John Paczkowski

Recent Posts by John Paczkowski

Will the iPhone 5C Have a Halo, Too?

A few hours from now, Apple will unveil a pair of new iPhones, expanding a smartphone strategy that has seen the company field only a single new handset each year since it debuted the first in June of 2007. Together, the two devices — one high-end (iPhone 5S) and one low (iPhone 5C) — will allow Apple to target a broader swath of the smartphone market, adding a bevy of budget-conscious consumers to an addressable market comprised of less price-sensitive purchasers.

It’s a strategy with significant upside for Apple, one that should allow it not only to acquire new smartphone customers, but to immerse them in its product and services ecosystem.

The iPhone often acts as a gateway product, introducing new customers to the rest of Apple’s offerings. As CEO Tim Cook said last year at the Goldman Sachs Technology and Internet Conference, “What is clearly happening now is that the iPhone is creating a halo for the Macintosh. The iPhone has also created a halo for iPad.”

So, how much bigger might that halo be following the introduction of the lower-priced iPhone 5C Apple intends to debut today? Obviously, that depends on the price of the handsets, but it’s likely to get quite a bit bigger. Consider these data points noted in a Monday research brief by Deutsche Bank analyst Chris Whitmore. In the second quarter of 2013, shipments of smartphones priced between $300 and $450 (the range Apple is believed to be targeting with the iPhone 5C) hit 31 million, growing nearly 50 percent year over year.

Annualize that number and you get a potential addressable market of 120 million units.

That’s a massive incremental opportunity for Apple, one with some potentially significant upside for its broader product ecosystem. As the company has shown us in the past, it often doesn’t take all that much to turn someone who never owned an Apple product before purchasing their iPhone into someone with an iPhone and an iPad or MacBook — or both. Question is, how likely will the budget-conscious consumers for whom the iPhone 5C is intended be to pay up a little bit for other Apple products once they’re introduced to the ecosystem?

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