Apple Inc. (NASDAQ: AAPL) plans to release two new iPhone models this year instead of just one, but why now? Rumors say Apple wants to make inroads in India and China, two immense markets brimming with potential even though most citizens simply can’t afford the high price of the iPhone. For these reasons and more, Apple will release a second iPhone alongside its iPhone 5 successor (iPhone 5S) this fall, rumored to be called the iPhone 6, iPhone 5C, iPhone Light, or simply “iPhone.”
Whichever name Apple chooses -- we’ll go with iPhone 6 for now -- Wall Street has high hopes for the budget iPhone. Morgan Stanley analyst Katy Huberty issued a note to clients on Tuesday (via Fortune) that the iPhone 6 could help Apple achieve tremendous growth in China.
Huberty, who was one of the first analysts to peg a 2013 release date on the budget iPhone 6, surveyed 2,000 mobile customers in China and discovered that consumers consider $486 (RMB 4,000) to be an acceptable price for a budget iPhone, which is 22 percent higher than the iPhone 6 price analysts are predicting ($300-400); in contrast, the actual prices of the HTC One Mini and Samsung Galaxy S4 Mini were higher than the range those consumers found tolerable.
According to Huberty, Apple’s market share in China could jump by 19.3 percent if Apple chooses to release its iPhone 5C on China Mobile for $400 off-contract, which would be enough of a leap to make Apple the No. 1 smartphone seller in China. Even sweeter for Apple: The projected increase in Apple’s smartphone share in China could reduce Samsung’s smartphone share by 10.3 points or more. In other words, the release of the iPhone 6 could mean a significant disruption for China’s smartphone market, which is bad news for every smartphone maker not named Apple.
Why Apple Needs An Affordable iPhone In China
In February 2011, when Tim Cook was COO at Apple, he told Bernstein Research analyst Toni Sacconaghi that Cupertino was working on “clever things” to attack the prepaid market. According to Business Insider, Cook told Sacconaghi he wanted Apple to be “for everyone,” not “just for the rich.” Cook mentioned how “price is a big factor in the prepaid market,” but that Apple would not be “ceding any market,” noting that China is “a classic prepaid market.”
China currently represents about 15 percent of Apple’s revenue each quarter, but CEO Tim Cook has repeatedly expressed further growth within Apple’s second largest market.
“One of our sources claims that Apple’s iPhone prices remain too high for most mainland Chinese customers,” iLounge editor-in-chief Jeremy Horwitz wrote in a January report. “The iPhone 5 hardware alone starts at $849 there, versus the iPhone 4 at $500, in a country where the average annual salary is around $3,000 per person. The source has said that mainland Chinese iPhone 5 sales are already tapering off as a result of the pricing, which is higher than in Hong Kong. A budget iPhone model would help sales in populous but underdeveloped countries to grow.”
Due to the exceedingly high price of the current iPhone, piracy of Apple products within China has grown to epidemic proportions. Many stores in China make money off selling fake or pirated Apple devices, parts and accessories, and a number of businesses have attempted to copy Apple’s storefront -- according to the China Daily, 22 of these copycat shops have been shut down. But even with the added intellectual property protection granted by 40-plus patents in China, Apple clearly wants a more viable solution that discourages piracy and promotes the real McCoy.
Cook’s strategy for China is to release a comparable iPhone that’s less expensive to make, and less expensive to sell. With smaller, cheaper and more power-efficient chipsets, Apple can afford to release an entry-level to midrange smartphone, but getting approval from China was another story. Even though Apple can now sell its smartphones in China -- the iPhone 5 was approved in the country last November -- Cook has yet to officially seal the deal with China Mobile, the largest mobile telecommunications carrier in the world. With 703 million current subscribers, Apple has an enormous opportunity to release the iPhone 6 to as many Chinese mobile users as possible, especially with a decent price under the $486 “sweet spot,” as long as it agrees to support the exclusive TDD-LTE network exclusive to China Mobile’s network. Cook has several times visited China Mobile this year to discuss “matters of cooperation” with China Mobile Chairman Xi Guohua, but there’s been no confirmed news of a deal between the companies.
