HK Business News

Low-End iPhone to be Sold in China and Brazil Could Generate $6.5 Billion for Apple

An analyst believes the rumored budget iPhone could generate upwards of $6.5 billion in revenue for Apple. The new phone is expected to be launched first in Brazil, China and other emerging markets, to consequently be launched globally.

In a research note, Piper Jaffray analyst Gene Munster said he believes there’s a 60 to 70 percent chance Apple will launch a lower-priced iPhone this year. He expects the the cheaper smartphone will feature a lower-quality screen and casing, as well as a potentially downgraded processor.

Munster predicts that Apple will charge nearly $200 for the off-contract phone “given Apple’s history of commanding a premium to the market.” The price would represent “a significant discount” when compared to the premium-priced current iPhones.

He added that if Apple launched the low-cost iPhone in September, it’s likely to account for 30 percent of iPhone sales during 2013’s fourth quarter. Munster believes if the proposed launch does occur, it would see the selling price of an iPhone decrease from $640 to around $520.

At least five independent reports over the past week have claimed that Apple (AAPL) has a new less expensive iPhone model in the works. By all accounts, the new smartphone model will feature a redesigned exterior, a new screen — perhaps smaller than the iPhone 5′s current display, perhaps larger — and a retail price that could reach as low as $99. There is no question that a cheaper iPhone would extend Apple’s reach in the global smartphone market, but according to TheStreet’s Rocco Pendola, this is “absolutely awful news” for Apple.

Pendola writes that if the rumors are true as they have been reported, it would be cause for investors to “freak out.” He’s not sure this will be the case though, noting that early iPad minirumors were way off and history may be repeating itself.

“The details of the rumor might not be true. We have been through this before with iPad mini. Most people expected it to cost less than it does. Some even predicted it would be of lower quality than a traditional iPad,” Pendola wrote. “Not so.”

He continued, “[The iPad mini is] a high-quality, premium-priced device and it’s selling well. Other than screen size and display quality, there’s no telling one iPad from the other. Big win for Apple.”

If the rumors are accurate and Apple releases a low-end smartphone at the prices suggested, Pendola says it will indeed be bad news for Apple, but not in the short-term.

The launch of the cheaper iPhone in late 2013 would likely weigh down profit margins not just for Apple Inc.AAPL +0.13%, but for the entire smartphone industry, according to Fitch Ratings. Read blog on how such a phone could boost Apple’s share, but hurt its margins.

In research released Thursday, the ratings agency said Samsung Electronics Co.SSNLF 0.00% KR:005930 +0.39% – which had a 32% share of the global smartphone market in the third quarter of 2012, twice that of Apple’s 16% – could be expected to further extend market-share gains over Apple in 2013 on the back of its wider portfolio of products and greater geographical presence.

As its smartphone sales improved, the South Korean firm’s profit margins jumped to about 14% in 2012 from 10% in 2011. Read: Samsung estimates record profit in Q4.

Furthermore, Samsung’s undisputed leadership position in several key smartphone components, including display and memory-chip technologies, will likely ensure that its future smartphone models will also be equipped with “cutting-edge technology,” the ratings agency said.

About the author

Robson Hayashida

Robson Hayashida has over two decades of experience in the computer industry in product development, support, training, and e-marketing. Mr. Hayashida has been working on writing ColdFusion Web Application series, as well as multiple books on SQL, Regular Expressions, Java Server Pages, WAP, Windows development, and has recently being involved in multiple Meteor / MongoDB and Node.JS projects and more.