Categories

The new iPhone portfolio and implications on ASP

The iPhone portfolio is now larger than ever. It’s arguable that, for the first time, we can actually call it a portfolio vs. the [n, n-1] pair of products that’s been available to date. A year ago I even argued that the n-1 variant of iPhone was more of a cognitive illusion than a real alternative.

But that all changed last week. For the first time since launch, there is a real portfolio. The iPhone is now available as five different variants with 10 different price points. Prices and options may vary by country, but I took the US portfolio as the baseline and illustrated it:

Including all the pricing options It’s a very regular pattern. It reminds me of the iPod which, at one time was sold at every $50 increment point from $50 to $500. The logic behind this pattern is that “there is now an iPhone for every budget”. Of course, as with any purchase decision, each of these price points has trade-offs. Considering product performance or in terms of option value, the buyer has many things to weigh.

To simplify, I divided the options into two subsets: Locked and Unlocked.

We can now see the premium for unlocking (or, the discount for losing the freedom to use the phone on another network, as the case may be). We can also compare unlocked prices to unlocked prices for competing products.

To assess it further, I combined the two charts above into one, superimposing the unlocked price onto the locked price.

In this last chart it becomes clear that buyers who purchase an unlocked phone are paying $450 more (the white areas), regardless of the phone’s spec (except for the 3GS where the difference is only $375). For locked phones, the $450 discount is, presumably, the value of the change of carrier (GSM only) option for a buyer.

But there is more to this picture. The unlocked price is also the price that Apple sells its product direct to consumers, many of which will be traded in secondary markets world-wide. Many will be sold in countries where Apple does not have distribution agreements with any operators. Because Apple needs to avoid channel conflict, they cannot price the unlocked product lower than they sell it to their channel. As a result, the unlocked price must be very nearly the price that operators themselves pay (excluding any volume discount).

We can actually confirm this because Apple publishes the average selling price (ASP) that Apple obtains from the iPhone. I made a line in the last chart at the price Apple got in the last quarter.  It falls very nearly around the mid-point in the portfolio (and thus assuming the mode equals the mean and median in the distribution of sales.)

There is one further implication in this. I think it’s a safe assumption that the ASP for the new portfolio will be largely unchanged. Although Apple introduced the lower price for the 3GS ($375), it also added a more expensive 64G option. The lowering of ASP with the 3GS may be offset by the additional high-end sales, especially early on.

  • http://twitter.com/twotribes Michael Burgstahler

    Presumably, the customers will never be aware of the price range of this portfolio as the availability of all these different options is buried beneath carrier’s crust.

    • http://www.asymco.com Horace Dediu

      Yes, it takes some digging to find out what options you really have. Note that this is not the case with the iPad or the iPod touch. This is the orifice effect at work.

    • Sergio

      Indeed, even here in Europe the new price tables are mind-boggling. This is Orange in the UK:

      http://shop.orange.co.uk/newiphone?WT.mc_id=ON_OUK_P_NEWiPhonePR_&WT.tsrc=Portal#pricepplans

      But Horace’s main point stand, your choice now is mostly a matter of how much you want to spend.

  • Anonymous

    I have a bit of a sidebar question. What benefit is there, in the US, of having an unlocked phone? Maybe Sprint will work with virtual operators and offer pre-paid plans? Otherwise, you still pay the same contract rate, so you’re actually stuck paying the unlocked price with no obvious benefit within this country.

    • El Aura

      Horace said once that the unlocked iPhone in the US serves as a semi-official channel for all countries without official iPhone distributors and generally as a channel for all kinds of tourists. (Plus the usual US-based frequent international traveller.)

      • steve crandall

        indeed – sadly we can’t get a cheaper rate that reflects the difference.

