Some pundits are predicting, and others are advocating, that Apple launch an iPhone that’s much cheaper than the current iPhone in order to keep up with Android phone sales.
This is crazy talk.
Apple doesn’t need a cheaper iPhone. They need a more expensive one — much more expensive. Here’s why. Android Gets Big Market Share with Small Profits
Android phones are selling in vastly higher numbers than iPhones. So high, in fact, that Google Chairman Eric Schmidt says the market share numbers are comparable to Microsoft vs Apple in desktop operating systems in the past 20 years.
The difference Schmidt didn’t mention is that Microsoft always made money from Windows.
The main reason Android is selling so well is that most Android phones are very cheap.
Sure, a tiny number of handset models like the Samsung Galaxy S3 are both very good and profitable. But the high-end, best-of-breed Android phones aren’t the ones driving massive market share numbers for the Android platform.
Those big Android market share and unit shipment numbers are being generated by China. In the world’s most populous country, with a population of more than 1.3 billion people, roughly 2/3 of the phones sold are Android phones. In fact one-third of all Android phones sold in the entire world are sold in China. And a huge chunk of the phones sold in the third world these days are Chinese-made Android phones. For example, one of the most popular phones sold in Kenya right now is a Chinese Android phone called the Huawei IDEOS that costs $80 unlocked.
These phones for the masses are not profitable Samsung Galaxy S3s, but instead no-name, no-margin Chinese-made pieces of junk, for the most part. They use Android in part because it’s free.
You’ll also note that, although there are hundreds of companies making Android phones, Apple makes far more money in mobile phone profits than all of them combined.
To say that Apple should make a cheap phone in order to keep up with Android market share is madness.
It’s like saying Ferrari should make a low-cost family car to keep up with Toyota. It’s like saying Starbucks should make cheap, low-quality coffee in a can to keep up with Folgers. It’s like saying Nordstrom should open a floor of cheap, discount clothing to keep up with J.C. Penny.
Apple is a premium, aspirational brand. It successfully targets the most profitable sweet spot in the market.
To slug it out in the muck with cheap Chinese phones for small margins would not only tarnish Apple’s image, it simply wouldn’t be worth the tech support, supply chain and manufacturing trouble.
Instead of a cheap, low-margin phone Apple should come out with an expensive, high-margin phone. A satellite phone.
I’m not convinced but it is an interesting idea. Some of the phones do not look half bad.
Geosynchronous orbits, though, usually result in a lag in transmission, making phone calls awkward.
But low Earth orbit systems exist. In fact, they offer coverage of almost the entire Earth.
And the phones could be useful in disasters from almost everywhere.
Apple could put up its own satellites or could probably buy the companies that already have them up. In one fell swoop, Apple becomes its own service provider.
Yeah, I’m sure it is just a fantasy but just thinking of Apple and Space-X hooking up to produce satellites and phones makes me tingle.