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How will iPhones 5S and 5C be priced?

The answer may lie in the way the iPad mini has been marketed. The pattern for iPhone pricing is pretty regular but that for the iPad shows a marked difference. The reason is, of course, that the iPad has already gone through a portfolio broadening. The following graphs tell the story.

Screen Shot 2013-08-12 at 8-12-11.30.09 AMScreen Shot 2013-08-12 at 8-12-11.49.19 AM

The only data in these graphs that is provided by Apple are the dashed purple lines. They represent the average selling prices (ASP[*]) for the two product lines. I added assumptions about product mix (shown in the lower set of graphs) and thus generated prices for each product variant at a given point in time shown as  line graphs.

If you look at the iPad, ignoring the legacy iPad 2 (which I presume sells mostly to educational institutions) the replacement of the iPad 3 was with a “bracketed” portfolio of the higher-priced iPad 4 and the lower-priced iPad mini. Note also that the mini reflects similar pricing to the legacy iPad 2.

My second assumption is therefore that the 5S and 5C will form a similar bracket as the new iPads did. I also assume that the iPhones 4 and 4S will be retired. This means that the 5C will take up the trajectory of the 4S while the 5S will take up the upper bracket around $650.

Screen Shot 2013-08-12 at 8-12-11.44.05 AM

The average pricing for the entire portfolio will depend on the mix. This is still highly speculative since we can’t predict how the end-user (operator) pricing will be set for the 5C. Aggressive promotion and new market growth might skew the 5C considerably. On the other hand, upgrade promotions might move the 5S in existing markets.

Notes:

  • These prices reflect blended average prices of all SKUs to the channel and do not necessarily reflect prices offered to end-users.
  • Gaurav B.

    If we assume that iPad mini was a response to 7 inch tablets (Nexus 7 and Kindle Fire being main competitors) launched few months ago (even though you have discussed before that new products are months in making), I am expecting iPhone 5C to be response for Nexus 4 which sells for $300 unlocked at 8GB variant. Assuming Nexus 4 makes little money for LG, adding 30% low end margin (same as iPad mini), starting price of 5C should be close to $400. Anything more, and Apple might as well have kept 4S around, which if 5C does not launch, will sell for $450 unlocked.

    • obarthelemy

      IIRC, the Nexus 7 2012 was at $200, and the iPad mini launched at $430. With a Nexus 4 at $300, that’d make the 5C 650 :-p

      I don’t think Apple can price themselves at 2x the competition w/ inferior specs (screen resolution in particular) anymore. Not sure the Nexus line is the baseline though, with its weird distribution channels.

      • Roman

        The iPad mini was launched at $329, Gaurav did not make a mistake there.

        And it is unlikely they will go to non-retina 4″ display on the 5C as this would introduce yet another new resolution to developers that would need to be supported, only to be replaced/eliminated again in a year..

      • retina

        It seems most unlikely to me because iOS 7 itself is designed pretty much exclusively for retina displays. The only non-retina device it runs on is the iPad mini, and I’m sure they wish they could drop support for that too.

      • anon_coward

        ipad mini resolution is higher than the iphone 5

        retina is a stupid marketing term that doesn’t really mean anything like cloud

      • retina

        The DPI isn’t higher, which is what retina was clearly introduced as meaning, so what is your point.

      • Walt French

        Hey, @anon, Jobs clearly defined “Retina™” as a display which, when the screen was viewed at its expected distance, a person with normal vision wouldn’t be able to distinguish individual pixels. Essentially, pixels some small number of arc-seconds apart. You can check it out the introduction on YouTube. (Sorry, no link as I’m working from recollection.)

        You don’t have to repeat somebody else’s deprecations without actually knowing what you’re saying.

        But at least you had the good sense to make an anonymous post!

      • Space Gorilla

        My non-retina iPad 2 also gets iOS 7. Just for the sake of accuracy here.

      • retina

        Thanks for the correction. Either way, I’m sure they wish they weren’t currently selling either.

      • Space Gorilla

        It seems obvious that any company would like to move forward as much as possible and decrease legacy support costs. Apple products are about trade offs, a new lower cost device will have a retina display if the proper price point can be hit and if an acceptable battery life can be maintained, and probably other factors as well. Older products will be retired as newer products fill those needs. Again, obvious. Apple has always been very good about older devices getting newer software, I typically use my Apple products with up to date software for many years.

      • retina

        Sure, I understand, not sure why you wrote this.

      • Space Gorilla

        I ‘wish’ I knew.

      • Shameer Mulji

        You make good points. I won’t be surprised if by this Fall next year, Apple will be selling only retina-capable iPhones & iPads.

      • handleym

        There appears to be zero value to improving the screen resolution of iPhone. If you’re going to claim otherwise, provide proof.

        I assume what you ACTUALLY mean is that iPhone doesn’t have a large screen. You’re welcome to imagine that the whole world is demanding, demanding I tell you, such larger screens, but I don’t believe this.

        The primary value of the really large screen is as a compromise solution for whom their “phone” is their one and only computing device. ie, the poor, a segment Apple is not interested in chasing.
        I suspect there is some demand among Apple’s target demo for something slightly larger than 4″. The question is: how large is that demand, and how much would it cost to serve it. (There is the obvious tooling and inventory costs, there’s also the question of how the screen is scaled.)

        But at the end of the day, I think you’re projecting. You desperately want Apple to be weak in this space, and so you latch onto a gap in the product line and claim it to be weakness. It’s not much different from claiming that Mercedes are weak because they don’t sell a consumer level flatbed truck.

      • obarthelemy

        Actually, large-screen smartphones are more expensive than small-screen smartphones. I don’t think they’re targetted at the poor, especially since they cost more than a small screen phone + cheap tablet. You want to think Apple is Elite, and Android is vulgum pecus, but that’s probably wrong.

        Indeed, I think “phablets” are targeted at people who use their smartphones as computing devices, ebook readers, video players, web browsers… and not mainly as phones. There’s really no comparison between working on a 4″ screen and a 6″ one. To give you an idea, it’s the same difference as between a 15″ and a 23″ monitor on the desktop. (21″ monitor would be 5.5″, for people with smaller hands and pockets than me).

      • Kizedek

        Now who’s being disingenuous? Obviously, the comparison is between the iPhone/iPad and a larger screen smartphone, not between large and small screen Androids. As you so often point out, you can get a large screen Android for sooo much less than an iPhone, why oh why doesn’t the iPhone have a larger screen.

        What’s sad, is that the emphasis on specs (large screens, stylus input, usb, sd cards, all the things you love to tout, etc.) make a larger screen Android the *obvious* solution for those who need a cheap and mobile primary computing device for developing their business — only to find that actual UI usability of iOS, plus the type, power and versatility of apps and development on iOS, might have served them better as a computing device.

      • obarthelemy

        The guy above is comparing large screens to small screens in general, erroneously (and arrogantly) stating that large screen devices are for poor people. I’m just contesting that.

        As for usability, magical apps, bla bla blah I keep hearing that, just never got any answer to the question I’ve been asking for months: what can you do on an iPhone that you can’t do on an Android ? There’s a guy who used a Note as is sole computing device for several months, not because he had to, but because he wanted to… Is there a similar story about an iPhone ?

        I’ve played around with my iBrother’s iThings. They’re very beautiful, but I’m stumped as to what they do that Android doesn’t.

      • Kizedek

        We get that you are stumped. It just doesn’t follow that hundreds of millions of satisfied users are equally stumped. They aren’t buying their iPhones and iPads for narcissistic or deluded reasons just because you are stumped and want to believe that.

      • Bananaj

        Serious media creation apps is one area where iOS is streets ahead AND getting further ahead. Example: music studio and synth apps. No comparison, seriously.

      • obarthelemy

        Agreed for music.

        I’ve been agreeing with that one for a while though… anything more mainstream ?

      • Bananaj

        5 out of this recent list of “10 excellent video apps” are iOS only:
        http://mashable.com/2013/06/05/video-edit-apps/

        vjay (live video mixing app) is another example, admittedly niche, but niches are where differentiation grows. Apple sees all their users as future content creators.

      • StevenDrost

        I think your reaching at the Note being used as the sole device. I barely use my computers, but if i want to log into my company email there is no way to do it on Android or IOS and a lot of people are in the same boat.

      • obarthelemy

        That’s a voluntary limit set by your IT dept. though. Android fully supports IMAP and Exchange Active Sync (and HTML…), so there’s no client-side technical reason for not being able to connect to email servers over IMAP, Exchange over EAS (mail, calendar, contacts), or Webmail gateways.

