Low Cost iPhone Rumors Simply Make No Sense

The big iPhone rumor for 2013 is a low cost iPhone, in addition to the iPhone 5S. The rumors claim that Apple is looking to expand market share internationally with a budget friendly iPhone. The only problem with this logic is that Apple doesn’t release products to be cheaper just for the sake of being cheaper, as seen by the iPad mini. Also, Apple does have two budget friendly iPhones currently available with the iPhone 4S for $99, and iPhone 4 for free with two year contract. The low-cost iPhone is said to be even cheaper for non-contract prices, as even the iPhone 4 is still $450 with no contract.

Another problem with the idea of a low cost iPhone is that it doesn’t make sense for the bottom line. Last quarter, Apple posted records across the board, but investors still didn’t like the results. Revenue, iPhone sales, and iPad sales all grew by double digit percentages, but profit is the one thing that was relatively the same, and that’s where investors look for growth. A low cost iPhone would cut Apple profit margins, probably even more than the iPad mini, so it just seems unlikely.

Even with logic to the contrary, the rumor mill keeps spinning, and iLounge has followed up their report from last week with more details on their claimed low cost iPhone. According to the report, the new iPhone will replace the exterior metals with plastic like the iPhone 3G/3GS. The front of the device will look like the iPhone 5, but the back will look more like the iPod touch with the iPod classic curves. The overall device will be about a millimeter thicker, taller, and wider, and the shape will allow for an easier manufacturing process. Still though, the report says Gorilla Glass will still be used for the 4” 1136 x 640 retina display.

When you look at Apple’s estimated bill of materials for the iPhone 5, the two most costly components for the display are the retina LTE chips at $44, and $34 respectively. The metal enclosure is third on that list at $33, and even cutting it in half doesn’t make much of a difference to make it all of a sudden a low-cost iPhone. Apple would have to forego the retina display and LTE along with switching to plastic to make a truly low cost iPhone. Then it simply sounds like a cheap iPhone, and again Apple has never shown any indication of trading profit margins for marketshare, nor making cheap products just for the sake of being cheap.

The low cost iPhone rumors will probably persist until the iPhone 5S is actually released later this year, but there’s no point in listening to them.


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