Apple iPhone 6 Release Date Coming: What To Expect
The iPhone 6 is expected to release with many of the same features of the iPhone 5, but the key difference is said to be its form factor, which reportedly replaces the anodized aluminum body of the iPhone 5 with a cheaper, albeit sturdier and more scratch-proof, polycarbonate shell. Back in January, iLounge editor-in-chief Jeremy Horwitz said the iPhone 6 will release as a "cross between the iPhone 5, the fifth-generation iPod touch and -- wait for it -- the iPod classic." With a 4-inch screen like the iPhone 5, a tapered bottom like the newest iPod touch and a rectangular shape like the iPod classic, the budget iPhone 6 is said to be substantially made from plastic but feature a hybrid chassis made of both plastic and metal. The locations of the SIM card tray, camera, microphone and rear flash are all reportedly placed in the same positions as in newest iPod touch.
We believe Apple will release the iPhone 6 with most of the same specs as the iPhone 5, including a 4-inch Retina display at 326 ppi, an A6 chip, a FaceTime HD camera and an 8-megapixel rear side camera; the 8-megapixel camera has already shown up in allegedly leaked photos of the iPhone 6 components. The major difference between the iPhone 5 and iPhone 6, besides the new polycarbonate enclosure, will be its availability in five different colors (red, green, yellow, blue and white), as opposed to the iPhone 5S's three color options (slate, silver and gold).
Apple tries its best to keep all its products under heavy wraps before they eventually release to the public, but the iPhone 6 has been spotted in a great number of reported leaks. After French site NowhereElse in early July posted several photos that looked like the colorful rear shells of the iPhone 6, M.I.C. Gadget blog’s editor-in-chief Chris Chang posted photos and video of the iPhone 6 on the Techdy Blog that he said came directly from suppliers in Taiwan. Since then, there have been nonstop leaks of the iPhone 6 that have all looked identical; recently, an image of the iPhone 6 appeared on Sina Weibo with all its required legal notices from the FCC, and this week famed Apple product leaker Sonny Dickson also released some new high-resolution photos of the plastic iPhone 6, leading us to believe this is the actual form factor of the new plastic phone Apple plans to release.
Once the iPhone 6 is unveiled on Sept. 10, we believe Apple will release the budget iPhone just one week and a few days later on Sept. 20, which would be two days after the projected release date for iOS 7 on Sept. 18. With the iPhone 6 release date on Sept. 13, we believe Apple will give some breathing room for its new iPhone 5S, which is important since Apple will need to market the two phones differently, and release the high-end iPhone 5S on Sept. 27. A late release date for the iPhone 5S may negate any reported supply constraints regarding the fingerprint sensor in the iPhone 5S.
Obviously, the selling point of this particular iPhone model won't be its form factor, or its specs, but rather its price (plus its availability in five colors, which will help the iPhone 6 stand out). Many originally predicted Apple would sell the iPhone 6 for the same price as the iPhone 4, which is currently being sold for $0 with a two-year contract in the U.S., or in China, about 3,000 yuan (roughly equivalent to $490). This week, these iPhone 6 price rumors seemed to be confirmed by a prominent poster on China's social network Sina Weibo, "C Technology," who also claimed the iPhone 6 will be the same price as the iPhone 4. KGI Securities Ming-Chi Kuo, who has an excellent record with predicting Apple's product pipeline, also predicted (via MacRumors) the iPhone 6 would release at a price between $450 and $550 off-contract, which would line up with the newest set of rumors.
If these price rumors are indeed accurate, Apple will likely be changing its price strategy across all iPhone lines. With Apple rumored to drop the iPhone 5 from its lineup, the iPhone 4S would assume the low-tier position ($0 on-contract), while the new colorful iPhone 6 would release as the mid-tier option ($99 on-contract). The new iPhone 5S price is said to release at $199 with a two-year contract, while the popular iPhone 4 may be removed from the U.S. lineup for the first year.
What do you think of the iPhone 6? Do you plan to buy a budget iPhone when it sees its release date later this year? Let us know in the comments section below.
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