        I know plenty of users who can’t connect due to security policies or non-installation of the required server modules, but also plenty of users who do.

        There *is* a way, it’s just not implemented, or disallowed, in your case.

      • StevenDrost

        Of course, you could always do something similar on the IOS devices as well, but for the masses its not all that practical, YET.

      • obarthelemy

        Mmmm…. it’s just a matter of filling 3 fields in a form (username, password, server adress), specifying the protocol (IMAP or EAS), and checking the “use SSL” box. The built-in Android E-Mail client handles this, so no new app is even needed.

        I don’t see what’s not “practical for the masses” about it.

      • StevenDrost

        A larger screen is without a doubt better for reading, watching video and a lot of other functions, but your wrong about the demographics. Tablets are great, but who truly NEEDS one. Its a luxury item purchased by people with disposable income. If you have a tablet then you don’t need a phablet.

      • obarthelemy

        Sorry, I for one do need a phablet alongside my tablets:
        - my 13.3″ tablet is a pain to move and setup, so it’s a 4th screen to my computer, watching over emails, rss and IM. I can even quickly switch my BT keyboard over to it (Logitech have a line of multi-homed BT keyboards with a hardware switch)
        - my 10″ tablet is mostly busy at my desk as a drawing pad, and near my couch/bed as a video player. I only take it out from my home when I know I’ll be seating at a table (train, plane, café…)
        - my 7″ tablets are too big for one-handed use, and have mostly been downgraded to gaming machines and ebook readers, or as fallback devices when battery life is an issue (long trips)

        My phablet is the only device I can use one-handed, and that is small enough to never leave me: on the bus/metro, while shopping to check my list, while walking for music or quick communications… . I have plenty of tablets, I really need my phablet and use it more than all my tablets combined. I could downgrade to a stamp-sized screen, but why would I do that ? To use half a hand and half a pocket ? I’m already regretting not having a bigger phablet, such as the Sony Xperia Z Ultra (6.45″) or the Samsung Mega (6.3″, but with hardware buttons, so probably bigger in the end).

        My 7 inchers have been mostly obsoleted by my latest, 6.1″ phablet. The 10 and 13 inchers fill completely different needs and use cases, sorry, have completely different jobs to be done, mainly static ones.

      • Walt French

        When one is out and about, their phone is EXACTLY their “one and only” computing device.

        Visiting Seattle with a friend who just isn’t excited about getting her daily dose of the NYT on her iPhone…we had to find a store to get the Dead Trees Edition.

        As yet relatively few of us regularly run around with an iPad, even fewer carry a laptop when we’re hopping between parks, shops and museums, maybe taking a few minutes to catch up on the outside world. That is the very definition of mobile communications, and especially for those of us over 50, a large screen can be a plus.

        In lower-income areas, a single device is even MORE important, especially if the extra real estate doesn’t cost too much more. A few square inches of LCDs seem pretty cheap these days.

      • Kizedek

        When it comes to reading, agreed. I wouldn’t want to read something on a larger smartphone screen either. For reading webpages, books or travel information (maps, tourism, etc.), then I want my iPad mini with its 4:3 ratio, etc.. And I will carry that around, even on vacation, as I would a paperback book or travel guide.

        Handleym was speculating that the true value of a larger screen smartphone is as some kind of primary device that replaces the need for a tablet or laptop in every situation. I agree with him, that as a “computing” device, I would far rather have the pro apps and usability I enjoy on my iPhone, than a larger screen for the sake of it. Smaller screen is fine because it is more mobile, while well-designed apps are still usable.

      • Shameer Mulji

        Bingo!

      • Dave

        The Nexus 7 was $199 for the 8 GB model but the more expensive 16GB model was more popular.

        The iPad mini 16GB was $329.

        Definitively not 2x the price.

        But we all know you like to make things up to suit your bias.

        Isn’t there some great analytical site for android fans? Can you leave this place so people interested in business and tech strategy can converse.

        The majority of your post are OT. You rarely contribute anything positive to the conversations.

        Maybe one day you’ll get board of trolling?

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

      Products are years in the making. At a minimum one year, at a maximum about 4 years.

  • Lun Esex

    >”I also assume that the iPhones 4 and 4S will be retired.”

    What about the iPhone 5? Why would Apple keep it around if the high end is served by the 5S and the low end is served by the 5C, especially when the 5C would presumably have nearly identical internal specs? (Or would it have the internals of the 4S but the screen of the 5? That doesn’t quite feel right.)

    Could it be that the iPhone 5 to iPhone 5S transition is more along the lines of the iPad(3) to iPad(4) transition, where the iPad(3) was entirely retired after only 7 months on the market, instead of being kept around at a lower price point?

    The fact that an entirely new handset is being designed/released to presumably serve as a replacement for the two-generations-back model (the 4S) means there might not be any carryover of models at all this time, from my perspective.

    It’d be as if the iPad(4) was accompanied by a new low-end iPad model that was designed to directly replace the iPad 2 (the two-generations-back iPad). Since this didn’t happen, the iPad 2 was retained. It appears to be happening now with the iPhone, though.

    Another historical similarity would be the iPod mini to iPod nano transition. The brand new nano took over the entire lower segment of the iPod market, while the full-sized iPod was revised without keeping older full-size models around at a lower price point.

    Finally, it’s purely speculative, but if the rumors of a fingerprint sensor are true, I could imagine the “S” in “iPhone 5S” to stand for “Security,” this time, the way the “S” in the 3GS stood for “Speed,” and the “S” in 4S stood for “Siri.” This would certainly be topical considering the current concerns about the NSA’s activities.

    • obarthelemy

      Whether the 5 will be retired could be seen as the litmus test regarding 5S novelties: if the 5S is streets ahead, if might make sense to keep the older model. If the 5S is barely different, see iPad 3/4.

      I’m still curious about an iPhone nano. No rumors, so probably not going to materialize.

      As for “Security”, it should be a “P” then, for “power supply root disabled” :-p

      • Lun Esex

        I think a more likely determining factor is how dissimilar the iPhone 5 and 5C are. If the 5C has the same processor and screen as the iPhone 5 but with a plastic case there wouldn’t be enough differentiation to keep the iPhone 5 around.

        Currently the consumer differentiation between the 4, 4S, and 5 is quite clear. The 4S adds Siri and a faster processor. The 5 adds a larger screen, again a faster processor, and it’s slimmer and lighter.

        With the 5C having a similar sized screen and processor, as implied by the “5″ in the name, the main advantages to consumers that the 5 would have over the 5C would be that it’s thinner, and possibly marginally lighter. Would consumers pay an additional $100 or more for that? Additionally, the 5C will presumably have the benefit of being available in colors. Then, finally, the higher-end 5S will be available in the slim and light form factor, with the added benefit of whatever additional features it comes with.

      • Guy

        The 5S and 5C (assuming those are correct model names) won’t be the same other than a case. The lower cost phone will have a slower (but still capable) processor and less available storage. I’m thinking 2 models…a 16GB and a 32GB for the lower cost one and 32/64/128 for the higher cost one. probably differences in screen res and graphics too.

      • https://twitter.com/#!/azulum azulum

        I think screen res will stay the same for this generation. Battery life seems to be the thing to optimize for.

      • StevenDrost

        Battery life does seem to be the number one priority based on the improvements to OSX displayed at WWDC and the Macbook Air updates. But I’m not so sure they will ever release a larger phone. Instead they are probably looking at some type of expandable/convertible phone. Basically an Iphone which expands to become an IPad Mini. They could probably do it now, but the battery life, durability, screen resolution/resolutions would all pose problems to building a decent device.

      • https://twitter.com/#!/azulum azulum

        The problem with the expandable/convertible devices is that Apple hates moving parts. They are more complicated to engineer and manufacture and thus add expense while being more likely to break. It certainly does mark the crazy/cool checkbox, though.

        It’s also worth noting that a 16:9 4.85″ device would still have a screen that was less than half the area of the iPad mini. These are quite differentiated — there is room for such a device.

      • Lun Esex

        It’s not the internal differences between 5S and 5C that are being questioned, it’s the the internal differences between the 5C and the current iPhone 5.

      • https://twitter.com/#!/azulum azulum

        The 5C — same specs as the current 16GB iPod Touch.
        The 5 — sticks around another year.
        The 5s — gets A7, cameras with better low-light and slow-motion video, better battery life, rumors say that fingerprint scanner thing, and if I’m speculating, maybe on-device voice processing for certain Siri tasks.

        That’s more than enough differentiation if you ask me. I don’t think there will be a RAM boost, but I wouldn’t be surprised if it started at 32GB, and if so, the iPhone 5 only sticks in its 16GB form.

