John Paczkowski

Recent Posts by John Paczkowski

Next-Gen iPhone Production Kicks Into Gear; Will There Be a Mid-Tier iPhone, Too?

Apple is ramping up production of its next-generation iPhone ahead of an expected fall introduction that could include a second, lower-cost version of the device.

That’s the latest from Jefferies analyst Peter Misek, whose channel checks suggest that Apple’s manufacturing partners will begin pumping out the iPhone 5s later this month. And sources familiar with the company’s plans say that this is indeed the case. Interestingly, Misek said that iPhone production ramp-up will follow one that’s already under way for Apple’s long-rumored lower-cost iPhone, a device he figures the company will price somewhere between $300 and $400 — without a subsidy. He estimates production plans at 25 million to 30 million units, split pretty much evenly across the 5s and its new lower-cost sibling. And he said the new entry probably won’t be competitive with the truly low-end handsets popular in emerging markets.

Which is an interesting theory. There isn’t as much room as there used to be in the upper and lower reaches of the smartphone market. But there’s plenty of room for growth in the middle.

And that’s a portion of the market that Apple has targeted with mid-tier products to great effect in the past. The iPod nano, the iPad mini — when those devices launched, they were dismissed as too expensive to attract the budget-conscious consumers. But they both proved wildly popular, establishing a new “mid-end” price band between the market’s high end and low end. The key to their success: Both were aspirational products that drew typically budget-conscious consumers into a higher price range.

Is Apple taking a similar tack with the smartphone market? Misek seems to think so, and it’s certainly possible, given the company’s history. And, as I’ve noted before, the opportunity for Apple here could be quite large. Consider the chart below from Gokul Hariharan and Mark Moskowitz over at J.P. Morgan, who figure the company could claim as much as a 25 percent share of the mid-tier smartphone market with a device like the one Misek claims is in production.


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I think the NSA has a job to do and we need the NSA. But as (physicist) Robert Oppenheimer said, “When you see something that is technically sweet, you go ahead and do it and argue about what to do about it only after you’ve had your technical success. That is the way it was with the atomic bomb.”

— Phil Zimmerman, PGP inventor and Silent Circle co-founder, in an interview with Om Malik