      • Anonymous

        I’ve never thought of what % of my monthly payment is due to paying back the price of the phone. If I’m covering $450 over 2 years, it’s $18.75 a month to “buy” the rest of the phone. So, $39.99 a month for voice and $25 for data+taxes, means that almost 30% of the total cost is to repay AT&T for the phone. Not rocket science, but I’ve never calculated it. And I guess the math is even more favorable if you a) hold onto your phone a lot longer, and b) add in the decreased likelihood of switching due to 2 year contracts. I’m curious if any of the execs have ever been asked about offering unlocked plans.

      • El Aura

        Actually it is even a bit more, AT&T is giving you a loan with the subsidy. Thus if you take out consumer loan of $450, repayable over 2 years, you pay a bit more than $450/24 per month because of the interest. I’d round the value up to $20/month.

      • http://www.asymco.com Horace Dediu

        Yes, that and the possibility of using the iPhone on prepaid plans in the US. At least those using AT&T’s network.

        But it is a very peculiar market.

      • Canucker

        In Canada we at least do have a choice of three major carriers (Rogers, Telus and Bell) along with some smaller subsidiaries and MVNOs since they have deprecated CDMA for GSM (thanks to the Vancouver Winter olympics…). Of note, though, the iPad 3G is unlocked worldwide (I think, unless you buy it directly from a network on subsidy) and you can buy 3G data as you go, month by month. Since data plans are where the profits lie for the networks and, correspondingly, account for the primary cost of a smartphone, its possible that some customers simply want to buy 3G access as they go – yes this month, no next – carry a dumb phone for voice and use WiFi for most of their smartphone access. It is a peculiar market and it’s a great pity that carriers do not offer more smorgasbord-like data plans specifically for unlocked phones like they do for iPads (of course, its is not in their interest – they crave lock-in and despise churn).

      • r.d

        Sadly none as there is no competition (T-mobile)
        so there is no incentive to offer ipad like data only
        prices nor even prepaid plan which is just 2G talk
        which expire within 30-60 days. International prices
        are virtual crime.
        Texting is $20.
        Can’t receive incoming calls without paying
        Gov. is taxing on these plans are humungous.
        Gov. has already made money of 3G spectrum
        thus price collusion will continue forever. not
        to talk about illegal wire-tapping and other crimes.

        So its a most expensive ipod that you can buy
        just to have GPS and better camera.

    • Rj

      The benefit is freedom; you can switch between Verizon, Sprint and AT&T whenever you wish rather than being locked in for 2 years. Also, prepaid or international SIMs will work if you like.

      • http://www.asymco.com Horace Dediu

        Actually and sadly, you can’t switch between the US carriers even with the unlocked iPhone 4S. In order to use a CDMA phone you need to activate it as such first. You can then roam using a SIM card but you can’t turn it into an AT&T phone without somehow de-activating the CDMA service (even this may not be possible).

        So if you initialize the phone to a GSM network, you can’t use it on a CDMA network.

        The other tragedy is that if you initialize it with Verizon you can’t switch to Sprint (I’m pretty sure of this but need to confirm).

        CDMA is and has always been a curse on the United States.

      • Rj

        Wow.

  • Anonymous

    It would be really great if we could see a comparison with the spread of other smartphones. Obviously it would be incomplete, but perhaps a histogram of android model prices from a single carrier?

  • El Aura

    While the US is the biggest market for Apple, in most other countries there is no fixed subsidised price, it varies from carrier to carrier and depends on which plan you choose and even on how good a customer in general you have been in the past. Thus, much more people start calculating the other way around, the start with unsubsidised price and then check how much subsidy the get from different carriers and for different plans.

  • poke

    So if Apple wanted to introduce a low-end prepaid phone (sub-$300) would their biggest problem be not upsetting operators who are purchasing the high-end phones? Presumably the only way to do it would be to lower margins.

    • http://www.asymco.com Horace Dediu

      It depends on the phone. The margin will depend on the cost as well as the price. Perhaps in another year it will be possible to price the 3GS below $300 without any effect on gross margin. Notice that the low end products are limited to 8G to keep costs down.