      • Lun Esex

        The current iPod Touch, from Oct 2012, has an A5, which was one generation behind the A6 in the iPhone 5 that was released one month before it.

        The iPhone 5S will presumably come with a new A7, so an iPhone 5C with an A5 would have a chip that’s two generations older.

        It’s uncharacteristic for Apple to release brand new products with chips that are two generations behind. They might still go ahead and do it, but I’m skeptical.

      • https://twitter.com/#!/azulum azulum

        It’s also uncharacteristic for Apple to release a brand new, lower cost phone. Going with a marginally less expensive chip that’s a year older may seem like a really cheap thing to do, but it makes a lot of sense when you look at it from all the angles:

        • The A5 is a known quantity that is readily available, potentially mitigating some the constraint on supply for their newer products that will use the A6 and A7 — like the iPhone 5/5S, new iPads with retina displays, maybe a 4k AppleTV with a screen attached.
        • The A5 is the first chip that seems like it will be good enough at driving iOS on a 1136 ? 640 or 1024 ? 768 screen for the next few iterations — especially since iOS 7 seems like a mature platform that is no longer making sacrifices based on silicon.
        • The A5 at the low end gives Apple more differentiation across the portfolio, giving a performance incentive to go for the 5/5S.
        • The A5 would be in their low end device even if they weren’t shifting strategy.

        That said, I welcome your skepticism. Such can make the world a better place.

      • Lun Esex

        Apple’s release of the iPhone 5C is a shift from a single-product line into a portfolio line, which they’ve done numerous times before: PowerBooks (single 15″ to 12″+15″+17″), MacBook Airs (13″ to 11″+13″), iPods (full-size/mini/nano/shuffle/touch), iPads (full-size/mini), iMacs (Luxo lamp iMac G4 gained multiple screen sizes), etc. In that respect it’s actually not at all unusual.

        The A5 was introduced with the iPhone 4S in late 2011, so it will be a two year old chip at the introduction of the iPhone 5C, not one year old.

        The most constrained chips will be the A7 in the iPhone 5S, and 5th generation iPad (as an A7X variant) to come later.

        Another consideration is that the body of the iPhone 5 is expensive to produce, with its various precision tolerances. As the iPhone 5S is presumed to use the same body, if Apple discontinued the iPhone 5 entirely then that entire production capacity could be switched to the 5S.

        In a larger view, it’s uncharacteristic for post-1996 Apple to keep previous generation products on sale at all when a new model of the same product is released. The iPhone is unusual in this. The 2nd and 4th generation iPod Touch were sold this way as well, but not the 1st and 3rd gen ones. Now they’ve discontinued the 8 GB 4th gen model in favor of a cut down 8 GB 5th gen model. The iPad 2 is still around, but that’s a bit of an odd case at this point. It entirely replaced the 1st gen iPad, and the 4th gen iPad entirely replaced the 3rd gen one. As the last remaining iOS device with a Dock connector, schools probably buy the iPad 2 for that almost as much as they buy it for its lower cost, due to their existing investments in Dock accessories.

        When the iPad 2 is finally discontinued, the iPad Mini might entirely take its place as the lower cost, entry-level iPad, with the full-sized iPad only sold as a single, current generation device like MacBooks and iMacs are.

      • https://twitter.com/#!/azulum azulum

        The A5 was introduced with the iPhone 4S in late 2011, so it will be a two year old chip at the introduction of the iPhone 5C, not one year old.

        I said a year older, not one year old.

        The most constrained chips will be the A7 in the iPhone 5S, and 5th generation iPad (as an A7X variant) to come later.

        Yep. Even so, the A6 could still be constrained if every device in the next generation used the chip. Apple has invested fab capacity in the A5, and that’s not just going to the AppleTV and the iPod Touch. I bet you 5 imaginary internet monies.

        Another consideration is that the body of the iPhone 5 is expensive to produce, with its various precision tolerances. As the iPhone 5S is presumed to use the same body, if Apple discontinued the iPhone 5 entirely then that entire production capacity could be switched to the 5S.

        The 5 is sticking around, if for no other reason than to tempt 5C buyers to spend a bit more.

        Now they’ve discontinued the 8 GB 4th gen model in favor of a cut down 8 GB 5th gen model.

        That’s 16GB. 8GB is dead. In fact, I believe this model is the base spec for all future iOS devices, including the 5C.

        When the iPad 2 is finally discontinued, the iPad Mini might entirely take its place as the lower cost, entry-level iPad, with the full-sized iPad only sold as a single, current generation device like MacBooks and iMacs are.

        Agreed. I see the lineup looking something like this heading into Christmas:

        iPods:
        $199 — 16GB iPod Touch sans camera with A5
        $299 — 32GB iPod Touch with A6 (maybe upgraded camera)
        $399 — 128GB iPod Touch with A6 (maybe upgraded camera)

        iPads mini:
        $299 — 16GB iPad mini with A5
        $399 — 16GB iPad mini with Retina and A6 (maybe A6X)
        $459 — 32GB LTE iPad mini with A5
        $479 — 32GB iPad mini with Retina and A6(X)
        $529 — 16GB LTE iPad mini with Retina and A6(X)
        $579 — 64GB iPad mini with Retina and A6(X)
        $629 — 32GB LTE iPad mini with Retina and A6(X)
        $729 — 64GB LTE iPad mini with Retina and A6(X)

        iPads:
        $499 — 32GB iPad with Retina and A7X
        $599 — 64GB iPad with Retina and A7X
        $629 — 32GB LTE iPad with Retina and A7X
        $699 — 128 iPad with Retina and A7X
        $729 — 64GB LTE iPad mini with Retina and A7X
        $829 — 128 iPad with Retina and A7X

        iPhones:
        $399 — 16GB iPhone 5C with A5
        $499 — 32GB iPhone 5C with A5
        $549 — 16GB iPhone 5 with A6
        $649 — 32GB iPhone 5 with A6
        $649 — 16GB iPhone 5S with A7
        $749 — 32GB iPhone 5S with A7
        $849 — 64GB iPhone 5S with A7

        There is certainly some speculation in the above predictions, but that seems to yield the widest range of price and performance. I think the 9.7″ iPad will start at 32GB on nothing more than a hunch — which made me want to lower the retina iPad mini $20. I’m just guessing here. Same with the 128GB iPod Touch which they may not do, but I think the classic finally disappears so they need a higher capacity. if that happens, maybe the $849 iPhone also gets 128GB.

        Whatever the case, I do think iPods (Touch) from $199, iPads (mini) from $299, iPhones from $399, iPads (original) from $499 are spot on.

        Addendum: Using the A5 in the lowest tier iPhone simply preserves the status quo, because this would have been the spot of the iPhone 4S.

        Also, many edits.

      • Lun Esex

        >I said a year older, not one year old.

        And I said that’d be a brand new product with a 2 year old chip, and that that’d be uncharacteristic for Apple. (And then you said… etc.)

        >Apple has invested fab capacity in the A5, and that’s not just going to the AppleTV and the iPod Touch.

        Well, no. If the 1st gen iPad Mini remains available then the A5 will still be in that, too.

        >The 5 is sticking around, if for no other reason than tempt 5C buyers to spend a bit more.

        They can do that with higher capacity versions of the 5C. It’d be just like how the iPad Mini came out in the same three capacities as the 4th gen iPad when they were both simultaneously released.

        >$299 — 32GB iPod Touch with A6 (maybe upgraded camera)
        >$399 — 128GB iPod Touch with A6 (maybe upgraded camera)

        You’re presuming an upgraded iPod Touch with an A6? And yet you say an A5 should be good enough for an iPhone 5C? That’s backwards.

        If anything can still make do with an A5, it’s the iPod Touch. Note that the 4th gen iPod Touch lasted for 2 years with an A4, from 2010 to 2012. The only thing the iPod Touch got at the end of 2011 was a white model, and that may be when the 8 GB model was dropped $30 in price to $199. I wouldn’t be surprised if the iPod Touch similarly got barely any revision this year.

        All iPods are a waning product line. Apple’s not going to throw A6 chips into them to hope to prop them up. This holiday season it’s going to be all about lower cost iPhones, most likely slightly cheaper 1st gen iPad Minis, and maybe an “iWatch.” :) Like 2011, iPods are going to be “back catalogue” items this year. Maybe they’ll put a camera back on the Nano, as the biggest real change.

        A 2nd gen iPad Mini would use an A6(X). Other than that, A6 chips will just be in iPhones. I say that could be in the 5C, with the iPhone 5 discontinued. You are saying with fervor that it will definitely be otherwise. Fine. We’ll see the outcome between my loosely held speculation and your firmly held belief in about a month. :)

        >Addendum: Using the A5 in the lowest tier iPhone simply preserves the status quo, because this would have been the spot of the iPhone 4S.

