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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