Rumour has it Apple may launch a new iPhone and a new cheaper model at Tuesday event
Apple may be set to announce a new iPhone and for the first time, a low end iPhone model, at a special event being held tomorrow, Tuesday 10 September.
After years spent ignoring the lower priced end of the market, it seems Apple could finally be ready to launch a smartphone aimed at users with less cash, possibly to enable the manufacturer to tap into growing markets, such as China.
Jan Dawson, chief telecoms analyst at Ovum commented on what to expect from tomorrow's event: 'The key challenge for Apple this week is to demonstrate that it can maintain momentum in overall sales of iPhone's, and to do so in a way which won't drive down margins significantly. iPhone sales have now fallen into a fairly predictable cyclical trend, spiking in the fourth quarter of the year, following a September launch, and falling over the rest of the year until a new device in launched.
'But as the overall numbers have grown, the year on year growth rate has slowed significantly, from between 80% to 100%, down to 24%, even accounting for the cyclical trends,' stated Dawson. 'This is partly due to the law of large numbers, as the same increase in shipments reflects a smaller percentage of historical shipments, but it's also largely driven by Apple's increasing saturation of its addressable market.
Dawson claimed that because of this spiralling reduction in sales it is key for Apple to be able to find ways to drive growth at a higher rate again. Tomorrow Apple is also likely to announce a partnership with China Mobile to sell both models at a separate event in Beijing this week. Getting China's biggest carrier on board and launching a cheaper version of the iPhone are both key to solving the reduction in sales, he said.
China is a key market for Apple, noted Dawson, but its sales have flagged there lately and getting beyond the two smaller carriers is critical for future success. 'The cheaper iPhone is critical for expanding the addressable market, because many people in China and elsewhere simply can't afford to buy a current generation iPhone, especially when it's not subsidised. However, the key risk for Apple in launching a cheaper iPhone is that it may cannibalise sales of the high end phone. That would exacerbate a problem Apple's had for the last few quarters, as average selling prices for iPhone's have fallen from $608 to $581 in the past year. That in turn squeezes margins, and it's only likely to get worse with a cheaper iPhone.'
Dawson continued: 'The trick is for Apple to position a cheaper device so that it's attractive for those that haven't been able to afford an iPhone before, but is missing enough key features for the new flagship iPhone to remain compelling. That means getting the price for both devices right, but it also means figuring out how to make the lower cost variant feel like a real iPhone while stripping out significant cost.'
Regardless of how Apple resolves this, if it is able to get back to higher growth it will definitely come at the expense of lower margins, said Dawson. The combined high growth rates and astronomical margins of the past are gone, he warned.
'All of this, along with similar trends in the iPad space driven by the launch of the iPad Mini, increase the pressure on Apple to launch a new line of products to keep overall growth going. We're not going to see such a product at the iPhone event, but Apple needs to demonstrate in the coming months that it has other product lines which can start to make up for slowing growth and falling margins in iPhone and iPad,' continued Dawson. 'That's a tall order, because both the iPhone and iPad generate $400 to $600 in revenue per unit, and sell tens of millions per quarter. A smartwatch or even a revamped Apple TV are unlikely to generate anything close to those sorts of numbers, and that's a problem Apple will have to work hard to overcome.'
Smart Chimps thinks: Apple has been dragging its feet in launching a lower end iPhone for too long; this could be just what it needs to boost sales, even if it does mean high end iPhone sales are cannibalised. It cannot continue to lose revenues and sales, so something significant needs to happen. Smart Chimps is keen to find out how it will manage a high end and low end device launch, and also to see what new innovations it has come up with for the top end model, if any. Let's hope it's better than Maps! Watch this space for more news tomorrow!