        …because Apple’s all about preserving a status quo? :)

        I thought that what the iPhone 5C is all about is being aggressive about marketshare.

        I foresee the iPhone 5C being Apple’s 2013 version of the iPod Mini to iPod Nano transition.

      • https://twitter.com/#!/azulum azulum

        The iPhone 5 continues — full stop. And it’s not fervor; it’s observation — like this that I wrote back in April. <—that’s a link, by the way.

        The intro devices for each category — the iPod Touch, the iPhone, the iPad mini — all will have the A5. I’ll bet you ten internet monies — and these things are worth their weight in gold!

        The iPod Touch was updated last year, but the 4th gen stuck around through May before it was replaced with the camera-less $229 version. That sticks around, for sure, but I’d like to see them drop the price $30 like the 4th gen did and upgrade the $299 one to the A6 because it’s a gaming device. And if they also upgrade the camera sensor to something more like the 4S than the 4, it becomes an even more capable point-and-shoot/camcorder replacement for people not on the market for a smartphone (a.k.a. John Siracusa). Even if they don’t upgrade the processor or the camera, a 128GB Touch makes sense. They might not touch the Touch, maybe there is too much else going on — but if they don’t, it’s a mistake.

        And Apple is all about preserving the status quo, when the status quo makes sense — for reach on the mid-low end, offering the status quo at a better price is the best bet.

        >Apple has invested fab capacity in the A5, and that’s not just going to the AppleTV and the iPod Touch.

        Well, no. If the 1st gen iPad Mini remains available then the A5 will still be in that, too.

        I guess I got the thread confused with another; I thought you were also advocating for the A6 in the current res iPad mini.

      • Lun Esex

        >The iPhone 5 continues — full stop. And it’s not fervor; it’s observation

        Uh, ok, sure.

      • StevenDrost

        I agree, on everything except the need to upgrade the IPod Touch to A6 and the price of the 5C. I would shoot for 350 to increase market share. They don’t need to go too low on the price as used models over the next few years would grab market share at even lower price points.

      • https://twitter.com/#!/azulum azulum

        A higher end iPod Touch (not differentiated in just memory, or now with just color) might tempt some to spend a little more for it over the base — great for portable gaming. Neglecting the iPod Touch every other year has never made sense to me, even though they’ve done it twice.

        As for the price of the 5C, Apple has a problem — a problem that merits examination. I’m working on a post about it that should be done soon. I agree that Apple want to go for marketshare, but should they devalue their products in the process? That said, $349 is actually the lowest I think they’ll go. Remember the iPad mini and its 8GB, $249 base model that never came to fruition? And then everybody was disappointed? And then the review came out about how it was the true iPad? And then sold like crazy? That’s something to keep in mind.

      • http://runningdigital.com/ David Hroncheck

        Regarding the iPad 3 to 4 part of the discussion, according to some expert opinions that I’ve read via iMore and Anandtech, the iPad3 had performance issues, namely the chip/GPU, and Apple wanted to get it out of production. Typed from an iPad 3, which I have no problems with.

      • marcoselmalo

        I’m getting (further) off topic, but I was under the impression that one of the reasons for the change was new port. I am seriously considering a refurb iPad3 (with the old dock connector) if prices drop after the new iPad comes out.

        So, the performance issues that you mention worry me. Can you give me any links or flesh out your comment?

      • https://twitter.com/#!/azulum azulum

        The A5X was really pushing the limits of what the Cortex A9 and the quad-core GPU could do, which meant that devs had to really optimize their code to keep up frame-rates.

      • marcoselmalo

        Thanks for the info! I’m less certain of what I’ll do now, maybe go with the iPad 4 refurb and just buy an adapter.

      • https://twitter.com/#!/azulum azulum

        Precisely. If the 3rd gen didn’t have issues, my guess is that the 4th gen would have waited to springtime with an iPad mini-like casing. Many of the issues in performance you may not have seen, because developers went through great lengths to hide them.

      • StevenDrost

        I think it was more about optimization. Keep in mind they updated all the IOS devices to incorporate the new lightning adapter. At the time the IPad 3rd gen was retired it was still the best tablet on the market according to any review/consumer report. In September 2012 you would have been required to have two separate chargers for two brand new devices which is sub-optimal. Also they by switching to the new A6X processor using 32nm tech, it put their best processor in the device which had been the trend and fixed the complaints of the device getting too hot which was major news shortly after the release of the 3rd gen. Had they not updated the IPad it would have been the lone product using the old 30 pin for 18 months, to speak nothing of the advantage of shifting product releases to be closer to the Christmas quarter.

    • KirkBurgess

      “What about the iPhone 5? Why would Apple keep it around if the high end is served by the 5S and the low end is served by the 5C, especially when the 5C would presumably have nearly identical internal specs? (Or would it have the internals of the 4S but the screen of the 5? That doesn’t quite feel right.)”

      Look to the iPod touch – similar dimensions and screen size to the iPhone 5, but A5 powered like the iPhone 4S (albeit a more optimised version of the A5).

    • davel

      I am curious what the hardware/software exclusions are for the 5C.

      I am assuming a $450 price.

  • obarthelemy

    2 Things re the 5C:

    1- $500 seems impossibly high for a midrange phone. A Galaxy S3 is $430-ish on Amazon.com and Newegg, and that’s still a rather high-end phone. A Galaxy S2 can be had for $260 on Amazon.com, and that’s still probably a superior product, specs-wise.

    2- I’d have gone the other way round, and tried to figure out costs, then applied a multiplier (probably x2 to x3, they take x3 on the 5). Hard to do w/o exact specs, but assuming non-retina, 8MP, 512MB, we can work backwards from the 5 which cost $200 to make (BOM+Mfg, no marketing/support/SGA), and shave at least $50 off that (5 RAM, 25 screen, 15 casing, …). If Apple keep the same multiplier, that $450. If they shave off more costs or lower the multiplier, all bets are off. I guess that’s mainly a marketing decision as to how low they can go specs-wise w/o ruining the brand, vs how low they need to go to limit iP5S cannibalization.

    • KirkBurgess

      The iPhone 4 & 4S already are priced from $400-$550 in the marketplace. Of course a new model priced in the same bracket will sell even better.

    • Janne Ojaniemi

      “A Galaxy S2 can be had for $260 on Amazon.com, and that’s still probably a superior product, specs-wise.”

      Specs do not matter, experience matters.

      • 1sthand

        Except when it comes to screen resolution? Certain specification are important, more so when Apple wants a consistent experience across all its devices.

      • Janne Ojaniemi

        Not necessarily. Increase in screen-resolution drives up cost, decreases battery-life while lowering performance. And at some point the benefits become meaningless. When Apple quadrupled the screen-resolution on the iPhone it gave tangible improvement in image quality. But as we can’t see individual pixels as it is, how much of a benefit would there be in image quality if Apple quadrupled the resolution again?

        Screen-resolution is quickly becoming another meaningless spec-sheet item. So we have FullHD 1080P dislpays in phones. Does that really make any sense? Would it be more beneficial to use lower-resolution screen instead, all things considered?

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

      You may want to take note of the note.

      • obarthelemy

        I took note of the note. On my Note.

        But I took less note of it than of the title. Was that wrong ?

    • http://www.noisetech-software.com/Home.html Steven Noyes

      “A Galaxy S2 can be had for $260 on Amazon.com, and that’s still probably a superior product, specs-wise.”

      Have you seen the displays on the GSII (and even he GSIII)? They are really really poor. Likeswise, each has a fairly low level of user experience (especially the GSII).

    • steven75

      Spec-wise? Apple has never been about spec list shoppers and never will be.

      Also you’re talking about a new Apple product that will get a full 2 years of software support vs a year old Android phone that will likely not see another major version.

      • obarthelemy

        Excuse while I go tell my 3 year old Nook Color that it should stop working and updating immediately.

        Also, Google has made good progress unlinking features from the underlying OS. Some low-level stuff (Trim….) is still version-dependent, other stuff (anything that is a separate app, or even new features like remote lock and wipe) is cross-version, going back to 2.2. The situation is not much worse than the cut-down iOS running on older devices… Actually, more honest.

      • Kizedek

        uh, “cut-down” is a separate issue, which also happens on Android, since there are lots of different hardware configurations out there.

        Buy a phone with the latest version of Android, but without a camera? Guess what, the OS is “cut down”. Genius.