      • K Zeise

        Actually I believe that the 8GB limit on the lower end phones is intentional to protect margins for the top model. This keeps the portefolio non-overlapping, and the 4S as the choice for heavy users, while the extra margin from extra flash allows for high end components in the top model, sustaining its place as the best phone.
        The changes for the iPod touch would suggest that production cost have fallen by at least 30$ for each model, so margins on the larger models wil be rising, showing that there continues to be no real competition, and so allows Apple to continue with its 100$ steps for iOS memory expansion pricing.

    • Anonymous

      Depends on the hypothetical phone. If it’s too good then it will cannibalize 3GS or even iPhone-4 sales. If it’s too bad then it may reflect negatively on the brand.

      Compare this with the iPod market, where there were many different ways to differentiate the products without simply making one worse than the other.

  • http://www.sequence-omega.net Anthony

    “Although Apple introduced the lower price for the 3GS ($375), it also added a more expensive 64G option. The lowering of ASP with the 3GS may be offset by the additional high-end sales, especially early on.”

    Beyond the ASP, the margin on the 64GB model has to be huge. Apple is only adding an additional 32GB of flash memory to the device, which maybe costs Apple $1.25/GB. So an extra $40 in costs for an extra $100 in price. A marginal margin (hah!) of 60%. Not bad.

    • Walt French

      Presumably the extra flash mem carries no extra licensing fees on GSM, WCDMA, AAC, JPEG, etc. I don’t know what fraction of Apple’s revenues are eaten up by non-hardware costs, but if it’s significant enough, that 60% mightn’t be all that different from the margins they get on all other hardware. No?

      • http://www.sequence-omega.net Anthony

        I would guess that their margin after all costs (BOM, licensing, assembly, etc) would be around 50%, so that extra 10% of margin can help offset more of those lower margin 3GS sales.

    • Canucker

      Ironically, iCloud reduces the requirement for larger on-board storage as you can add and delete apps and media as you go from the device. Even iTunes Match doesn’t seen to add to the need as its really only caching recently listened songs but allows for a greater directory of songs to be available to you in the cloud. Would be interesting to see what the breakdown is in sales. My 3GS is 32GB and has always had spare capacity. My iPad is 64GB but I watch more movies on that. Think I’ll spring for a 32GB 4S next week (which seems odd to me – I always tended to max out memory).

      • Anonymous

        It’s the same for me, if they could offer me a 128GB I’d be interested, because that could hold effectively all my music, but 64 I’d be paying a big premium and still having to curate to get it to fit.

      • Anonymous

        Don’t forget the caps on broadband put by carriers. Lower storage capacity phones would need a lot of online activity to make Cloud meaningful.

  • Site7000

    You meant to say it’s the “median” versus the mean, not the “mode,” which remains an unknown.

    • Anonymous

      You seem to have missed the word ‘assuming’ in there.

      • Site7000

        But the median was known and was shown in his graph. Are you saying he wasn’t referring to the line he drew through the middle of his graph wasn’t meant to convey a mid-point (i.e. median)? Do you understand what “mode” means?

    • azulum

      median does not necessarily equal the listed prices, mode does (though bulk carrier purchasing may be discounted). i think horace is using mode because there is good evidence that 649 is the mode. the base iphone 4 is the best selling iphone.

  • http://deviceconvergence.wordpress.com Nalini Kumar Muppala

    “In this last chart it becomes clear that buyers who purchase a locked phone are paying $450 more… ”
    typo? unlocked phone?

  • http://twitter.com/Tom Tom

    You’re missing 2 price points, a $149 locked iPhone 4 16gb and a $199 locked iPhone 4 32gb, still available from Verizon (you just have to go to upgrade, not straight to iPhone 4S upgrade). This adds an ability to get 32gb of space for $100 less or 16gb for $50 less if you don’t care about Siri.

