried about second-rate smartphones temporarily occupying space in potential user’s pockets – it’s far more concerned at the anti-Apple bias emanating from some carriers. What Wilcox is missing, however, is that Apple now has a lower end iPhone model you can rest assured will be made available to the market at lower prices moving forward.

The meaning? Apple already has a contingency plan through which it will drive competitors to scrabble for share at lower price points at the cost of profitability — an unsustainable business in the long term. This is forcing — as we are seeing — further consolidation among competing handset makers, and putting a lot of pressure on Samsung, which shores up its market share with low end devices, and loses roundly to Apple at the high end.

So is Apple afraid?

Probably not because in those terms its plan is working fine.

In the future? You’d be dumb or stupid to imagine Apple will stick slavishly to its current pricing model — it will inevitably meet the market with larger and cheaper devices. They will not be the cheapest devices, but the company will ensure its solutions are more accessible: but not at the cost of a sustainable long-term business plan.

IMAGE c/o: Paul Townsend

Jonny Evans

Watching Apple since 1999. I don't say what they should do. I say what they might do. They sometimes do.

3 Responses

  1. Gk says:

    I agree. While low cost phones are getting more advanced this mostly affects the mid-range.

    Cost cutting to the extreme to get the phones down to these price points cuts off any room for future developments. New/good hardware is expensive and low cost manufacturers won’t use it. We’ve seen this race to bottom many times before.

    Cheap phone makers are also reliant on Google proving them a free OS – surely saving them billions in development costs by now. How long more will Google keep subsidising this and what’s the catch? We’re seeing Google impose more and more conditions with each release.

  2. Mike Smith says:

    Cheap phone manufacturers aren’t reliant on Google for a free OS at all. There’s Tizen, Firefox, Sailfish, Windows. Google could even stop their development of Android at this point, and others (such as Cyanogen) would continue with it.

    We’re at the point now where most people don’t need a better flagship. We already have phones that can shoot 4K video and have more power than is necessary for the current crop of apps. So it’s natural that phones will get cheaper, and that can only serve to squeeze margins. My handset is two years old now and does everything that the latest phones do. It has a higher-res screen than the iPhone 5s, so what do I gain by “upgrading”? The growth area will for handsets like the Moto G – every bit as good as the iPhone 5c (except for the camera) at a quarter of the price.

    • Jonny Evans says:

      So where’s the business in sophisticated low margin products? Where’s the extra bit of cash you need to invest into the platform in order to deliver better user experiences? Doesn’t the lack of that capital damn us all to incredibly average and unrewarding experiences? Must Apple always be the only firm that does actually invest in good experiences? And is it right that that investment is then “benchmarked” by the bottom shifters at the low end of the industry you describe?

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.