Apple is doomed. Android OS is winning. Apple has peaked. It’s déjà vu all over again.
Apple is repeating the same mistake with Android smart phones and tablets that it did with Microsoft Windows and personal computers. That seems to be the view of many tech pundits today. Yet another analyst has a cure for Apple’s future woes. Cheaper stuff for emerging markets.
Cheap iPhone, Cheap iPad, Cheap Mac
It’s all the rage these days to describe what Apple should be doing, and lowering prices or shipping less expensive products in the mainstay of the critical crowd.
Tiernan Ray writes about Ben Reitzes in Barron’s who worries that Apple may not be able to compete with Google’s Android devices in new, emerging markets.
Ostensibly, Apple needs to hook customers into the ecosystem early to ensure the company’s long term prosperity. Translation: Produce a cheaper iPhone to compete with low cost products by Samsung and China’s ZTE.
This isn’t a new idea. Cheap anything by Apple dates back to the late 1980s when the company decided people would and should pay a premium for the Mac.
Does it make sense for Apple, which has nearly three times the gross margins on iPhone and iPad as second place Samsung, to introduce a low-priced iPhone and iPad simply because customers in emerging markets cannot afford expensive products?
For many customers in developing markets, simply accessing internet, email and an app store may be enough to stimulate a purchase. We believe Apple could offer a scaled down version of the iPhone at a low price point in order to capture the initial smartphone purchase from customers upgrading from feature phones – pushing new consumers into the Apple ecosystem earlier.
That seems plausible, right? I’m not sure what Apple could do to an iPhone or iPad to make it much less expensive, cost less, and have less functionality, but lower prices mean higher market share.
Wait a minute. Are there examples of other companies with premium products that have introduced low price products just for emerging markets? And what are those emerging markets, anyway?
Does Mercedes have a less expensive car for the African continent, India, or parts of Asia that have customers who can’t afford the real thing?
Does General Electric make a less expensive engine for airplanes for newly emerging markets in Africa, India, South America, or Asia? Let me use the emerging market of China as an example.
There are plenty of iPhone competitors in China. The Chinese with money prefer the iPhone and it’s selling like crazy. Why? Not only is the iPhone more functional, more capable, and more durable than cheap smart phone knockoffs, it– like Rolex, Mercedes, and other premium products– is a status symbol.
Without question Apple could reduce prices, or simply manufacture and sell lower priced and less capable iPhones, iPads, and Macs. What would Apple gain? More customers. What would Apple lose? That list is arguable.
Profit margins would shrink. Lower priced products often mean lower quality, so some of Apple’s product brand and cachet would be diminished. Yes, you can buy cheaper tablets (Amazon, Google, Samsung), but are they better tablets? Are they as durable? Do they do as much?
Worse, all those smart phone makers, sans Samsung, are losing money hand over fist, even in the prosperous, mature markets of North America, Europe, and Asia. Who would Apple compete against at the low end?
What’s the benefit to Apple of a cheaper iPhone, iPad, or Mac (as in, lower quality, less functionality)?
About Kate MacKenzie
These analysts are really ridiculous. I understand that unless Apple has high market share, Apple’s share price won’t climb, but that doesn’t make the company less successful. It’s really a sad thing to see a world where only cheap and plentiful products make a company valuable to Wall Street. I would definitely like to see Apple’s share price go up, but I think they should try to do it with something other than hardware. I’d like to see them get into banking or acquire some software companies. Forget building cheap hardware for the starving masses. Let other companies do that.
Why should it even matter to analysts whether Apple sells cheaper products or not. They can just put their money into the companies that do, if they believe it’s that important. Apple honestly seems to be doing just fine catering to the higher-class market. Wall Street just wants to try to devalue Apple for reasons I don’t quite understand. Wall Street is always hyping Android because of high sales numbers. They act as though second place doesn’t count for anything. The Android platform is a fragmented mess and the financial model is very poor. Why should Wall Street want to push some loss leader platform? I don’t see it anything to aspire to.
Wall Street is bordering on crazy. It’s as if these analysts know more about what a company should do to create value than the company itself. Apple is rocking it in multiple industries– PCs, smart phones, tablets, and ecosystem. Their reward for beating all competitors? The stock drops. That’s crazy.
In reality all we are really talking about is iPhone. iPads outstripped pretty much any tablet out there.
I disagree that the answer to market share is “cheaper”. In reality if one looks at what is offered Apple is on par with any smartphone maker, from $1 iPhones to $299+ iphones, Android and Apple are neck and neck. And carrier costs are the same where Android and iPhone are offered by the same carrier. And that is what is different. Android is available on all carriers, iPhone is not. Apple has never, and still does not, even with the new unlocked version. In order for a carrier to offer an iPhone they apparently have to be able to offer a minimum of technical levels, especially with LTE iPhone 5s. Not all carriers can do that.
And that is what also differentiates Apple from Google/Android. Apple cares about the whole experience, Google does not.
Joe
In what world are iPhone and Android neck and neck. Android outsells iPhone all over the world; up to three-to-one. iPad market share world wide is down to just over 50-percent. But you’re right about the difference between Apple and Google. Apple is all about the experience. Google is all about just shoving crapolalalala out the door in as many numbers as possible.
When you look at specific carriers that carry both. In the US, Apple actually trounces Android under those conditions.
Also, in terms of “Cheap” Android smartphones are no “cheaper”, except in quality and experience, with the possible exception of Samsung, maybe HTC, too.
If Apple is going to have problems, its going to be a function of their incredible success with new products and their ability to continue hitting home runs. I’m not sure.
I was in the ATT store last week to replace my wife’s broken iPhone. They had iPhones priced at $0.99 (iPhone 4) $99 (iPhone 4s) $199 (iPhone 5) and up.
I don’t see how you can get a much lower price than 99 cents.
The problem here is that you’re comparing the U.S. cell phone market with the rest of the world. Many developing countries do not have subsidized smart phones. That makes an iPhone 99-cents in the U.S. but how would it be priced in a country where there is no subsidy or incentive to buy a smart phone at a discount? Apple does not compete well at the very low end, and anyone who thinks Amazon and Google are selling their notebooks and making money isn’t paying attention. Both companies exhibit classic market disruption and desperation. The cannot compete with Apple on features, apps,distribution, or build quality– the only thing left is to sell at cost and home to make some profit on content.
You must be living in Colorado or Washington and stoned because Apple has been very, very successful taking money from the top of the bell curve and will continue to do so even through we have gone slumming by opening up to the Windtel crowd! Sometimes it makes me want to wash my hands hearing someone spout off about how they have always been with Apple only to find out it’s only since they bought a phone (read 3-4 years)