Apple has introduced an 8GB iPhone 5C model, but it still isn't "cheap". Is the release a sign that the product has failed, or a testament to Apple's refusal to play in the low end market?
Only a few months ago Apple's marketing VP, Phil Schiller, warned us Apple's low end iPhone wouldn't be cheap. The media wanted a cheap Apple. Multiple reports say the iPhone 5C has failed in the market, but is this true?
Apple's new 8GB iPhone 5C configuration is being made available through Apple's European online stores this morning. Hopes that the company would make its device more affordable were dashed -- the new configuration costs just £40 (about $60) less than the existing 16GB model.
That's not cheap.
Apple isn't making a big deal of either introduction (it also replaced the iPad 2 with an iPad 4, same price). Recent claims Pegatron will begin iPhone 6 manufacture in Q2 hints we shouldn't expect significant upgrades until later this year (late Q3/4). These are mid-term product tweaks.
Despite this all the reports suggest the iPhone 5S is selling far better. Even Apple's Tim Cook said: "I think the (iPhone) 5S, people are really intrigued with Touch ID. It's a major feature that has excited people. And I think that associated with the other things that are unique to the 5S, got the 5S to have a significant amount more attention and a higher mix of sales."
A nice spin, but recent reports have claimed Apple has around three million unsold iPhone 5C units in inventory. Chinese app analytics firm, Umeng, recently carved its own brand identity when media outlets picked up its claims that just 2 percent of China's iPhone's are 5C in contrast to 12 percent 5S.
If we use those figures to make for a hugely inaccurate estimate, they suggest Apple sold around 42 million iPhone 5S units globally in contrast to around 7 million iPhone 5C devices (a ratio of 6:1 on 51 million iPhone sales in the last quarter). These numbers put iPhone 5C sales on par with Samsung's estimated 9 million Galaxy S4 sales in that quarter. Is that failure?
Apple hasn't told us how iPhone sales split between the two models, making it easy to speculate that the iPhone 5C has "flopped". Cook attempted to spin the data when he said that sales in both categories (entry and premium) "grew year over year versus the phones that were in those categories previously."
If so there seems little reason for Apple to enter the market for cheap devices -- designer Jony Ive would be the first to slam such products as "anonymous, poorly made objects".
Apple's 1984 ad man, Ken Segall calls Apple a "company that doesn't do cheap. It makes products for people who care about design, simplicity and a great user experience."
Apple's iPhones, with or without the 8GB model, already dominate the high-end market. That's why it grabs between 60-70 percent of industry profit on just 10 percent of unit sales. Apple has achieved around 60 percent of mobile industry profits since 2011.
Despite the hype, the truth is that iPhone 5C competes vigorously with the high-end product from Apple's biggest rival, while the top-flight iPhone 5S model soars above all rivals. That is a long way from failure and Apple still doesn't do cheap. It doesn't have to.
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