      • obarthelemy

        I don’t get your point. I know of no phone w/o a camera. And no, only Apple releases cut down versions of their OS for older devices with no labeling (“OS7 Lite” ?) whatsoever and pretend it’s the true thing. They just keep harping on others’ fragmentation, very disingenuously.

      • Kizedek

        The point being, that an OS has a lot of capabilities developed on a wide variety of fronts that may or may not depend on some aspect of hardware.

        The 3GS does run the “true” iOS 6, just not each and every feature to the same capability of the iPhone 5. That is normal and understandable, and also occurs on Android…

        Unless you are saying, “Android” is more *honest* because a three-year old phone just won’t get the latest version, period.” Yes, I can see that. Just as many Android phones are not currently shipping with the latest version of Android.

        However, when an iPhone 3GS is upgraded to iOS 6 (and most of them are, as stats for iOS are extremely high and it only takes the click of a button), there is definite improvement and extended life. No, you clearly don’t get certain features, like Siri or Air, but that is clearly stated. You do get speed improvements, usability improvements, ability to run more recent apps, etc.

        You are just looking for things to criticize. Nice way to spin how the iPhone, such as the 3GS, is capable for far longer, a better-supported device for far longer, and with better resale value to boot. You keep asking for reasons why people spend more on iPhones, and there you have it. When it is mentioned you have to call it “dishonest”.

        I’ll tell you what’s dishonest, your need to believe and convince us that people are outright rejecting the iPhone because they are “honestly” seeking a system for which there are multiple vendors — rather, it sounds like subconsciously they are just cynically and pessimistically giving themselves an escape route to fall back on when they get dissatisfied with their current device. No, people get what they think they want at that moment and what they think will fill their needs. When they finally stumble on an iPhone, 99% don’t look back.

      • 1sthand

        A real concern in the days of Android 2.X. Nowadays, there is really no need to have the latest because Android has good backward compatibility for 4.X above. If you bought a flagship Android, it will work perfectly for 2 years and then some.
        If one is savvy enough to care about these things, then a Nexus phone or Google Edition phones from Samsung/HTC will take care of the issue.

    • http://policydiary.com/ John S. Wilson

      Not really. Look at the 3GS at the end of its life for comparison. Well into 2010 when it was fully subsidized and offered for free on contract, it was still garnering a price no lower than $450. Similar could be said for the iPhone 4 currently. Carriers are probably paying $400 while offering it fully subsidized. The same could be said here.

  • Chaka10

    A broadly distributed lower priced “5C” would not only potentially cannibalize 5 and 5S sales, but it would also compete with the resale market for those high-end iPhones. The essential economics that enable the carriers to launch accelerated upgrades is high residual value in used iPhones. The support for this has been very high international demand, driven by high prices (and high tariffs) for new phones outside the US (the same demand, unfortunately, that drives theft, as reported in a piece in Huffington Post). Does it make sense for Apple to sell a mid-line phone that potentially not only cannibalizes its high-end phone, but also competes directly with, and perhaps undermines, the resale market for its high-end phone?

    Has anyone wondered what the “C” stands for in 5C? Not C for cheap, surely? Perhaps C for China? Maybe a phone specific to the China Mobile TDS CDMA network?

    • KirkBurgess

      Does Apple actually care about resale market? On first thought I would think it would rather people simply spent $400 on a new iPhone instead.

      C could stand for lots of things (composite, colour, china, cheaper) but I like to think it will stand for Choke Chain, which apple is going to use to prevent oxygen to any competitors selling phones above $300.

      • Chaka10

        I think Apple does and should care, a lot. Resale value is an important part of the economics for the initial sales of iPhones. It matters that a “US subscriber who paid $199 for an iPhone 4 on a 2 year contract in 2010, can now sell it on eBay with prices during the first quarter of this year that range between $355 and $430 (for fixed price sales) and $280-300 (for auction sales).” That’s from a comment I posted in March, which means the prices are a bit dated, but Piper Jaffrey has subsequently conducted some studies, tracking resale prices from 3/15 onwards, which continue to support this analysis. It matters in my thinking about an upgrade to a 5S that I can sell my iPhone 5 for a good price….

      • questions

        How many people think like that, and how large is the resale market, and for how many people would lower resale value be a dealbreaker? These are all questions you need to ask after you decide that the resale value will be significantly damaged.

      • Chaka10

        I don’t think the 5C will be broadly distributed.

      • El Aura

        I’ve resold every single Apple device once I got a new one (and the number of devices I had is in the double-digits now), do the same with photographic equipment. People sell all kinds of stuff on Ebay and selling iPhones is one of the easiest things because everybody knows exactly what they are getting as the number of iPhone models is really small (once per year, six in total so far) that it is very easy to know the different models).
        The US is probably the worst market because of very limited availability of subsidy-free cell phone plans, because of this used iPhones are exported from the US.

    • anon_coward

      so? if apple doesn’t do it then samsung will. at this point you don’t really need a high end phone unless you really want one.

      i’m thinking of keeping my iphone 5 for 3-4 years

      • Chaka10

        … or instead you can sell it on eBay (simple as taking a few pics, completing the forms and waiting to get paid). See screen shots showing price trends between $715 and 802 for a VZ 32 gig and approx $35 more for an unlocked version. Then you can go get your new 5S.

      • https://twitter.com/#!/azulum azulum

        That’s a good proof of how Apple sells products at a hefty discount to their value, which is why the iPhone seldom goes on sale. Others seem to sell their devices at their value, which is why they get discounted over time — come to think of it, that’s probably a huge reason for the surfeit of devices released over the course year by competitors.

      • Chaka10

        The prices I gave above are a bit date. Reran it on eBay and it’s closer to $600. Still the same point.

      • roheyd

        I believe the C stands for Color.

      • Chaka10

        Gosh, I hope not. I can imagine the cries of “lack of innovation” already if Apple is so lost for ideas that color is worthwhile for a special model designation.

    • steven75

      iPad Mini hasn’t dropped iPad resale prices.

    • rationalchrist

      “What ruined Apple was not growth … They got very greedy … Instead of following the original trajectory of the original vision, which was to make the thing an appliance and get this out there to as many people as possible … they went for profits. They made outlandish profits for about four years. What this cost them was their future. What they should have been doing is making rational profits and going for market share.” – Steve Jobs

      Time for more market share.

    • Walt French

      “C” is rumored, cheap, or maybe compact.

      Conditions keep changing, but if a pending bifurcation of the iPhone lineup were to address the strongest selling point of the competition (as seems to have been the case for the iPad Mini), *I* would envision a larger-screen iPhone, not a lower-cost one.

      In the US, that is.

      In Europe, cost is a major issue, and in developing nations, it helps relegate Apple to 5%–10% market share. A lower-cost phone in those areas makes all the sense in the world, limited mostly by how it could hem in future Apple moves to put Siri and other high-end features into the phone. Apple *NEEDS* to keep the innovation engine running; incremental enhancements keep the engine running while you work out the Next Great Thing, but sure don’t seem like the main path for Apple Inc. over the next 5–10 years.

      If I ran the zoo, I’d only make a major push towards the lower-cost devices if I had a vision for how low-cost lines would work within an infrastructure featuring Siri or comparable differentiation on every phone; otherwise even tiny cost differences would favor the very-low-cost devices. And Siri is nowhere near ready for becoming a full OS, from what we see of her today.

      • Chaka10

        There are so many signs that I’m frankly surprised Apple watchers seem to be ignoring. It’s widely reported that China Mobile has been lagging China Unicom and China Telecom in 3G adoption, in part due to its being on the China home-grown TDS-CDMA. China Mobile is now actively working to launch its 4G TD-LTE network, reportedly this year. A deal with Apple in conjunction with that launch would give it a big boost, and a 5S that works on the 4G network plus a 5C that works only on the 3G TDS-CDMA network would make a lot of sense for both parties. See link to a report on the China Mobile 4G buildout.

        http://seekingalpha.com/article/1614622-china-mobile-readies-for-a-massive-4g-launch?source=yahoo

      • Walt French

        Well, yes.

        But, Apple would want to sell to Chinese who visit HongKong or the US, and so need GSM or some other standard. So while you could isolate the “C” phone by allowing it to ONLY work on the proprietary net, I don’t quite envision it.

        Apple’s CDMA phones also support GSM, to travel from the US to the civilized world, amirite?

      • Chaka10

        A China Mobile specific 5C would be in addition to the existing sales of iPhones into the China Unicom and China Telecom networks.

  • Pingback: 10 Things You Need To Know This Morning In Tech | Digital Wealth

  • redoak

    Competition has become more fierce. Companies with 5% of Apple’s resources are able to use off the shelf components and easily produce products that offer 80% of the the features of the iPhone. It is very concerning. I think its the primary reason for Apple’s collapsing market share in China.

