Inexpensive Apple iPhones on the way

Posted by Nermin Hajdarbegovic

Rumours of a cheaper iPhone have been floating around for ages, but this time around it's expected Apple will indeed introduce a low-cost version of the device, designed with emerging markets in mind.

Apple guru and part time Piper Jaffray analyst Gene Muster believes that a cheaper iPhone might be a very hot product. In his latest investors note, Muster said he expects Apple to launch a $300 iPhone starting in September. He thinks Apple could shift as many as 75 million units next year. This would put Apple’s share in the low-end smartphone market at about 11 percent, which sounds pretty good, as Apple currently has no low-end share at all.

However, it will come at a price. Munster expects a cannibalization rate of around 30 percent. Basically for every three cheap iPhones sold, Apple will lose a single high-end iPhone, which doesn’t sound too bad and it seems to be lower than the iPad mini cannibalization rate.

Apple’s decision to introduce a $300 non-subsidised iPhone should go down well with consumers in developing countries and the BRIC gang. Since western markets are already oversaturated and the smartphone market is maturing, it sounds like the logical next step for Cupertino.

It won’t come without risks. The cannibalization rate could go up over the next few years and Apple will probably have less headroom for high margins on an unsubsidized device. Apple’s iPad margins are already significantly lower than iPhone margins, and we might see a similar trend with the unsubsidized iPhone.