    • huxley

      Those aren’t really “missing” price points, those phones represent pre-announcement inventory, once Verizon has unloaded the ones in stock, that’s it.

  • SF

    Horace,

    Very much enjoy reading your analysis. Although I agree that there is now a substantial iPhone portfolio, I wonder how much impact this will have given that data plan rates remain roughly the same, even given the introduction of Sprint as an additional carrier. As you know, the cost of the phone is maybe 10% or less of the revenue the carrier receives from a two-year contract. I think it is these data rates that will slow the acceleration of the adoption of smartphones that you point out in your recent post on BlackBerry. The cheapest rate you could possibly get for the iPhone would be from AT&T for $55 (for 200 MB of data, no free text messages, and 450 minutes). All other rates are substantially higher.

    I’d be interested in hearing what you have to say about this. Will there ever be an authorized, official prepaid option for iPhones? Or how about a data-only plan priced between $15-30? (with VoIP as the substitution for traditional minutes)

    Again, I enjoy reading your work, please do keep it up.

    • http://www.asymco.com Horace Dediu

      Prepaid data plans will appear but not before the overall market is saturated. Right now the carriers are still growing by converting non-smart users to smart usage and from upgrading current smartphone users. This is why I pay attention to the comScore penetration data. My hypothesis is that when we reach over 50% penetration, the service plans will begin to come under pricing pressure. I think 2013 will be the year it happens.

  • http://twitter.com/judsontwit Judson

    Is it curious that with the new iPhone 4 rev. 2 model (world phone, but limited to 8GB), that the iPod touch 4, while not upgraded, is priced more sensibly for comparison ($99 contract for iPhone 4 8GB, $199 for iPod touch 4 unlocked with the same specs?)*

    [*Secretly it's made a little more cheaper with less RAM, but aside they're now even more equivalent than they were last year.]

    If the iPod touch line is not ended, perhaps the new pattern will be “new iPod touch at 8GB” = “this year’s n-1 8GB iPhone hardware for $199″. The touch will still be priced very nicely, even if the hardware was always slightly behind, so I hope this is just a repositioning of the touch, not the beginning of the decline.

    • Kizedek

      No, they are less equivalent than they were last year — I doubt there is an A5 in the iPod Touch. Apple’s website doesn’t mention which SoC is in the Touch, but I think they would mention it, or have made more of a big deal of the Touch at the iPhone event if they had changed that. Therefore, even if the RAM is bumped up to 1GB, there would be no Siri.

      Further, the camera is not the same — in fact, I don’t think it was up to the last iPhone 4 camera. It’s probably the same as the iPad camera.

      Third, there is no GPS chip.

      What they have done is bring the screen unlined with the iPhone 4, 4S.

      So while it is a great deal, it is no iPhone, which remains the flagship product for that size. device.

      • http://twitter.com/judsontwit Judson

        I mean, it is more equivalent to *last* year’s iPhone than it was before (sans the camera & GPS of course).

        Off contract, I think I’d say that the iPod touch *is* the flagship device at that price (if contracts aren’t your thing).

        For nearly half the price of the unlocked 3GS, you get a device that is far superior in nearly every aspect except the camera (although the iPod touch 4 can do 720p video while the 3GS can not, so that might be a toss up if you’re not a picture taker).

  • Nivlac

    i happen to see this pricing / product / value ranging as one of the latest innovations that apple has brought to the market with the 4s. That and the fact that this device device was arguably a “software” based upgrade – nothing remarkable from a hardware perspective.
    I marvel at apple’s ability to dictate pricing in th US market that is polarizing around a small army of Android devices.
    i have often thought that one of Apple’s great strengths has been their ability to garner significant market share with a small line-up of devices. I often assumed that this was a conscious decision to avoid the paradox of choice for the segment of the market that might consider buying an iPhone. We will have to see how this new proliferation is managed and received in the marketplace

    • Anonymous

      “this device device was arguably a “software” based upgrade – nothing remarkable from a hardware perspective.”

