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Apple faces added dilemma as 'phablets' bank big sales in Asia

Gregg Keizer | Sept. 6, 2013
It will unveil a larger-screen iPhone next year, analyst predicts, but unless it competes on price, its Asian share will dwindle even more

Most analysts believe Apple will price the iPhone 5C at over $400 without a mobile service contract — near or identical to the price of the unlocked iPhone 4 currently — and thus protect its U.S. market at the risk of not gaining ground in Asia.

From Singh's perspective, Apple will do the same with any phablet it introduces.

"Apple's overall strategy will be to try and maintain their premium image and margins," said Singh. "[But] I'm skeptical if that strategy will be successful long-term."

Not that Apple won't make money on phablets. Even with a larger screen — the current iPhone 5 boasts a 4-in. display — an iPhone phablet would be a profit driver.

"I don't expect cannibalization to be much of a factor. The phablet's gross margins should be comparable to other iPhones — upwards of 60%— and much higher than the iPad Mini, so any shift in the sales mix towards phablets will probably benefit Apple," said Singh.

Yet other analysts have stressed that, minus risk-taking, Apple's business model — which relies on premium prices for premium profit — could be crippled as Chinese smartphone makers undercut Apple globally.

"Carriers have lower influence on pricing and distribution in Asia, so smartphone sales need to be driven by their own merits and on price," said Singh. "Unlike in subsidized markets, when price becomes a factor in the purchasing decision, the relevance of the brand reduces ... we've already seen this unfold in the tablet industry."

The notoriously-secretive Apple has not announced plans to expand its iPhone display choices. However, at the AllThingsD Conference in May, Apple CEO Tim Cook said, "A large screen today comes with a lot of trade-offs," but then hinted that if those trade-offs could be minimized, larger displays in a smartphone would be considered.

 

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