Apple is working on a lower-end iPhone, according to people briefed on
the matter, a big shift in corporate strategy as its supremacy in
smartphones has slipped.
While Apple has explored such a device for years, the plan is
progressing and a less expensive version of its flagship device could
launch later this year, one of the people said.
The cheaper phone could resemble the standard iPhone, with a different,
less-expensive body, one of the people said. One possibility under
consideration is lowering the cost of the device by using a different
shell made of polycarbonate plastic; in contrast, the iPhone 5 currently
has an aluminum housing. Many other parts could remain the same or be
recycled from older iPhone models.
Apple could still decide to scrap the plan. A spokeswoman for the
Cupertino, Calif., company declined to comment. Apple now faces greater
pressure to make the iPhone more affordable. An onslaught of lower cost
rivals powered by Google Inc.'s Android operating system are gaining
market share.
In the 2012 third quarter, Apple held only 14.6% of worldwide smartphone
shipments, down from a peak of 23% in the fourth quarter of 2011 and
the first quarter of 2012, according to IDC. Samsung Electronics Co.'s
share, meanwhile, rose from 8.8% to 31.3% from the third quarter of 2010
to the third quarter of 2012.
The Korean electronics maker on Tuesday said it capped its best year
ever with another record quarterly profit, adding that it expects
operating profit of $8.1 billion to $8.5 billion for the three months
that ended in December.
Selling multiple new iPhone models would be something new for Apple.
Under former Chief Executive Steve Jobs, Apple prided itself on
prioritizing profits over scale and offered a relatively small number of
products mostly targeted at the high end.
In more recent years—and especially since Tim Cook took the reins as CEO
in August 2011—that has started to change. In October, Apple unveiled a
smaller iPad, dubbed the iPad Mini, to go alongside its bigger iPad
tablets. Still, the company has sold only one main new iPhone model,
with different storage capacities, at a time since launching the
smartphone in 2007. Today the iPhone is Apple's chief revenue driver,
with sales of iPhones and related products and services accounting for
48% of revenue in the quarter ended in September.
Apple has been considering a less-expensive iPhone since at least 2009,
viewing it as a way to grab market share and introduce people to the
brand, said people familiar with the efforts. Before the launch of the
iPhone 4 in mid-2010, the company developed designs for cheaper phones
that were very similar to the iPhone at the time but had a less
expensive back and sides, one of the people said.
Apple tabled the idea as some executives worried a second iPhone would
complicate its manufacturing processes. The company decided to keep
older iPhone models on sale for less, a strategy that didn't require
designing new products. While the iPhone remains the top-selling
smartphone in the U.S., Apple's share of the high-end cellphone market
has taken a hit in China and remains low in other emerging markets.
A less-expensive iPhone risks crimping the company's profit margins,
which executives have been loath to sacrifice. Even small changes in
margins often sway investors. Gene Munster, an analyst with Piper
Jaffray, said that a less expensive iPhone won't necessarily hurt
Apple's overall profit margin if it attracts buyers who haven't bought
iPhones before and not those who would have been willing to purchase the
higher-end device.
Source: Wall Street Journal
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