Thu, 10 Jan 2013 Cheaper iPhone could cost £61, but may damage Apple's brand

Apple's cheaper iPhone will cost between $99 and $149, according to a Bloomberg report. That's around £61-£92. The news has sparked a debate about whether a cheaper iPhone will be a good or a bad thing for Apple. On one hand it might open Apple up to the emerging markets, but on the other Apple's brand may lose some of its shine. 

The Bloomberg comes a day after the Wall Street Journal published its own story claiming that Apple is working on a cheaper iPhone for launch this year.

The idea that Apple will launch a cheaper iPhone, or an iPhone mini – on the assumption that it will follow the same naming convention as the iPad mini – is by no means a new rumour. However, the Bloomberg report does add some details.

Bloomberg's source claims that the device will use cheaper parts and that it might be smaller than current models. This contradicts a DigiTimes report that indicated that Apple could be considering a 5in screen size for the cheaper iPhone, however, all three reports appear to agree that Apple will use low-cost materials.  

Here's the argument for and against Apple launching a cheap smartphone, made from cheap parts…

Q: Should Apple launch a cheaper iPhone?
A: Yes

If Apple launches a cheaper iPhone it will impact on Samsung's lead, according to ratings agency Fitch.

Samsung currently gets bonus points for having a wider variety of handsets in terms of both price and screen size, and having greater geographical exposure, particularly in emerging markets. It's worth noting here that Samsung released 37 phones this year compared to Apple's one, as Fortune points out.

Fitch thinks a low-cost iPhone will allow Apple to gain reasonable market share in emerging markets like China and India.

Even better, a low-cost iPhone could damage Samsung, or specifically Samsung's operating margins. Fitch expects that intense competition among the major smartphone manufacturers will reduce operating margins across the board. If Apple does release a low-end iPhone this could also pull down the margins for Samsung and other smartphone manufacturers in 2014, writes Money AM.

Q: Should Apple launch a cheaper iPhone?
A: No

Others are concerned that a cheaper iPhone will negatively affect Apple's image. The company is known for quality products that cost more. To produce a low-cost product is contrary to late Apple founder Steve Jobs' vision. Forbes suggests it means abandoning Steve Jobs strategy of offering a small number of products, focus on the high end, giving priority to profits over market share, and create a halo effect that makes people starve for new Apple products. "A low-end iPhone would demolish all four pillars of Jobs’ strategy," states Forbes.

The idea that Apple would use a less expensive body made of polycarbonate plastic rather than the aluminum housing of iPhone 5 "should scare the hell out of you," writes the Street.

The less-expensive iPhone, not so cheap 

However, there is every chance that, like the iPad mini, the low-cost iPhone won't be cheap. Just less expensive. If Apple follows the same logic as it followed with the iPad mini, the iPhone mini will still be a top notch product, less expensive than it's older brother, but still the most expensive product in its category.   

Bloomberg suggests that Apple has been working on a more affordable smartphone since "at least February 2011". That is contradictory to the WSJ claim that the company started work on the idea in 2009.

Bloomberg claims that the cheaper iPhone will debut in late 2013, at the earliest. That report also states that Apple has spoken to a wireless carrier about its plans.

Related:

Apple's iPhone mini could stop Samsung extending lead in smartphone market, says analyst

Apple working on cheaper iPhone for launch this year, says WSJ

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