      I really have to take issue with this. The outward appearance didn’t change. But the internals changed a lot. Here is a partial list:

      •new antenna system that can reconfigure the antennas during a call
      •dual core processor and better GPU for overall faster operation
      •more sensitive camera with improved lens and more pixels, much faster operation
      •improved battery life

      These are the published specs. My experience with Apple products is that there are probably many more minor changes under the hood. Things I’d expect to see are better speakers, better connectivity via HDMI or VGA, better WiFi reception, etc. These things probably changed for the better but not dramatically so.

      You may not consider these to be stunning achievements but I don’t see how you can call this “nothing remarkable”.

      • jago

        I agree there’s significant hardware upgrades in the 4s, but I wouldn’t say battery life has improved. Specwise, it’s a wash: better 3G call time, worse standby and WiFi browsing.

      • http://twitter.com/judsontwit Judson

        Actually, considering that Apple revised their battery ratings for all of their product lines (Apple confirmed this somewhere I believe; note how the Macbook Pros went from 9hrs to 7hrs on each model in the last revision), perhaps the truth is that the 4S has better battery life all around, and the battery life of the original 4 isn’t as accurate as they claimed last year.

        Or, wait for anandtech’s ratings. Those are always very thorough.

      • Anonymous

        I don’t think that’s a re-rating, I think that’s a real change due to the hotter chips and GPUs in the newer devices.

      • http://twitter.com/judsontwit Judson

        From the new Macbook Pro page: “Apple is using a new, more rigorous battery test that measures the results you can expect in the real world…”

        http://www.apple.com/macbookpro/features.html

      • Canucker

        You forgot BlueTooth 4.0….. which allows a form of NFC. This could be a big deal.

    • Rj

      I find this perspective very odd.

      The CPU & GPU is substantially faster than the A4; that’s not a surprise, it was widely expected to be there but that doesn’t make it any less significant as an upgrade. Camera, radio and battery were all also called out as improved, which is… well it’s most of what’s inside an iPhone! I’d be very surprised if the chassis didn’t change too, in order to accommodate all of the other new internals.

      The only things that didn’t change are the screen specification and the the external form factor.

      We see this type of update all the time in Mac hardware; minor or no external design changes with substantial internal upgrades. It’s not like this is a novel behaviour in the mobile phone market, either. There are a proliferation of models but those that are successful are often fairly static during their life (think of the Razr) or seem to have quite modest updates. Wouldn’t substantial redesign like we saw with the 3GS/4 be the exception rather than the rule in mobile phone hardware?

      • deV

        Looking at a broader range of modern devices, there does not seem to be much continuity among generations of phones. The Galaxy S II is very different than the Galaxy S. The Nexus phones are all different. Droid isn’t even a specific manufacturer–it’s a Verizon trademark. The “Droid” series come in many different shapes and sizes. Phones like the Atrix that may soon see a sequel are generally quite different than their predecessors, updating the hardware as it becomes available, and not holding anything back.

  • James

    Horace, do you know if Apple has ever broken down iPhone sales on the basis of locked vs. unlocked (or has anyone else ever deduced this)? I can’t imagine that unlocked sales are that high – the price premium is insane, and considering that you still have to pay for service anyway, all you gain is the ability to switch carriers at your will.

    Still, though, with the introductions of the free 3GS and the 64 GB 4S, they now offer (locked) phones from $0 to $500 in nice $100 increments. This is definitely the “widest” that the product line has been so far.

    • http://www.asymco.com Horace Dediu

      There has never been such a breakdown. Almost all unlocked iPhones are sold outside the US where there is a very large market because buyers are used to paying a lot for a phone and not very much for service.

    • El Aura

      In most countries the monthly cost varies significantly depending on how much subsidy you want, the US is an anomaly in this regard. I bought my iPhone 4 with a subsidy of about $380. If I right now extend my contract by two years without getting a new phone, I would get about $15/month of discount, ie, over 24 months a savings of $360. So, it is pretty much a wash what you get. This is true in most countries, though the precise conditions vary and not all carriers offer these discounts or they might not offer them all-year around.

