ACM 251: What’s in an Upgrade, Apple’s Google Gambit, the Future of iPhone

| Apple Context Machine Podcast

Dave Hamilton sits in for Jeff Gamet this week, and he and Bryan Chaffin gab about Mac upgrades, Apple's courtroom Google gambit, and what they think Apple's iPhone lineup will look like by the end of 2014. They also chew on Apple's decision to open up Mavericks betas to the public.

ACM 251: What’s in an Upgrade, Apple’s Google Gambit, the Future of iPhone

Apr. 23, 2014 — Download: MP3 Version (AAC Version Coming Soon)

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Paul Rubin

I think you’re both overthinking the situation on the future iPhone lineup. There will be 4 subsidized price points: 0, 99, 199 and 299. And there needs to be clear differentiation between those 4 price points and there needs to be clear profit at each. But there cannot be a sense that Apple raised its prices. Market realities won’t allow that.

So at 0, you’ll find a slightly reworked version of the 4” 5C, perhaps the 5C+.  They may tweak the processor to get all 4 phones to 64 bit. Or they may add the fingerprint features. But most certainly not both those features and quite possibly it will simply remain the 5C simply cheaper. It will be something that they can sell as close to $400 as possible and still make respectable margins. Possible color tweaks, etc. They don’t make enough money on the 5S to improve it and drop the price $100 so it will likely stay as is and they’ll sell it at $99 and hope sales fade away towards the 6. At $99 I bet a lot of 5S’s sell but ultimately Apple isn’t going to bother to two largely metal designs. The 5C and 5S are simply to make sure that people who want a 4” phone are served during the transition to bigger and eventually the 5S will go away and the 5C will be the only 4” iPhone.

The 6 will slot in at $199 and have the A8/M8 guts, the a further refined camera, the 4.7” higher resolution screen, and rounder case as well as some other improvements that speak to current iPhone 5S and 5 users and to a lesser extent current 5C users, and will become the mainstream iPhone for late 2014. That’s not a phablet. Even 5.1” phones are not considered phablets. That’s a phone at $199 and will command the bulk of the market share in 2014-2015.

The $299 price point (subsidized) is being saved for the 5.5” iPhone (perhaps some name variant of the 6) and the $299 price will primarily stem from the larger screen and I believe the 32 gig minimum memory that it will feature. Monetarily going to 32 gig costs apple maybe $10 in profits. The screen and perhaps a few other tweaks (more onboard ram, features as yet unknown) will account for the rest. It still has to remain profitable because it’s going to hurt sales of the iPad mini’s to the point where either this fall or shortly after Christmas, the low end iPad Mini will disappear or is getting reworked to be faster with the lesser screen but at $199. In this day and age. And even that’s a stretch. That’s an iPad 2 inside. The guts are simply a hindrance in that developers shouldn’t be developing for such an old platform still on the market. And I’m not sure they can put the guts of say an iPad 4 into it without damaging battery life. And the Mini Retina must get down to $299. One of the reasons iPad sales are down now is not the devices but rather their price points given the state of the market. They’re all priced $100 too high right now and even if they got faster cpu’s and slightly better cameras, and fingerprint readers, they’re priced $100 too high. Apple would be well advised to bump up the memory to 32 gigs across the board to take SOME of the sting out of their inflated pricing. And in fact the recent $100 price drop on the MacBook Air’s indicates that may very well happen plus that $899 price on the low end Air puts real pressure on the iPad Air so unless there is a RAM bump on the Air or something way beyond a slightly faster cpu, don’t be shocked to see RAM reset to 32/64/128 at current price points with a few other tweaks.

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