Rumor: iPhone Has a Wee One on the Way
Seeking to address smartphone buyers in the mid-range of the market, Apple is working on a smaller, cheaper version of its iPhone, according to a recent report. Doing so could open it to more sales and battle archrival Android for more ground, but Cupertino will have to be careful not to let a smaller and presumably weaker iPhone drive a wedge in its iOS platform, which could turn off developers.
Apple (Nasdaq: AAPL) is working on a smaller, cheaper smartphone in order to fend off the threat from Android, according to a report in Bloomberg.
Opinion over this news is divided.
"It makes sense for Apple because its iPhones are premier products, but the bulk of the market purchases basic phones and feature phones," Harry Wang, a director at Parks Associates, told MacNewsWorld.
"With a lower price, Apple can reach the price-conscious consumer, thus getting a higher penetration rate in the smartphone market," Tina Teng, a senior analyst at IHS iSuppli, told MacNewsWorld.
On the other hand, "Apple may be working on a smaller iPhone, but a cheaper one is unlikely," Chris Hazelton, a research director at the 451 Group, pointed out.
"It's in Apple's best interest to stay focused on the high end of the market, as the mobile market has more than a few companies that are, or were, a few steps from the grave because they dabbled in the low end to gain market share," Hazelton told MacNewsWorld.
Apple did not respond to requests for comment by press time.
What Cupertino Might Do Next
Apple's working on new versions of the iPhone, and one of them will be smaller and cheaper than the iPhone 4, Bloomberg quoted an unnamed source as saying.
The source, who reportedly saw a prototype of the smaller, cheaper device, said it's about one-third smaller than the iPhone 4 and has no Home button.
Apple will be able to sell it at a comparatively low price because it will use a processor, display and other components similar to those used in the iPhone 4 instead of newer, more expensive technology that will be used in the iPhone 5, according to the source.
"If Apple plans to reach 80 percent penetration in the smartphone market, then it's very possible that it's working on a smaller, cheaper phone," iSuppli's Teng said.
In addition to broadening the customer Increase sales with VerticalResponse. Free trial. base for Apple, the less-expensive device will also "get more acceptance from carriers because they will recoup their investment in it much earlier than for a more expensive product," Teng remarked.
"The premium brands like Apple are looking at how to increase sales volume and are looking at the mid-range segment of the smartphone market," Parks Associates' Wang suggested.
"These consumers are looking for a good brand but not one as high-end as the iPhone," Wang added.
Possible Features of a Lower-End iPhone
It's likely that Apple will retain iOS as the operating system for a new, less expensive smartphone.
"Apple's differentiation from other smartphone brands is the software, which is pretty unique and user-friendly," Parks Associates' Wang pointed out.
It's not likely that Cupertino will strip out some features of iOS to fit a smaller cheaper smartphone, iSuppli's Teng said.
"People buy iPhone for the apps, and if a stepped-down version of iOS means less app options or functions, it'll affect the user experience, which will not be what Apple has in mind," Teng explained.
Further, app developers likely won't be willing to set aside additional time to develop on a stepped-down version of iOS, Teng suggested.
Apple will probably massage the hardware in order to offer a cheaper smartphone, Wang opined.
"Maybe they'll use a two-megapixel camera instead of a five-megapixel camera, or they'll use a camera that doesn't support HD video, or they'll use a screen that's less expensive or offers lower resolution," Wang said. "But remember, over the last few years, Apple has been able to significantly reduce costs because of its order volume, so it can launch a mid-range smartphone without sacrificing too many features."
The Need for Speed
Cupertino needs to move quickly, Parks Associates' Wang stated.
"LG has launched a basic smartphone -- the LG Optimus -- and that's a pretty smart move to capture the mid-range to lower-end market," he pointed out. "That's had pretty good sell-through numbers."
Meanwhile, white-box manufacturers such as Huawei are making huge inroads into the lower-end market.
White-box sales exceeded 115 million units in the fourth quarter of 2010, and 360 million units for the year, according to Gartner (NYSE: IT).
