Apple is working on a low-cost, unlocked iPhone, analysts continue to insist.
Piper Jaffray analyst Gene Munster continued to make a case for such a phone in a Feb. 19 research note, according to Apple Insider, which received a copy of the note. Munster expects Apple will debut a $199 iPhone in the September quarter, and sell approximately 37 million of them through the rest of the year, 96 million in 2014 and 170 million in 2015.
"We believe a lower-priced iPhone will be a positive for [Apple] shares for two reasons," wrote Munster. "First, despite its lower margin, it should accelerate gross profit growth given the size of the low-end market (we estimate $135B in 2013); second, investors have historically bought into [Apple] ahead of major new-product releases."
Munster looked at pricing in Germany, the U.K., France, China, Brazil and India, and offered a snapshot of the $135 billion low-end smartphone market, which in 2013 will account for 60 percent of smartphone sales, he said.
The iPhone 4—the lowest-priced iPhone—still costs 133 percent more than the average low-end smartphone, Munster wrote, while the iPhone 5 costs 19 percent more than comparable flagship devices from Apple rivals.
On average, an unlocked iPhone 5 costs $1,050, Munster pointed out, while the average low-end handset in China and India sells for $138 to $140—a divide Apple will need to cross if it's to tap into that $135 billion.
Apple CEO Tim Cook recently spoke to the topic of a lower-cost iPhone at a Goldman Sachs conference Feb. 12. While neither confirming nor denying the existence of such a product, he called great products Apple's "North Star" and said that Apple would never simply create a cheap version of a great product. But a product could evolve in a way that makes it accessible to more customers, he said.
"If you take something like the iPod, when we came out with the iPod it was $399. Where is the iPod today? Today you can ... buy an iPod Shuffle for $49," said Cook. "So instead of saying, 'How can we cheapen this iPod to get it lower?' we said, 'How can we do a great product?' And we were able to do that at a cost that enabled us to sell it at a very low price of $49, and it appealed to a lot more people."
In December 2012, Canaccord Genuity analyst T. Michael Walkley similarly told investors that he expected that Apple was working on a low-cost iPhone.
"We believe Apple could launch a refreshed iPhone 5 along with a more mid-tier-priced competitive iPhone for pre-paid oriented international markets this summer," Walkley wrote in a research note.
Tech site iLounge has reported, citing "reliable sources," that the low-cost iPhone will a feature a 4-inch display, an elongated, pill-shaped front button, rather than the circular button on the iPhone, and be shaped rather like the iPod classic.
"The budget iPhone will look a lot like an iPhone 5 from the front, an iPod classic from the side and an iPod Touch 5G on the bottom—only made from plastic rather than glass or metal," said the site.