    I don’t think taking 4S specs and putting them in color casing at $449 is going to be an effective response.

    • http://runningdigital.com/ David Hroncheck

      But competitive mobile products don’t integrate with Apple’s ecosystem, only iOS devices do. An alternative mobile device means you don’t get full admission to Apple’s synergies. I’d rather pay more for a lesser spec’d iOS than an alternative with stratospheric benchmarks and scores of megapixels camera, all because of Apple ecosystem value-adds.

      • obarthelemy

        Which value-adds ? The opportunity to spend money on apps and content that you’ll never,ever be able to use on anything but Apple hardware ?

      • http://runningdigital.com/ David Hroncheck

        As it stands, Apple’s ecosystem offers the biggest, most varied, highest quality app market, as well as the biggest, most varied, highest quality 3rd party hardware market. There isn’t much you can’t do within Apple’s garden, but the added value of features like AirPlay are worth it alone. I’m happy to pay now for that which I used to avoid paying for when I was deep in Android for four years before switching.

      • 1sthand

        Well, Android was really a bit shite 4 years ago. Then just a lil’ crap 2 years ago. If there is anytime to be using Android, it is right now, from now on.

      • tmay

        Just thought that I would mention that more and more apps are mac and iOS, which is actually kind of a big deal. On the desktop, Chrome gets the prime real estate; Kindle not so much. Makes be wonder when Google is going to kick Kindle to the curb as the insurance policy is no longer needed and provide Chrome OS on mobile, where they can keep more lucre.

      • anon_coward

        in the 1980′s when home video first became big you needed a special device called a VCR to play movies
        in the late 1990′s that turned into a DVD player
        same with music, you have always needed a special device to play recorded music
        google play content is locked down to OHA certified android devices. not like i can play google play content on a windows phone

        how is apple any worse?

      • obarthelemy

        Single supplier. And an expensive one at that.

        If you buy a movie for your kids on the iTunes store, it means you *must* have Apple TVs, iPhones, iPad and iPods to watch them. (The one exception is desktop/laptops which can also be running Windows). That’s an expensive proposition, given that iStuff is routinely priced at 50-100% above branded Android wares, and 3-5x unbranded ones. That bites when it means your all your kids’ phones and tablets *must* be iDevices.

        On the Android side, any device from any supplier can access your apps and content. (as long as your device supports the PlayStore which is almost all of them by now, even my parents’ $50 Android desktop does). That means you can get one of those “good not great” $200 phones and $100 tablets to start of with.

      • Space Gorilla

        iOS apps work on iOS devices while Android apps work on Android devices. Brilliant analysis! Well done! Not so fast with the content argument though, Apple content is very interoperable since it is based on standards. The only exception I can think of is the multi touch .ibooks format but that’s more like an app. Normal books are epub, a standard which I can use on any device that supports epub.

      • anon_coward

        yeah, but android is open. i can only only buy an iphone from apple, but android is open because i can buy almost the exact same device with the almost exact same GUI from 5 different manufacturers. most of whom are about to go out of business

      • Space Gorilla

        And open always wins, that’s why we’re all using Linux desktops and laptops right now :)

      • obarthelemy

        Funny how you guys started in on “open”. I was talking about “multi-vendors”. Need me to explain the difference ?

      • Space Gorilla

        Sure. Why not? That should be fun.

      • 1sthand

        Playing the snarky game? Then that is probably why we are all using Mac computers as well then… @_@

      • Space Gorilla

        Sarcasm, not snark. The whole open thing drives me nuts. We all use many closed systems in all areas of our lives, all the time, and we don’t say a word about any of those highly regulated systems. But when it comes to computers, look out! Open! Evil closed! Blah blah blah! Humans are such hypocrites.

      • anon_coward

        i haven’t seen any open ecosystem in the computer world either.

      • obarthelemy

        Give one example of a non-Apple device that can use Apple’s “very interoperable” ebooks and videos ? (Wintel PCs aside, and without hacking of course).

        To make the point very clear:

        - iTunes ebooks and videos and apps can be accessed by: Apple devices (all premium)
        - PlayStore ebooks and videos and apps can be accessed by devices from Samsung, LG, Sony, Motorola, Ainol, Huawei, ZTE, Huyndai, Archos, Asus, HTC, Toshiba, Viewsonic, Wiko, Acer, Lenovo, Pantech… (in no particular order, cover from premium to very cheap, via good and OK).

        Got it now ? This means when one particular supplier doesn’t make the device that fits your needs and wants, you get to pick another supplier. especially when you don’t want premium, but want cheap, or “featureful”.

      • Space Gorilla

        You’re conflating two separate ideas here, apps and content formats are not the same thing. epub books can be read on all the devices you listed. So that’s not just one example of a non-Apple device that can use Apple’s ebooks (as you requested), it’s many, many examples. You are correct about the apps, but you are incorrect about the content. This is very simple.

      • obarthelemy

        indeed, it’s a bit sad that dumb content and intelligent apps are locked into the iTunes platform in the same way.

        So you’re saying ebooks, and videos bought on the iTunes store can be read as-is on non-Apple devices ?

      • Space Gorilla

        Of course. They’re standard formats. I do this. Aside from the odd .ibooks file, all my content from iTunes is in standard formats supported by a wide range of device manufacturers. I don’t buy for a second that you didn’t already know this.

        The exception would be the Kindle obviously, I’d have to convert my epubs to the mobi format, and while that isn’t hard it’s not ‘as is’ re: the file.

      • obarthelemy

        are there instructions on how to do that you could link to ? I just asked my iBrother, and he says he can’t do it for me ?

      • Space Gorilla

        What?!? The Great and Powerful Android User doesn’t know how to manage content files? Kinda funny that you’re willing to seem less intelligent in order to perpetuate a lie. Cognitive dissonance for the win!

      • obarthelemy

        So, no link because you’ve been lying, i guess ?

      • Space Gorilla

        Sure, let’s go with that. What a maroon.

      • Space Gorilla

        I should add that it depends on how you want to define ‘as is’. Can you sync an Android device directly to iTunes. No. Is it extremely easy to manage your iTunes content so that you can use it anywhere you like, including Android devices? Yes. Music and books require almost no effort. Videos do require a tiny bit of effort. As I said, I do this, there’s no lock in with iTunes. In fact I prefer it because it’s so easy to move content around.

      • obarthelemy

        No. Videos and books require DRM-breaking, which is illegal in many countries (and a breach of contract in all countries), and neither transparent nor doable for many users.

      • Space Gorilla

        Gasp! (wait, let me edit that, you’re from France right?) Le gasp!

      • Guy

        Dumb content is locked because that’s the only way Apple is allowed to sell it. DRM is not there by Apple’s choice but by the content copyright holder. No DRM in music in iTunes and you can play anything with any device (that is capable of using AAC formated files…also not owned by Apple) or even convert it within iTunes to an MP3.

        Applications are different. Can I use an Android app on my iPhone? How about a Windows phone or one that has a Linux core? Damn Google for locking those apps to Android devices!

        eBooks and videos are subject to DRM as specified under contract by the copyrights holders. That isn’t in the hands of Apple, Amazon, or Google to change.

      • Space Gorilla

        Video is a bit of work, but epub files are super easy to manage across whatever devices you like. And as you say, the music is plug and play.

      • obarthelemy

        But that other guy is saying content isn’t locked ???

        That’s my point though: iTunes content is locked to ONE vendor, PlayStore content is locked to A LOT OF THEM.

      • Space Gorilla

        Locked only in the sense that you can’t simply sync iTunes with an Android device. But come now, this is a trivial problem for any Android user. It is only the drooling know-nothing iPhone users that couldn’t easily move their content around.

        Music isn’t locked, at all. That is actually as simple as syncing your Android device. Books are barely locked (actually many aren’t at all, but let’s just say they are lightly locked). Videos are the most locked. But all of it is very easy to move from device to device.

      • El Aura

        You put it very well, Android users are very much used to moving stuff manually around.

      • Space Gorilla

        You don’t even have to do it manually if you don’t want to, at least mostly not. There are all sorts of apps that can help users manage their content. It’s so easy that I don’t consider any iTunes content to be ‘locked’, and the music files actually are not locked.

      • El Aura

        It’s the users decision from which vendor they get content. If they choose the iTunes store, they accept the trade-off of convenience vs. versatility.

        And the only relevant iTunes content that is DRM’ed is movies/TV shows. I don’t see why how one can make a general argument out of one product category.