For example, Huawei sold 23.8 million units in 2010, up from about 13.5 million last year, Gartner's figures show. White-box sales were partly responsible for the year-on-year decline of Nokia's (NYSE: NOK) share of the mobile market in 2010, Gartner said. Nokia's market share fell from 36.4 percent in 2009 to 28.9 percent in 2010.
Apple (Nasdaq: AAPL) is working on a smaller, cheaper smartphone in order to fend off the threat from Android, according to a report in Bloomberg.
Opinion over this news is divided.
"It makes sense for Apple because its iPhones are premier products, but the bulk of the market purchases basic phones and feature phones," Harry Wang, a director at Parks Associates, told MacNewsWorld.
"With a lower price, Apple can reach the price-conscious consumer, thus getting a higher penetration rate in the smartphone market," Tina Teng, a senior analyst at IHS iSuppli, told MacNewsWorld.
On the other hand, "Apple may be working on a smaller iPhone, but a cheaper one is unlikely," Chris Hazelton, a research director at the 451 Group, pointed out.
"It's in Apple's best interest to stay focused on the high end of the market, as the mobile market has more than a few companies that are, or were, a few steps from the grave because they dabbled in the low end to gain market share," Hazelton told MacNewsWorld.
Apple did not respond to requests for comment by press time.
What Cupertino Might Do Next
Apple's working on new versions of the iPhone, and one of them will be smaller and cheaper than the iPhone 4, Bloomberg quoted an unnamed source as saying.
The source, who reportedly saw a prototype of the smaller, cheaper device, said it's about one-third smaller than the iPhone 4 and has no Home button.
Apple will be able to sell it at a comparatively low price because it will use a processor, display and other components similar to those used in the iPhone 4 instead of newer, more expensive technology that will be used in the iPhone 5, according to the source.
"If Apple plans to reach 80 percent penetration in the smartphone market, then it's very possible that it's working on a smaller, cheaper phone," iSuppli's Teng said.
In addition to broadening the customer Increase sales with VerticalResponse. Free trial. base for Apple, the less-expensive device will also "get more acceptance from carriers because they will recoup their investment in it much earlier than for a more expensive product," Teng remarked.
"The premium brands like Apple are looking at how to increase sales volume and are looking at the mid-range segment of the smartphone market," Parks Associates' Wang suggested.
"These consumers are looking for a good brand but not one as high-end as the iPhone," Wang added.
Possible Features of a Lower-End iPhone
It's likely that Apple will retain iOS as the operating system for a new, less expensive smartphone.
"Apple's differentiation from other smartphone brands is the software, which is pretty unique and user-friendly," Parks Associates' Wang pointed out.
It's not likely that Cupertino will strip out some features of iOS to fit a smaller cheaper smartphone, iSuppli's Teng said.
"People buy iPhone for the apps, and if a stepped-down version of iOS means less app options or functions, it'll affect the user experience, which will not be what Apple has in mind," Teng explained.
Further, app developers likely won't be willing to set aside additional time to develop on a stepped-down version of iOS, Teng suggested.
Apple will probably massage the hardware in order to offer a cheaper smartphone, Wang opined.
"Maybe they'll use a two-megapixel camera instead of a five-megapixel camera, or they'll use a camera that doesn't support HD video, or they'll use a screen that's less expensive or offers lower resolution," Wang said. "But remember, over the last few years, Apple has been able to significantly reduce costs because of its order volume, so it can launch a mid-range smartphone without sacrificing too many features."
The Need for Speed
Cupertino needs to move quickly, Parks Associates' Wang stated.
"LG has launched a basic smartphone -- the LG Optimus -- and that's a pretty smart move to capture the mid-range to lower-end market," he pointed out. "That's had pretty good sell-through numbers."
Meanwhile, white-box manufacturers such as Huawei are making huge inroads into the lower-end market.
White-box sales exceeded 115 million units in the fourth quarter of 2010, and 360 million units for the year, according to Gartner (NYSE: IT).
For example, Huawei sold 23.8 million units in 2010, up from about 13.5 million last year, Gartner's figures show. White-box sales were partly responsible for the year-on-year decline of Nokia's (NYSE: NOK) share of the mobile market in 2010, Gartner said. Nokia's market share fell from 36.4 percent in 2009 to 28.9 percent in 2010.
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