Analyst: lower price iPhone will launch in 2013

News Richard Goodwin 14:03, 12 Feb 2013

Will Apple launch a cheaper iPhone this year?

Topeka Capital Markets analyst Brian White says he is confident that Apple will release a cheaper iPhone during 2013, possibly as early as June. 

In a note to investors, White said the handset would likely retail for around $250 to $300. If that price is correct, UK punters could be looking at a sub-£200 iPhone.

That’s Nexus 4 territory, and it’s a very hard-to-reach sweet spot for 99.9 percent of retailers to hit. Samsung, Nokia, and HTC cannot go this low - it'd be suicide.

Will Apple go there? 

‘This low price will help Apple (AAPL) expand its smartphone market share in emerging markets such as China,’ says White. It’d also help Apple make gains in the pre-pay markets where its current iPhone handsets are just too expensive. 

The iPhone Mini would deliver margins of around ‘10 to 15 percentage points lower’ than the standard iPhone model – or 58 percent cheaper than the current 16GB iPhone 5, according to White. 

The logic behind the idea of a budget iPhone is sound - Apple needs a cheaper iPhone in order to better compete with Android. Looking at Samsung, the current leading mobile manufacturer, and Apple’s share of the smartphone space alone, most people would agree. 

But this isn’t entirely true: Apple raked in 75 per cent of all profits across the entire mobile space in Q4 2014 despite only owning 9 per cent of the space, according to Asymco analyst Horace Dediu. Samsung, the world’s biggest phone-maker, secured just 16 per cent. 

Apple also captured almost 40 per cent of the market’s total revenue for the same period thanks to high demand for its iPhone. Similarly, strong iPhone 5 sales meant gains for iOS at the expense of Android for the quarter ending December, 2012.  

Viewed in this context the argument for a cheaper iPhone doesn’t seem anywhere near as pressing as White implies. A sub-£200 iPhone would sell well, that’s a given. But so do the iPhone 5 and iPhone 4S, and with higher profit margins too. And if that’s still the case then why would Apple release a cheaper iPhone? 

During 2013 and beyond, Tim Cook needs to prove to investors that he can grow Apple’s iPhone business in 2013. Could the launch of the iPhone Mini be the first step along that road? 

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