      • obarthelemy

        Aren’t ebooks DRMed too ?
        Actually, as far as I know only Music isn’t DRmed.
        And the point is valid for apps too: the moment you switch away from Apple, you lose all your apps, while in the Android ecosystem you do have the possibility to switch away from one hardware maker to another Android one, and keep your apps, and videos, and books.

      • El Aura

        Yeah, but there is no reason at all to buy books from the iBook store, they don’t have better prices, or better selection, or better reading apps, or better syncing (not that they are much worse). Being able to pay via the same AppleID with which you buy apps is about the only advantage but then most people have an account with Amazon.

        It’s bit like saying Macs are expensive because if you get extra RAM from Apple you pay significantly more. It’s true but it is just not relevant because there is very little to entice you to go that route.

      • 1sthand

        Why switch here and there when you can just use the best !?
        Life is too short thinking about these things. Trust Apple to keep up the good work. In the meantime, concentrate on important stuff such as keeping up the career in order to have the dosh to keep buying the best.

      • StevenDrost

        Now your just getting silly. Criticize Apple for not supporting any other OS, but compliment Android for it.

      • 1sthand

        You can use an Android app on many types of phones from many manufacturers. Not a major advantage for most but for some it is.

      • Guy

        I understand that, but apps are tied to the OS. The only difference is how many companies make the devices. They aren’t any more or less locked down than apps for other devices.

      • anon_coward

        can i play google play content on a Windows Phone samsung or HTC phone? No?

      • 1sthand

        You can on a Samsung Android and HTC Android phone though? Why would you wanna use WP anyway? yucks…..

      • anon_coward

        which locks me into the android ecosystem and into android which is not really open

        so why not just buy movies from itunes which has a better selection than google play and is generally cheaper? all my ebooks are bought for kindle which is a lot more open than google play books.

      • ril

        iTunes store music, at least, is sold in a crossplatform AAC format.

      • http://policydiary.com/ John S. Wilson

        Pretty sure anyone with half a brain understands that Apple controls hardware and software. It’s an advantage, not a detriment. And even when Apple users have the choice of competing services they still choose iTunes for video and music more than anything else.

      • davel

        @obarthelemy:disqus

        You keep repeating yourself. Android stuff works on Android. The fact that many companies produce hardware for Android means you have multiple choices of hardware to run some flavor of Android. This is fine. I don’t know the particulars of PlayStore eBooks, videos, etc – I won’t discuss apps because well it is an Android app. Can you move this content easily to another platform say Windows, MacOS, iOS, Unix and play them easily? If so please say that.

        The fact that there is one vendor of hardware for iOS is a given. Everyone in the world knows this. Some value this and others hate it.

      • StevenDrost

        Music on Google services is only 18 months old. Choosing a platform for your digital content is a fairly big commitment. With a DVD or CD you physically own your content, with ITunes of Play your trusting Apple or Google to honor your purchases and support new tech as it emerges. With Apple its a sure thing with Google I’m a little less sure with Microsoft NO WAY, they have abandoned one too many platforms for my taste. FYI, its easy to download ITunes content, convert the file format and load onto Android devices.

      • StevenDrost

        You make it seem that Apples ultimate goal is to get everyone hooked on their content and then jack up their prices. Lets be real here, these products are priced reasonably. When you factor in the continued software support and services which come with the devices and the far longer life spans, then the premium does not seem that bad. The problem with purchasing “good” or “O.K.” devices is that most of us have multiple devices to choose from and your “good” phone might not be good enough to keep you from switching to a laptop for serious usage.

      • http://policydiary.com/ John S. Wilson

        Yet iBooks market share grew 100% year over year and now stands at 20% of the entire ebook market. Just because you don’t believe it to be a worthwhile platform doesn’t mean that it is not. (Source: http://paidcontent.org/2013/06/12/apple-we-have-20-percent-of-the-u-s-ebook-market/)

      • DarwinPhish

        I can understand that there is no perceived value-add for yourself. What I can not understand is how someone who pays any sort of attention to the market can not acknowledge there are value-adds for others.

        100′s of millions of people have bought iPhones and in probably every case, the buyer was faced with a choice between an iPhone and a less expensive or higher spec’d competitive device. All of these users chose the iPhone despite this. To deny the existence of any value-add means you assume all of these buyers are irrational or are somehow fooled.

        In other words, you do not need to know what they are to know that they exist.

      • Space Gorilla

        You know, your involvement in these comments makes me imagine a site that posts analysis of global weather patterns, and there’s lots of intelligent discussion and comments about various factors impacting the weather, but then you keep chiming in with “The analysis here is flawed because the earth is clearly flat.”

      • 1sthand

        Now now… play nice. We are all entitled to our own preference. What you think adds value might not be the same as David Hroncheck.

      • redoak

        I agree, it is still a core competitive advantage for Apple. A very meaningful one. But almost every popular iOS app is now on Android. And, Google Play has accelerated the build-out of other content offerings e.g. music

        There is a real scenario developing of Apple perpetually having a 10-15% unit share world-wide. And if it does, what does that mean to the long term strength of the company

      • 1sthand

        Maybe similar to what is happening on Mac VS PC. Only time will tell, who knows.

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  • peter

    I can certainly see the logic by which you would end up at a $500 price (Horace’s analysis is very clever). However, I would think that $450+ for the ‘cheap’ iPhone is quite steep.

    If you start the calculation on the other end with the iPod Touch (the de-phoned iPhone) then you could end up with a lower price point. The latest iPod Touch (A5, 16 GB and 4″ retina screen) sells for $229. What is a reasonable premium for the mobile phone ‘feature’?

    If Apple believes that they can life with a $170 premium (which is nothing to sneeze at), then at $399 they have a very attractive offering. It is still quite a bit higher than the $249-299 that a less fortunate manufacturer might be able to charge for somewhat comparable hardware.

    If Apple believe that they ‘need’ a $270 premium over the iPod Touch then they may well behave like a prisoner of the iPhone’s high margins; something which would leave a dangerous price umbrella and would not bode well.

    • obarthelemy

      I’ve been looking at price differentials within the iPod line to try and get a feel for what Apple think is a significant enough difference to avoid cannibalization while still registering. The comparison is probably not valid because the iPods vary significantly in form factor, whereas the 5C and 5S don’t seem to. But: an iPod nano is only $100 cheaper than a Touch. that’s very low, basically the price of 16GB extra Flash, for a vastly mor epowerful and versatile (though bigger) device.

    • El Aura

      The $450 to $500 is the ASP, not the price of the entry-level model. This might easily be priced at $400, with higher storage options and accessories driving the average price up.

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  • Gaurav B.

    Thinking a little bit more, we are assuming that the cheaper iPhone is being hired only on the basis of cost. While that might be true for non-US countries (where most of the phones are being sold unsubsidized), I am having hard time Apple doing this.
    If the jobs to be done for 5C is same as 5S, there is no reason to pay premium for 5S, other than aesthetics. This will enable new customers, but at the same time cannibalize the existing customer base, with much less margin. iPad mini is a classic example of this case study.
    Secondly, what we have heard so far, we are not seeing any technological break through. When iPod mini was launched, it was sold at different price point but had different job – more portable, at the cost of less capable – storage capacity in this case. Underlying motivation was use of smaller HDD. We saw the same transition to iPod nano when flash was underlying technology.
    My point is 5C can not be sold purely on the same jobs to be done at same price point, if apple still wants iPhone to be leading contributor to margins. I am guessing this is what Tim Cook meant when he denied iPhone portfolio since they didn’t have a value proposition for alternate model.
    5C has to be quite a bit better in dimensions more than just price – portability (much thinner and lighter compared to 4S by using lighter & cheaper materials), enabling new scenarios (wear on wrist anyone?) or better integration with another apple accessory – iWatch may be. Price is what will end up being what the material cost is + apple margin.

    • obarthelemy

      I’m guessing the 5S will probably retain a better camera, bigger storage (32GB max for the 5C, if that), probably a better CPU/GPU, the thumbprint unlock, maybe a better screen, maybe NFC ? Those are significant features for many customers. I mean, these innovations have a direct impact on the jobs to be done for a sizeable segment of the target market.

      The battery is already a sore point for the 5, so I’m guessing even the 5C (and even more the 5S) will have to do better: no phone can’t last less than a day.

      As for looks and bulk, the 5Cs we’ve seen to look very common (and slippery ?), and a fair bit thicker ? There’s certainly no way to confuse them with 5s. Well, maybe once the 5 is in a silicone sleeve…

      • hmm

        “The battery is already a sore point for the 5, so I’m guessing even the 5C (and even more the 5S) will have to do better: no phone can’t last less than a day.”

        http://www.anandtech.com/show/6330/the-iphone-5-review/13 hmm

      • obarthelemy

        Well maybe my brother got a bad one. He’s always complaining that his doesn’t last a day.

