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How low will Apple go on the iPhone 5C?

Gregg Keizer | Aug. 15, 2013
Apple's new iPhone 5C will sell at an unsubsidized price between $330 and $400, analysts said, even as some questioned whether the change in the company's lower-priced strategy would pay off.

In a note to clients Tuesday, Marshall outlined the pricing structure of the iPhone 5C, saying that consumers could purchase it minus a contract for $339, or in markets where carriers subsidize sales, for $99 with the mobile carrier picking up the remaining $240.

Sameer Singh, an analyst who covers mobile devices at his Tech-Thoughts website, had a similar take on prices, again based on compiling a BOM estimate.

His conclusion: Apple could manufacture an iPhone 5C for $150 to $155, virtually the same number as Marshall came up with before the latter added in license royalties and warranty costs.

But while Marshall forecast a $339 unsubsidized price, Singh thought that was too low, even though in January he pegged the likeliest price between $299 and $349.

"I'm beginning to think that the price we're talking about is actually at the low-end of the potential range," Singh said in an email reply to questions. "If the low-cost device and iPhone 5S are launched in all markets — very likely — it would mean that Apple would have to discontinue the iPhone 4 [which has an unsubsidized price of $450], the iPhone 4S [$550] and possibly the iPhone 5 [$650]."

Apple, said Singh, has two problems: First, competing with inexpensive Android devices in unsubsidized markets, and second, minimizing revenue losses in subsidized markets, which are Apple's most important. But by going low in the range — say $339 — Apple risks accomplishing neither.

"The primary competition in unsubsidized markets is at or below $200, while in subsidized markets it's above $450 or $500," Singh noted. "So coming in at $339 to $349 risks losing revenue in subsidized markets without making comparable gains in Asia. [So] I wouldn't be entirely surprised to see a price as high as $399."

Milanesi was also convinced that Apple wouldn't reach for an under-$300 price, but instead said the Cupertino, Calif., company would list the iPhone 5C at $350 to $400.

But would that be low enough? Milanesi thought so.

"A mid-range device like this would be about half the price of what Apple is selling today," Milanesi said, referring to the iPhone 5, and the future iPhone 5S, which is expected to have the same non-contract price. "Three hundred dollars is a heck of a lot in emerging markets, and we do think it will open up an addressable market."

Gartner's future forecasts are based on sales of 10 million iPhone 5Cs during 2013's final quarter.

Milanesi said the assumption was that the iPhone 5C would cannibalize sales of the top-tier iPhone 5S to the tune of 30%. In other words, if Apple sold the 10 million iPhone 5Cs that Gartner anticipates, only 7 million would be additive; 3 million would have come at the expense of iPhone 5S sales.


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