How Apple Gets Its Growth Back
NEW YORK (TheStreet) -- It's no secret that the smartphone market is slowing. Apple
Topeka Capital Markets analyst Brian White has a research note that a low-end iPhone, which many analysts have suggested previously, would allow Apple to compete in China, and recapture some of the lost magic Apple had over the years.
"We believe a $350 to $400 price point for a lower-priced iPhone would make sense and 42% below the $649 price point for an unlocked 16GB iPhone 5," White wrote in his note. "A $350-$400 price range would also be competitive with China-based Xiaomi that offers a high-end phone experience at a mid-range price of ~$320 in China. We believe a $350-to-$400 price point will allow Apple to significantly expand its reach in the smartphone market and better address developing markets such as China, while opening up more opportunities in Brazil, Russia, India and elsewhere."
The chief concerns about a low-cost iPhone are gross margins. Apple has extremely high gross margins for a hardware company north of 37%. They have been coming down in recent quarters, as Apple has introduced lower priced products to hold on to or recapture market share, including the iPad mini. A low-end iPhone could potentially hurt Apple's margins.
Lower margins might be worth it for Apple, especially if it can capture some of the low-end market, especially in China. Apple is behind competitors such as Samsung, ZTE and others in China, as its products are priced out of the reach of many consumers. Many of these lower cost smartphones run Google's
Perhaps that's been one sticking point on a deal with China Mobile