Apple’s Lower-Cost iPhone as a ‘Mid-End’ Device

Apple’s Lower-Cost iPhone as a ‘Mid-End’ Device

Here’s an intriguing thought, what if Apple’s much-rumored low-cost iPhone isn’t targeted at the lower end of the smartphone market? What if Apple follows the path that works so well for the iPad mini, and instead targets it at the middle?

Low_price_iphone_pyramid

AllThingsD

What if it isn’t low-end at all, but simply mainstream? Not a $150 phone or even a $200 one, but a $350 one? A “mid-end” iPhone?

That’s the theory put forth by Gokul Hariharan and Mark Moskowitz over at J.P. Morgan, and it’s a pretty compelling one, with strong historical precedents.

The iPad mini’s starting price tag of $329 was initially thought of as too high to attract the budget-conscious shoppers attracted to Google’s Nexus 7 and Amazon’s Kindle Fire. However, since its introduction, it has proved to be wildly popular, carving out a nice niche for itself in the area between Apple’s full-sized iPad, and the numerous budget Android tablets available in the marketplace.

Apple has a history of making such moves. The iPad nano, as an example, launched at $199, less than the top of the line iPod at the time, which commanded $299 as the price of entry, but a significantly higher asking price than the low-end MP3 players of that era. The nano proved itself as a winner, becoming so popular that it accounted for about half of all iPod shipments in its first few years of existence.

In both above instances, Apple sacrificed a piece of its usual high margins to produce a high-end product that expanded its market share. Will Apple follow the same path with its rumored “budget” iPhone?

It is very possible Apple will indeed follow that game plan, and as the J.P. Morgan chart shown above shows, it could have a lot to gain by doing so.

Hariharan and Moskowitz give their view of the implications: “Currently Samsung dominates this segment ($200-500 price range) with 35+ percent market share. … We believe Apple could take 20-25 percent of this market in the next 12 months (from almost no market share currently), if it prices a lower-priced product at $350-400 levels.”

If Apple does release a budget iPhone, will it follow the proven path taken by the iPad mini and iPod nano? What do you think readers? Tell us your thoughts in the comments section below.

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