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Why Apple needs a budget iPhone

Column And why arguments saying otherwise don't make sense
Fri May 31 2013, 13:26

AHEAD OF APPLE'S next iPhone launch, the online rumour mill is rife with speculation about whether the iPhone 5S or iPhone 6 will be thinner than the Samsung Galaxy S4, or look as premium as the HTC One.

However, perhaps the most interesting rumour circulating at present is that Apple has shifted iPhone production from Foxconn to Pegatron, as it starts building a budget iPhone.

Recently I've read a handful of articles explaining why Apple shouldn't release a budget iPhone, and I disagree.

Most of the arguments that I've seen claim that releasing a cheap iPhone will "tarnish" the Apple brand. They take the view that Apple is a company that should release only "premium" products, and seem to have missed the memo about the iPad Mini.

Many of these arguments - in fact, almost all of them - lead with the opinion that Apple would never release a cut-price Macbook, and they're right. Apple would never release an affordable Macbook, because the laptop market, and Apple as a company, doesn't need one.

It's silly to compare the laptop market - where those who want a Macbook, buy a Macbook - to the rapidly evolving smartphone market, where some customers quickly switch and swap between Blackberry, Android and iOS devices. People with a Macbook don't often switch to a Windows PC, for example, but as Samsung's dominance in the smartphone market has recently shown, people are flocking from iOS to Android.

Another argument that people seemingly can't get enough of is that Apple already has a budget iPhone - two in fact, in the iPhone 3GS and iPhone 4. This is yet another silly assessment, because when punters go shopping for a new smartphone they don't want a two or three year old device, they want a spanking new mobile phone, something they can get excited about and show off to their friends. Imagine turning up at a friend's house with an iPhone 3GS to show off, and imagine how your pals would react to that. Exactly.

Apple needs to create a new SKU, not repurpose an old phone for the sake of trying to win over those looking for a cheap mobile. I'm an avid iPhone user, but if I was given the choice between an iPhone 3GS and a Samsung Galaxy S4 Mini, for example, I'd rather switch to the Android ecosystem.

There's a lot of value for Apple in releasing a budget iPhone, a point that some people seem to have missed. It might have a knock-on effect on Apple's profit margins at the beginning, but there's little question that in the long run, Apple will reap the rewards.

Assuming Apple gets the price right - I'm thinking sub-£300 is a must - it will start to see customers flocking from other mobile operating systems who previously didn't want to fork out so much money to get their mitts on the iPhone 5.

Once Apple gets a new customer, thanks to the release of a budget iPhone, they will become part of the Apple ecosystem. This is something Apple does well, and thanks to its iCloud integration and the way it supports multiple devices, it's likely that these customers will opt for an iPad over an Android tablet in the future.

Finally, there's also the argument about emerging markets, where Apple currently has little or no presence. It's in these regions that Samsung, unsurprisingly, and Nokia are starting to dominate with their affordable smart devices. If Apple doesn't act fast, it might never be able to gain a footprint in these crucial markets.

Come on Apple, you know it makes sense. µ


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