Although Apple is competing in the high-end smartphone market, industry watchers believe that a low-cost iPhone will enable the company to address 65 percent of the smartphone market. As pointed out by Gene Munster of Piper Jaffray, a cheaper iPhone can let them sell devices to a market that represents 580 million of potential customers.
We believe that the high-end smartphone market (above $400 USD off contract) for [calendar year 2013] will be about 320 million units, of which we believe Apple will capture 50 percent market share. We believe this means Apple is missing the other 65 percent of the market of the market, or 580 million units, given its current lineup without the lower priced phone.
In addition, Munster is not concerned about the prospect of reduced margins with a cheaper iPhone. He even expects that a low-cost Apple handset will have a total impact of less than one percent over the next few years.
We believe the opportunity for Apple is too large to miss, as the low end market is growing significantly faster than the high end smartphone market.
Apple’s Future with Low-Cost iPhone
On Wednesday, Munster said that a low-cost iPhone could generate $6.5 billion in revenue, assuming that Apple would roll out the device at the end of the year. In relation to this, he expects that the cheap handset will be tagged at $199.
As of the moment, the company’s cheapest model is the iPhone 4, which costs $450 without a contract. However, is could cost up to $490 and $750 in China and Brazil respectively because of taxes. China and Brazil are the two key countries where low-end, contract-free smartphone are big sellers.
This week, a couple of rumors claim that Apple is interested in reaching new customers through a low-cost iPhone. In addition, this move is said to be in response to the growing popularity of low-end devices, particularly those running Google’s Android mobile operating system.
It is also believed that Apple’s success with the iPad Mini prompted the company to work on a more affordable iPhone model. Moreover, there were speculations that the purported handset will rely on Qualcomm’s Snapdragon chipsets.
Rumors about a cheaper iPhone are not new. However, industry pundits have continuously predicted that the Cupertino-based company will build a cheaper model. Many even cited what the company did with their iPad and iPod, both of which saw their product lineup grow by providing smaller and cheaper options.