Apple may be able to build a cut-rate iPhone for $144, which would let it price the device between $299 and $349, hundreds less than the unsubsidized price tag of its flagship smartphone, an analyst said today.
A lower-cost iPhone would be a major strategic shift by Apple, which has rigorously held the price line, and may signal that it believes real growth will be found only in emerging markets, said Sameer Singh, who covers the mobile industry at his Tech-Thoughts blog.
"I think the primary driver would be their position in emerging markets," said Singh in a Thursday email reply to questions.
In a Jan. 14 post, Singh assembled a rough estimate of what it might cost Apple to assemble a lower-priced iPhone. His total, including manufacturing costs, came to $144.03.
By comparison, other BOM calculations by the likes of IHS iSuppli have pegged the BOM, including manufacturing, of the lowest-priced iPhone 5 at $207, indicating a 30% reduction in Apple's cost if it did pull the trigger on a less-expensive smartphone.
Singh made numerous assumptions about the hypothetical handset -- which he, like others, tentatively dubbed "iPhone Mini" in a sop to a frequently-used Apple naming convention -- including a 3.5-in. display, 8GB of storage space, the same processor and camera as used in the successful iPad Mini, a plastic rather than metal case, and the omission of support for faster LTE, or 4G, data networks.
"This is not a BOM estimate nor my prediction of the iPhone Mini's cost structure, but a rough estimate of how far Apple could realistically bring down product costs," Singh wrote in the Monday post.
Many of his component assumptions were based on the idea that Apple would reuse parts it has worked with in the past, such as a 3.5-in Retina screen -- last used in the iPhone 4S -- and the A5 system-on-a-chip (SoC) found in the iPad Mini.
Using the rough cost estimate, Singh then ball parked suggested list prices by determining various profit margins. He assumed that Apple would not surrender its historically high margins for such a phone, just as it did not when it created and priced the 7.9-in. iPad Mini tablet.
"After the launch of the iPad Mini, we can safely say that Apple will not compromise on margins and will price its products at a premium even at the low end of the market," Singh said.
The likeliest retail prices were $299 and $349, which would deliver margins ranging from 52% to 63%, close to, but not equal to, the 68% margin Apple collects on the iPhone 5.
Analysts have argued that Apple needs a lower-priced iPhone to compete with the hard-charging Samsung, and to keep its growth in line with Wall Street's expectations by broadening the potential pool of buyers.
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