The funny thing is, the argument that Apple is arrogant or stupid (or both) for not manufacturing a $300 iPhone sound ominously the same as the arguments from a few years ago that Apple needed to produce a Mac netbook or face oblivion.
Mac & iPhone Déjà Vu
Five years ago ZDNet ran an article explaining why Apple and Google needed to get into the Netbook business. Google did, and Apple did not.
Which company has the most profits from sales of hardware? Apple has the most. Google has none. What happened?
The common wisdom at the time was that low price and marketshare go hand in hand.
Apple was told by tech pundits to create a pretty case, tweak OS X, drop in an Intel Atom CPU, or risk a slow, agonizing death as Netbooks ruled the world.
A funny thing happened on the way to reality. Steve Jobs launched the iPad as the device to sit between the smartphone and notebook, and the 21st century tablet industry was born. Jobs from 2010:
If there’s going to be a third category of device it is going to have to be better at doing these types of tasks than a laptop or a smartphone; otherwise it has no reason for being. Now, some people have thought ‘that’s a netbook!’ The problem is that netbooks aren’t better at anything. They’re slow, they have low-quality displays, and they run clunky old PC software. So they’re not better than a laptop at anything, they’re just cheaper. They are just cheap laptops. And we don’t think that they’re a third category of device.
Cheaper Isn’t Better
Customers quickly soured on the plethora of netbooks that hit the market– slow, underpowered, cheaply made, still running Windows (or some variant of Linux). The user experience was mostly craptastic, and this year netbooks are dead.
What happened? Isn’t cheaper supposed to make the market expand? A few hundred million netbooks were manufactured, shipped, sold, and obviously discarded as the iPad took over for lightweight computing usage.
The same thing is happening again with Android-based smartphones and tablets vs. Apple’s iPhone and iPad. Apple’s critics say the company must make a cheaper iPhone to survive. Really?
Apple did not make a cheaper Mac, and yet prospered, so that cause and effect doesn’t have a basis in reality. The Mac, with perhaps a 10-percent marketshare, has approximately half of the traditional PC industry’s profits– equal to the next four manufacturers combined.
Apple’s iPhone, with a similar marketshare, has a greater amount of the industry’s profits. Is it possible that Apple is on to something with the iPhone and iPad, still priced more than most Android smartphones and tablets?
Not every smartphone or tablet customer will value Apple’s quality and ecosystem, but it should be obvious to most critics that Apple is comfortable carving out a profitable niche. Apple is where dissatisfied customers of other products upgrade, and where those with discriminating tastes prefer to go.