ACM 202: The Apple Competitor Disconnect

| Apple Context Machine Podcast

BlackBerry's CEO seems to think the tablet market is a dead end despite the iPad's success, Microsoft can't seem to find its target audience for commercials, and Jeff and Bryan disagree on what they think Apple's iPhone strategy will be. All that, and it's poke-Bryan-with-a-stick week.

ACM 202: The Apple Competitor Disconnect

May. 1, 2013 — Download: MP3 Version (AAC Version Coming Soon)

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Thanks for the great show.

I find myself agreeing with Bryan quite often, very much so during the cheap iPhone discussion.
It seems quite clear to me that the production costs for older iPhone models can only decrease so much and as such they are not the key to getting an iPhone below half the historical price.

Starting from the obvious 2013 Christmas iPhone lineup
$450 iPhone 4S 16GB
$550 iPhone 5 16GB
$650 iPhone 5S 16GB, $750 32 GB, $850 64GB
we have these issues:
- no cheaper model to attract unsubsidised buyers
- many subsidised buyers go for the iPhone 5 which has lower margins because machining aluminium doesn’t follow Moore’s law to get so much cheaper in just one year
- even more subsidised buyers than today go for the good enough iPhone 4S

So let’s tweak this lineup a bit
- iPhone mini with many case colours available, the same 3.5” screen and great camera from iPhone 4S, new SoC designed entirely by Apple, based on the 32nm A5 in iPad mini but with a new on die built in 3G only radio developed in house by Bob Mansfield’s team; $300 8GB, $400 16 GB, $500 32GB
- iPhone (5S, but designation dropped just like for iPad) with fingerprint sensor; $650 32GB, $750 64GB, $850 128GB
- iPhablet is unpredictable because one doesn’t make sense in the current context of iOS.

The tweaked lineup has:
- new attractive lower price entry point with everyone’s favourite hook
- great upsell potential to a higher capacity model with better margin
- significant growth potential by attracting unsubsidised buyers
- clear and obvious differences in processing power, connectivity (3G vs. 4G), build materials, and other capabilities between the two tiers which leads to
- clear incentives for subsidised buyers to choose a premium model and for operators to promote it

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