      By keeping the handset price after subsidy constant over all plans (offering the expensive handsets only with the more expensive plans) and carriers, the US carriers create the illusion that handset prices are what is advertised and more importantly that service prices are service prices (ie, don’t let people think that if they don’t get a new handset they should pay a lower service price).

      • Anonymous

        The US is indeed strange.  I have a good friend carrying around an iPhone 3G.  He is tight on cash and can’t afford the new model, but does not feel the 3Gs is enough of an upgrade to get for “free” with a new contract.  As a result, he continues to pay AT&T at his contract rate, even as a month-to-month subscriber.  AT&T did not lower his bill when the subsidy was fully repaid, and he cannot move the phone to another carrier because he will lose 3G connectivity.

  • BB

    You call the $450 discount the “value of the change of carrier option” but it can also be related to the value of using the device on a lower priced service plan. At the extreme, you could get value from an iPhone on a voice only plan and use data via WIFI. For those that have good access to WIFI at work, school, home, hotspots etc. this can be quite workable. This might save well over $1000 for a two year period. Another option is to use a lower tier data plan – one that is not designed to subsidize a device.

    The “unlocked” price is also the “no contract” price. When you consider the full service and hardware price over 2 or more years, a $99 phone can be much more expensive an a $549 phone. Note in places like Canada, the contract terms are typically 3 years vs 2.

  • Steve Weller

    Missing from all the iPhone 4S announcements: lower build cost. It’s a big feature for Apple, but one the consumer neither knows about nor cares about.

    • Canucker

      And related to that, economy of scale. The antenna design of the iPhone 4 required FoxConn to buy 30 or so specific manufacturing mills. While the 4S has an improved switching antenna, it looks to me as through the metal part is just as complex as the one in the iPhone4 but FoxConn doesn’t have to replace its milling devices. The precision engineering of the parts also required less refinement as the model was perfected over the past 18 months. Moreover, Apple’s desire to shift the launch nearer to the Holiday season to merge with the iPod event gave the suppliers ramp up time. All of which adds up to getting devices into more hands in a shorter time at the least cost.

      • Tony

        Did it merge with the iPod event? I don’t recall any new iPods being introduced. The Nano software was tweaked, but everything else stayed the same, right?

      • Canucker

        Well, there is no other iPod event and they did announce a White iPod Touch too and dropped prices. In other words, the changes to the iPod line were no longer significant enough to warrant a separate event. Merging or replacing – there will be no separate iPod event going forward.

  • http://twitter.com/grigs Jason Grigsby

    Horace,

    Do you have a chart that shows iPhone ASP over time? While there are more options now, this isn’t the first time that Apple has had previous models available for less money.

    More to the point, I haven’t seen any indication that these older models sell in substantial numbers. Have you? If Apple was selling a lot of them, wouldn’t they lower the ASP?

    I’m not sure why, but it seems like cheaper, older models of iPhone don’t sell the same way the lower end iPod versions did. I think there is something here about product positioning in the consumer’s mind. I’m not sure that the new lineup will fair better. I certainly hope so, but it remains to be seen.

    Thanks.

    • http://www.asymco.com Horace Dediu
      • http://twitter.com/grigs Jason Grigsby

        Thanks. I don’t know that I would have known to look there. I knew I had seen something like that before.

      • http://www.asymco.com Horace Dediu

        There’s actually an easier way. Click on the Explore Vendor Data in the rightmost column and that takes you to http://www.asymco.com/hire-me/vendor-bubbles/

        From there click on Apple Product Motion Chart tab at the bottom. Then select ASP for the vertical axis and time for the horizontal. Then click on the line chart tab at the top.

        That data is also maintained and downloadable as a Google spreadsheet.