      • Space Gorilla

        Ah, so you know one person who tells you his iPhone doesn’t last a day, and in your mind that means the “battery is already a sore point for the 5″. This is exactly what I’m talking about, you post nonsense like this, all… the… time.

      • http://policydiary.com/ John S. Wilson

        I agree that Apple has to clearly distinguish between models. However it doesn’t make sense to limit the memory to 32GB. Memory is a very profitable enterprise for them. It would make more sense to start the memory options at 32GB and go up to 128GB for the 5S. That way Apple still has a profitable path for upgrades in the 5S, while also maintaining a profitable path for the 5C (i.e., 16GB, 32GB, and 64GB).

        NFC isn’t coming. AirDrop proves that. But better camera, fingerprint sensor, souped up Passbook, iTunes Radio, and iOS in the car are very fascinating.

      • Shameer Mulji

        “……..souped up Passbook, iTunes Radio, and iOS in the car are very fascinating.”

        These are iOS 7 related. They will work on both the 5C & 5S.

      • http://policydiary.com/ John S. Wilson

        That’s accurate. However I don’t think the fingerprint sensor will come to the 5C.

      • Shameer Mulji

        Agreed.

      • http://www.noisetech-software.com/Home.html Steven Noyes

        “The battery is already a sore point for the 5, so I’m guessing even the 5C (and even more the 5S) will have to do better: no phone can’t last less than a day.”

        I get 2 days on typical to heavy use.

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  • willo

    Don´t forget Apple introduced iTunes Radio subsidized with ads in IOS7…. That might be a peak into what 5C will bring. Slice another $200 off for advertisement subsidizes and what you are left with is a highly capable phone for $199 that shows Ads the lock-screen.

    • Asad Quraishi

      That would be foolish. I don’t see it happening.

  • Walt French

    Just a “thank you; job well done” for the revealing and immediately-understandable pricing/share charts. Because their story is so clear, they really drive the analysis.

    Which came first? The price lines or the assumption that the 5C would be the analog of the iPad Mini?

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

      Price lines came first. I was not even thinking about the 5C while doing the usual allocation of margin to the product lines. I just put the iPhone and iPad lines side by side and saw the pattern.

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  • Ryan Jones

    I have an idea for alternate presentation of this data, does Horace still publish docs with the dataset?

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  • mint_cloud

    I think previous iPhone models’ prices are a bit above of what you can find in the market..are they referred to “brand new” iPhones? I don’t get how an iPhone 4 could be sold at 450$ right now..

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

      The ASP for all iPhones is a given. If you reduce the ASP for the 4 then you have to either increase the ASP for the 4S and/or 5 or reduce the percent of iPhones 4 in the mix. You also have to account for margins and hence the cost of production which fits the reported data. In other words, if you reduce the ASP for the 4 you also have to adjust the overall margins upward for the 4S and 5 assuming the cost of building the 4 did not drop dramatically.

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  • Mikko

    I think I remember reading your analysis earlier regarding possibly CapEx and cost of manufacturing iPhone 4 and 4S. I think it was something along the lines that compared to iPhone 5 the manufacturing costs of those older models were higher and the sooner Apple gets “rid” of those models the better it is. Could you take a look at this again now that it seems that Apple is dropping both of those models this year (instead of just iPhone 4) from line-up and starting to sell iPhone 5C instead.

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  • Bill Haynes

    A thought: Apple’s relentless increase in iphone sales stalled at almost exactly the same time it ‘retired’ the iphone 3GS (which sold at $375) and replaced it with the iphone 4 (selling at $450). Seems to me that the 5C will be priced at $375 or lower. Intriguingly, the 3GS at $375 did not seem to cannibalize the 4 or 4S – probably because the features and design of the 4′s were superior. So I predict the 5C will be slightly heavier, slightly thicker, worse camera, and lack finger print recognition, and sell for $350 or so.

    • obarthelemy

      I concur. Slower CPU and RAM/Flash too probably. My one unanswered question is the screen: size, resolution, and quality. It’s a large part of costs, drives the need for battery and GPU or even CPU…

    • Asad Quraishi

      I agree with you on the more modest specs but don’t think it will be heavier – thicker maybe if that’s what it takes to make the plastic shell equally strong. $349-399 for an 8GB seems right.

  • Chaka10

    The stars seem to be so clearly aligning for a China Mobile announcement. This is pure speculation, but:

    1. Tim Cook was in China 2 weeks ago, right after a high level government meeting presided by Premier Li Keqiang on July 12, 2013 covering telecoms buildout plans.

    2. China Mobile is reported, as recently as in a 7/30 article by China Daily (the government newspaper), to be preparing to launch 4G on the domestic TDD LTE standard as early as September (http://www.chinadaily.com.cn/business/chinadata/2013-07/30/content_16852019_2.htm).

    3. The Apple iPhone event is reportedly scheduled for 9/10

    4. Samsung announced late last week that it will sell a dual band S4 that will work on China Mobile’s 4G network (http://www.computerworld.com/s/article/9241279/Samsung_readies_dual_mode_4G_LTE_phones_for_China).

    Incredibly, I haven’t seen any reporting or even chatter in the blogosphere. But to me, these are all clear signs that Apple may announce a deal with China Mobile soon, maybe even at the rumored 9/10 iPhone event. As previously posted, I think it would make sense for Apple to launch a dual band 5S that works on China Mobile’s 4 G network and a 5C that is specific to China Mobile’s 3G TD-SCDMA network (surely “C” is not for “cheap” or “color”?).

  • http://www.robertauguste.me/ RAuguste

    Took a different approach. I was inspired by the Phillip Elmer Dewitt article on VAT and tariffs on the iPhone. So I looked at tariffs of the BRICS, carrier subsidies, and then took some COGS estimates from iSuppli to estimate what a reasonable margin would be based on LTM estimates. Also factored favorability probably from Foxconn’s move to Brazil. iPhone 4 line is there and been probably depreciated or some added cost for retrofitted for 5C. I also added subsidies being about 5% for creating jobs.

    My guess is $350 retail price point for the 5C aka the BRIC phone(non-subsisidized). At $350 price point and $199 COGS, Apple is at a 43% implied gross margin (higher then the LTM gross margins). I don’t think Apple builds to margin, but for a product that delivers over 50% of revenues, I think they are cognizant of the fact, they can not be careless.

    I am working on a theory that Apple’s 2 year cycle on form factor helps stabilizes launch costs and maintains focus. 1) They depreciate their lines quickly with the volumes. 2) With a fall roll out. They launch for Q1 holidays and Q2 Chinese new year. Q3 is managing momentum and the pipeline. Q4 they start the process over and manage mix to hit their guidance, since market is anticipating new products. e.g. they end the 4S and move the 5C into its spot and turn up the volume. The 5S has minimal external changes and keeps the flagship side of the business humming along. By tweaking in Q4, they duck Wall Street, because all eyes are on Q1, by that time they are running at full pace.

    The past 2 years on avg they sold 57% of their volume in Q1 and Q2. 2013 they sold 85 MM phones in 26 weeks which is outstanding (3.2 MM phones a week). Which then makes me think, that the 5C also helps balance out the back half swings. The consistent hitter in your lineup.

    What we really want to know is what the subsidized cost is here in the US vs iPhone 5S. With the 5C Apple gets to offer US carriers a lower subsidy cost on a handset purchase requirements but still hit a healthy margin. What carrot is Apple offering to carriers like Verizon, to manage their equipment commitments and to close those non-smartphone consumers.

    BRIC markets have all the of upside (ex India. Really its about Brazil and China), and with 61% of Apples’ sales coming from international markets. With VAT’s and tariffs, the 5C is competitive with that middle-tier of handsets and Apple’s margins are still higher then the current LTM average.

    Should have been a blog post. Keep up the good work.

    • obarthelemy

      Very interesting, thank you.

      I do find hard to believe that i5C’s COGS will only be $13 (6%) lower than the i5′s. That would basically mean only the casing changes, and all the innards stay the same. I think this puts undue pressure on margins, and increases the risk of cannibalization.

  • Chaka10

    “According to Kuo, Apple manufacturing partner Foxconn began production of a new TDD-LTE supporting “iPhone 5C” model for carrier China Mobile in August, which was earlier than expected. He believes Apple is working to stock up on units in time for China’s October Golden Holiday.”

    That was buried in the middle of a piece in Apple Insider.

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