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8 Ways Apple Could Make A Cheaper iPhone

To build an iPhone that's affordable in emerging markets, Apple will have to cut some corners or rethink the iPhone entirely. We break down some options.

2. Cheaper Flash Memory.

Flash memory accounts for about 5% of the total materials cost of Apple's iPhone 5. Apple's acquisition of flash memory maker Anobit and potential volume deals with suppliers eager for business that once went to Samsung might provide some savings here.

3. One Word: Plastics.

Aluminum, used to make the iPhone's distinctive outer casing, costs only about $0.92 per pound, but plastic is cheaper still, particularly when the metal parts manufacturing costs are considered. Add the word "biodegradable" to the cheap iPhone's marketing and a potential liability becomes selling point.

4. Less Expensive Or Smaller Screen.

The screen is the iPhone's single most expensive component, costing $44 on the iPhone 5, according to iSuppli. If there's no immediate way to reduce the cost of making touchscreens, and if reverting to a non-Retina resolution isn't an option, then shrinking the screen could be a way to squeeze costs for Apple.

5. Recycled Or Reclaimed Electronics.

Apple's iPod and iPhone recycling program might be useful as a way to obtain electronic components at minimal cost. The public relations value would be significant, too. However, it's probably more labor-intensive to remove, sort, test and redistribute components than it is to insert them on an optimized assembly line.

6. Less-Capable Camera.

Apple might be able to save a few dollars by making its cheap iPhone with a cheap camera. Omitting the camera entirely would result in even more savings, but probably isn't feasible given consumer expectations.

7. Alternate Subsidy Model.

Apple is able to offer its $600+ iPhones for several hundred dollars less, thanks to subsidies from mobile carriers, which recoup their costs through two-year subscriber contracts. To make a $99 or $199 iPhone sufficiently profitable without a contract, Apple might have to explore other subsidies, such as a payment from a search provider, a payment from a carrier or app company for app pre-installation, or a subscription revenue percentage in exchange for a loss-leading price.

8. Get Radical.

Maybe the way forward for Apple is to reinvent the iPhone completely to be smaller. A $99 price point would be easy to achieve if the device were more like an iPod Nano with a wireless chipset. Forget the touchscreen and think voice interaction and cloud services. However, Siri probably isn't up to the challenge at the moment.

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User Rank: Apprentice
1/11/2013 | 5:05:56 PM
re: 8 Ways Apple Could Make A Cheaper iPhone
It's hard for me to see Apple succeeding at the lower end. Less pricey, sure. But fewer features or a crippled phone? It doesn't exactly speak to the Apple brand promise. I know there are cheaper models of BMW or Mercedez automobiles, so maybe there's a model there, but there aren't that many differentiating features to strip out and have an "iPhone" still be an iPhone.
Tom Claburn
Tom Claburn,
User Rank: Apprentice
1/11/2013 | 5:21:25 PM
re: 8 Ways Apple Could Make A Cheaper iPhone
I agree, Fritz. If Apple produces a much cheaper phone, I don't think it will be an iPhone. I'd bet plenty people would be interested in a iPod nano size device that doesn't have a touchscreen at all. It would be a different product line -- a small phone with push notifications and limited network interaction -- but it might open the door for more Apple services and could shut out competitors. No apps or Web would also mean no Google Maps embarrassment.
User Rank: Apprentice
1/11/2013 | 6:53:47 PM
re: 8 Ways Apple Could Make A Cheaper iPhone
The premise that Apple would WANT to build a cheaper iPhone is unsupported. Why would a company race into a lower margin business? Sure, volume is higher. Apple doesn't already have supply chain issues...oh wait, they do. Apple surely needs the revenue...oh wait, they don't. This target segment is surely a winner for the incumbents...oh wait, it's a loser by a number of metrics.

Ok, so I see that there is little reason for Apple to produce a product for the low-to-mid range. I wonder why people are so anxious to jump on that bozo bus?
User Rank: Apprentice
1/11/2013 | 7:41:44 PM
re: 8 Ways Apple Could Make A Cheaper iPhone
I don't think that Apple's all that competitive at the lower end. They tried to make a cheaper tablet and the iPad mini is still significantly costlier (although also better) than a kindle fire. At least in my opinion. Instead of wading into the battle over lower end tablets I think they just created a new niche in the market that's a step above the lower end products but not a full blown iPad.
User Rank: Strategist
1/11/2013 | 8:24:47 PM
re: 8 Ways Apple Could Make A Cheaper iPhone
Almost none of the ways mentioned in the story/graphic would significantly reduce the iPhone manufacturing costs. A plastic case would have a negligible effect on price. A cheaper camera might save a few bucks. Less memory? Maybe a little ... but you have to have enough to store songs, photos and videos, let alone run apps. Recycled components? Not likely -- the costs of getting them off old boards, testing them and putting them back into production would likely out-weigh the benefits.

Apple would be better off just selling more of the older models at an even lower price, thanks to cost savings due higher volume production. But a less-capable iPhone really isn't The Apple Way. Who wants a cheap-feeling plastic phone with a lousy screen and hampered capabilities? (I'm resisting the urge to take a cheap shot at so many of the Android phones here. ;-)

Seriously: I can see Apple wanting to prevent others from getting the low-end market, because it wants to prevent people from getting comfortable in another ecosystem and on another platform. But a crippled, flimsy product doesn't seem like the way to go. Instead, give them a well-engineered, quality phone at a lower (or competitive) price, due to volume efficiencies.

Oh ... as for cannibalizing iPod Touch sales ... I don't see that happening, because the Touch doesn't involve a monthly service fee like the phones. They're different animals. People who need a phone aren't going to consider the Touch. And people who want a nifty hand-held device for running some games or work-related apps aren't going to sign up for monthly service fees. If that were the case, the cheap/free iPhones would have killed sales of the Touch, which hasn't yet happened.
User Rank: Apprentice
1/13/2013 | 3:56:46 PM
re: 8 Ways Apple Could Make A Cheaper iPhone
Follow the money. Where does Apple make their "real" money? In margins from phone sales? Or, on revenues from App and Content sales? imho, it's best to rope customers into the ecosystem rather than try and maintain high margins on low end devices.
Atlanta Owner
Atlanta Owner,
User Rank: Apprentice
1/14/2013 | 4:07:38 AM
re: 8 Ways Apple Could Make A Cheaper iPhone
Why do people keep obsessing about this? In the unlikely event that Cook alters their model of "maximum profit", whatever phone they come up with would still never be sold in North America, so it's something for emerging countries to think about. For us, since so many of us are willing to get the more expensive model, nothing will change in terms of choices or prices.
User Rank: Apprentice
1/14/2013 | 2:29:44 PM
re: 8 Ways Apple Could Make A Cheaper iPhone
Why would Apple want to make a cheaper iPhone when people are falling over each other trying to be the first to have whatever thing Apple puts out there next, whether it's worth the money or not?
User Rank: Apprentice
1/15/2013 | 3:55:21 PM
re: 8 Ways Apple Could Make A Cheaper iPhone
True, with so many people programmed to shell out hundreds and thousands of dollars the second apple releases anything new, there's no need for a lower price point device.
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