      • ADVILL

        The question I think is what % 3GS is in the total? It seems that 3 GS can be again a big winner in the biggest part of the market, the one that receives a phone free in redemption points.

      • ADVILL

        Great article by the way….new in the site but is my home page now.

  • Pingback: iPhone price range shows carrier's costs

  • Pingback: Vexed Digital Acquires Future Platforms…in the News « V E X E D

  • Pingback: iPhone 4S supply chain explained: The winners and losers | 3dot5 -iPhone and iPad Apps and everything Apple

  • Pingback: iPhone 4S supply chain explained: The winners and losers | Apple World

  • Pingback: Apfelzone | Es gibt nun ein iPhone für jedes Budget

  • Pingback: iPhone 4S supply chain explained: The winners and losers - Gadgets | Tech Buzz Blog

  • Pingback: 赢家或是输家,让 iPhone 4S 的供货链来说明吧 - 苹果派

  • Anonymous

    The big problem with this analysis is that ios5 runs slowly on a 3GS something which is not mentioned – either that is through choice or ignorance of the fact. Why is this important -simply the idea that a 3gs running ios5 is a good choice for users when it clearly is not.

    • Anonymous

      Good point, I don´t have the answer my is no longer a 3GS but sound illogical that being the most popular model in Asia and still being in the market by Apple, perhaps another blogger can provide us more information in this interesting question.

      Rgds.

      • Anonymous

        If you want an Iphone plump for the 4 or 4s the 3gs is a false economy.

      • http://www.asymco.com Horace Dediu

        I use a 3GS with iOS 5 and it works fine for me.

    • kevin

      I have a 3GS running iOS 5 and it’s clearly no slower than it was running iOS 4. Some of Anandtech’s measurements say it is faster. 

      • Anonymous

        Anandtech – hmm the Iphone forums on Apple website paint a different picture. As I said buying the 3gs is a false economy the marginal cost of an ip4 is very small once you factor in the cost of the line rental.

      • kevin

        I agree with you that buying a new 3GS at this time is generally a poor move, as besides the obvious hardware differences, I am not sure it will support iOS 6 next year, and I can’t imagine it will support iOS 7 in 2013.  (My 3GS has been passed down to my 12 year old and is now just an iPod touch.)

        However, if you’re buying a 3GS as a replacement phone for your child/teen on a family plan on AT&T, then the delta cost is at most just the extra data plan ($15×24 = $360). (It could be $0 if your child is willing to replace the $15/month unlimited SMS plan with iMessage and other apps (TextFree, WhatsApp, FB, etc.)  Then even $99 or $199 is a significant cost difference, especially for some in this economy.

      • Anonymous

        The reasoning is OK in a ” US only” análisis, but 1 billion of indians and Chinese could die for one “outdated” 3GS unit there, as a matter of fact there has been a good business selling second hand units there.

        Rgds.

  • kevin

    Just another data point: CIRP (Consumer Intelligence Research Partners) is reporting that 23% of US iPhone 4S purchasers bought the highest-priced 64 GB version.  If accurate, that looks to be more than enough to balance the lower-price 3GS sales (which are AT&T only), so the ASP might not decrease by much for this quarter.

    The survey was from October (presumably Oct 14th) to Nov 10th, so it might be skewed due to early adopters.  Also, 30% of iPhone 4S purchasers upgraded from an iPhone 4. (The remainder upgraded from other iPhones, switched from other non-iPhone smartphones, upgraded from featurephones, or bought a phone for the first time.)

    For all US iPhone purchases (which also includes 3GS and 4 sales) in that period, 71% were previous iPhone owners, 18% switched from non-iPhones, and 11% bought their first smartphone (or phone).  45% terminated or broke their contract (and presumably paid the fee) to get an iPhone.

    • http://www.asymco.com Horace Dediu

      Good point. Early adopters are clearly valuable customers. So many older iPhone 4′s will have to find their way to new users, or will they be put away?