More Mini-iPhone Mania

May 5, 2011 at 12:45 pm PT

Will Apple ever release a smaller form-factor iPhone? It will if its market-share aspirations for the device are anything like the ones it had for the iPod. In a research note today, Oppenheimer analyst Ittai Kidron says it’s only a matter of time before Apple releases a lower-tier version of the iPhone, extending its reach in emerging and prepaid markets.

If Apple intends the iPhone to grow beyond the top 20 to 30 percent of mobile subscribers, it needs to hit a lower price point and position the iPhone against competing devices in the mid and lower range of the market. One way to do that is to reduce the device’s bill of materials, something the company is said to be considering.

The other is to add another, smaller iPhone to its portfolio, which Kidron views as an inevitability. “We strongly believe that a lower cost mini-iPhone will eventually materialize, as it would allow Apple and carriers to ease back on the device and service pricing and extend Apple’s reach into new and lower consumer segments with only minimal cannibalization to the iPhone’s high-end position,” he writes. “Clearly, there is a large untapped market available to Apple once it lowers price, and it makes sense to approach these markets in the same way that the iPod found its way to lower price tiers.”

Kidron figures Apple could likely build an iPhone like this for about $93.11, if it were to make some design and performance compromises (cheaper screen, off-the-shelf processor, toss the front-facing camera). The question, though, is will it? Last time rumors of a mini-iPhone/iPhone Nano surfaced, people briefed on Apple’s plans dismissed them, saying the engineering and manufacturing challenges inherent in such a device were too great to make it worth pursuing.

Of course, as I’ve noted here before, there is another tack to be taken–an entirely new device.

What if the company’s strategy is to build an entirely new iPhone for the prepaid market? What if it were to build a feature phone version of the iPhone, one with a mass-produced chip, a lower resolution screen, less on-board storage and no app store, just a handful of built-in apps? That seems a hell of a lot easier than painstakingly removing features from the iPhone 4 or 3Gs to the point where it’s suitable for the prepaid market. And as many an analyst has pointed out a lower-tier iPhone-–one free of the required $70+ a month voice-and-data service plan–-could be quite the bonanza for Apple.

[Image credit: JackieTran, MacThemes]

Tagged with: Apple, iPhone, iPhone Mini, iPhone Nano

comments so far. Add yours.

Anonymous

“If Apple intends the iPhone to grow beyond the top 20 percent to 30 percent of mobile subscribers,…..”

I think Apple will be OVERJOYED with 20-30% of the smart phone market CREAM.

Where Apple will expand its line-up to BOTH higher & lower priced devices is the iPad line.

iPads are COMPUTERS, not primarily phone devices. The World Wide computer market in mid-price & higher price computers is staggering in profit potential. And unlike the phone market Apple has a great head start.

Between now & tablet saturation, problem 10+ years, Apple can build a juggernaut of tablet & quick small laptops which would fit the needs of 90% of computer users.

Ayuh
Anonymous

Why would Apple ever prioritize _market share_ over _profits_?

When HAS Apple prioritized market share over profits? And how did that turn out? (Hint – cloning; almost put Apple out of business, before Jobs came back and refocused the company on … wait for it … profitable activities.)

I’m sure Apple is capable of producing a feature-phone that maybe looked like an iPhone, but it wouldn’t _BE_ an iPhone if it didn’t support all/most of the features of iOS. It would be the equivalent of the new iPod nano… Looks like iOS, but isn’t; removes features that people think of when they think of iPod nano. It’s not clear to me why they build it other than “because we could” — or who is buying it.

Would a smaller iPhone be neat? Sure. Would I want one? Eh, not if I lost capabilities just to get a smaller device. I buy an iPhone to get iOS, apps, GPS, FaceTime, the “real browser” experience, etc. etc. Not because it has a shiny Apple on the back.
Anonymous

“Kidron figures Apple could likely build an iPhone like this for about $93.11, if it were to make some design and performance compromises (cheaper screen, off-the-shelf processor, toss the front-facing camera).”

Oh this makes perfect sense. I mean, the idea of a cheaper screen and an off-the-shelf processor makes perfect sense for a device built around running third-apps.

