How Apple could have built a cheaper iPhone 5C
Compromises -- ones Apple decided not to make -- were necessary to drive down component costs for a $400 smartphone
Computerworld - Apple could have built a much less expensive iPhone, a move most analysts expected before Sept. 10, but that would have risked destroying intangible advantages the company has accumulated over decades, an expert in component costs said Wednesday.
"You can make a smartphone for under $150 or even under $100," said Andrew Rassweiler, a senior director of IHS iSuppli's cost benchmarking team, in an interview Wednesday. "Apple could have done that if it de-speced [the iPhone 5C] enough. But it would have tarnished the brand."
Two weeks ago, Apple unveiled the iPhone 5C, an old smartphone -- essentially 2012's iPhone 5 -- in a new plastic coat. More importantly to the Wall Street and industry analysts who had pondered the long-rumored handset, Apple priced the entry-level 16GB iPhone 5C at $549 sans a mobile carrier subsidy, just $100 less than the company's flagship iPhone 5S.
Before the Sept. 10 unveiling, experts of all stripes bet on an unsubsidized price of between $300 and $450 for the iPhone 5C. That price range, their thinking went, would allow Apple to compete with global smartphone brands powered by Android, like Samsung, and the plethora of in-country, Android-using handset makers in massive markets such as China, like the hard-charging Xiaomi.
They argued that without a truly low-priced model, Apple would continue to shed share -- especially in China, India and other parts of Asia -- and perhaps lose its prominent place in developers' minds as a result. In turn, that could negate one of its biggest advantages, a thriving app ecosystem.
Instead, as only a few analysts predicted, including Ben Thompson of Stratechery, Apple reiterated the strategy that has made it billions: The iPhone is a premium smartphone even when it costs less.
The build quality and components within the iPhone 5C support that, said Rassweiler. IHS regularly disassembles smartphones and tablets to see which component suppliers are in with a vendor, which have been dumped. The research firm also uses its teardowns to calculate a "bill of materials," or BOM, an estimate of the device's manufacturing cost.
According to IHS' calculations, the iPhone 5C's BOM was $173.45 for the 16GB model.
But Apple could have built an iPhone that would sell unsubsidized for $400 and retained its customary high hardware margin of around 68%, Rassweiler contended. Such an iPhone would have had to cut enough corners to bring the BOM in at approximately $130.
In fact, IHS created a "straw man" BOM as an exercise, hoping to find out what such an iPhone would have -- and have to give up -- to meet the $130 limit.
- Apple will 'set the world on fire' with iPhone 6 sales
- The other Apple economy: $2B in devices on eBay
- Apple sends users scrambling for OS X Yosemite
- Apple grows Mac sales by 18% on the back of the MacBook Air
- What to listen for during Apple's earnings call today
- Timeline: How Apple's iOS gained enterprise cred
- Apple and IBM: A winning combo for IT
- IBM and Apple ties go way back
- Apple quickly counters China claim of iPhone spying
- China calls the iPhone and iOS 7 threats to national security
- Tips for Driving User Adoption in New Technology Deployment Read this checklist on tips for driving user adoption to see where you stand.
- Mission Critical: Managing Mobile Applications & Content Smartphones, tablets and other mobile devices have become embedded in enterprise processes, thanks to the consumerization of IT and a new generation of...
- Securing Mobility, From Device to Network At one time, the process of managing and securing mobile devices and applications was fairly straightforward. Most organizations worried about one application (email)...
- Planning for Mobile Success Many organizations are seeing clear and quantifiable benefits from the deployment of mobile technologies that provide access to data and applications any time,...
- Keep Servers Up and Running and Attackers in the Dark An SSL/TLS handshake requires at least 10 times more processing power on a server than on the client. SSL renegotiation attacks can readily...
- On Demand: Mastering the Art of Mobile Content Management Mobile device usage in the enterprise has skyrocketed, and it continues to escalate. IT must answer to users who demand access to their... All Smartphones White Papers | Webcasts