It’s amazing what qualifies at “analysis” these days.
http://twitter.com/rcastano rcastano

I don´t think a small iPhone will be with us soon because it would affect the manufacturing capabilities of the iPhone 4. That is unless it doesn´t have a touch screen.

Going to lower priced/lower margin products when you are selling about everything you can make at high margins may not result in the best thru put for Apple.

Now… what about a bigger iPad???
Anonymous

We’re not talking about prioritizing market share over profits, we’re talking about prioritizing both market share and profits.

Once iPod gained all of the high-end media player market, which is a position that iPhone is in right now, Apple diversified the iPod line in a way that surprised many observers, given that the Mac has stayed at the high end of the PC market only. But even that is no longer true: iPad is a low-end PC.

So Apple has a music player lineup that goes from $49 to $399, a PC lineup that goes from $499 to $1999 and beyond with Mac Pro, and a phone lineup that goes from $449 to $699 (unsubsidized). The phone lineup is the odd one out. The iPhone is the equivalent of the Mac, but where is the phone to match iPad? The iPhone is obviously equivalent to iPod touch, but where is the phone to match iPod nano?

Same way that not every computer user needs or even wants a Mac or an iPod touch, not every phone user needs or even wants an iPhone. Many people just want a free phone with $40-$50 monthly contract that makes calls. If you give those people an iPod nano phone with all the built-in apps of the nano plus Phone, they would see a lot of value in that, and if they ever want a full-featured smartphone, they will likely choose Apple.
Anonymous

I think they will do both of these things. Both a cheaper iPhone, and a feature phone.

The cheaper iPhone is just an iPod touch with 3G. The feature phone is just an iPod nano with a phone. Considering the existing models of those products are almost a year old, they may even be able to add those features without raising the price. You move up from the basic model to get App Store and a big screen, you move up from the middle model to get 4G and GPS and a still camera and more RAM, and the best quality screen, and possibly a faster processor. A feature phone (Nokia competitor), a basic smartphone (Samsung/HTC/Motorola competitor), and a full-featured smartphone (iPhone) would be a complete phone lineup. Their market share would go from 5% to 25% very quickly, but they would still double their high-end iPhone sales as usual and still take more than 50% of phone profits.

I think that is why we are seeing the next iPhone launch move to the September iPod event. Apple is the most successful phone maker, now. Their handheld lineup is going to be primarily a phone lineup, not a media player lineup where one model has a phone in it.

Steve Jobs said the mistake that was made by the 1986-1996 Apple (that he was not a part of) was that once they had the high-end PC market sown up, instead of just sitting on it and milking it while low-end models rose up to challenge them, they should have done low-end models, competed across the board. With the iPod, the new Apple executed on the across the board strategy. The iPad finally
brings that to Apple’s PC line, but they were working on that even in 2003, when the new Mac with Mac OS X was just finding its legs. So I can’t see how the new Apple is going to stick to just one high-end phone and emulate the 1986-1996 Apple that was its antithesis.

Did a touchscreen really sell that many more iPod nanos that it was worth adding touch to iPod OS? From the get-go I thought that was a feature phone in waiting. With touch you can do a keypad.
http://disqus.com/samirsshah ???? ???

No to app-less phone, minimum 8GB for emerging markets.
http://profiles.google.com/calvinbaumann Calvin Baumann

You described mini iphone provide all the facilities that are available in iphone 4 with lower cost.This post will helpful for the people who want to buy iphone but in lower price.

http://www.iphoneappsdevelopers.blogspot.com/
Anonymous

The iPhone is the odd one out because it’s their most profitable product line. Why would they create a low-cost/low profit version when they are outselling the competition?

Steve Jobs also said he will not cheapen the experience for the customer. a low-end phone is going to mean a fragmentation of the OS. After spending years mocking Google for their inability to provide a unified system, I don’t think he’s about to do the same.

Any company that sacrifices pricing power for volume does not last very long.
Anonymous

I wouldn’t mind seeing a small iPhone, basically an iPod nano (earlier model) / feature phone. maybe a few minor apps like address book, camera, calendar, alarm clock.

Turn on find my phone and track your kids. Might be popular, might not. Couldn’t hurt to try.
Anonymous

So, it will cost like what? 350 US$ unlocked?

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