Tim Cook Admits Lower-Cost Used iPhone Sales Are Good for Apple

NEWS ANALYSIS: Asked during the July 22 earnings call whether used iPhone sales cut into sales of new phones, Tim Cook said sales of low-cost iPhones help draw people into Apple's fold.

Used iPhone Sales

Apple iPhones cost too much. There, I've said it. But this isn't the first time I've said this. In fact, I've said many times that Apple needs to develop a lower-cost version of the iPhone if the company expects to dominate sales beyond North America and Europe.

The last time I wrote about this, which was three years ago, nobody listened. But now, with Android sales far surpassing iPhone sales and with sales of the lower-cost iPhone 5C picking up strongly, the need for a lower cost iPhone is becoming more clear. What puts the icing on the cake, however, is the success of the various iPhone trade-in programs.

During the earnings call held by Apple on July 22, an analyst asked Apple CEO Tim Cook whether the iPhone trade-in programs were resulting in sales of lower-cost used and refurbished phones that might be cannibalizing the sales of new iPhone 5 units.

Cook's response (you can hear it for yourself at about minute 36 in the conference call recording, but you'll need to use an Apple product or Safari for Windows to listen) was that the iPhones sold as a result of such trade-in programs were "hugely beneficial" to Apple.

According to Cook, "More people are able to join the party," this way. Cook noted that there are a lot of people who are "price sensitive," as he put it. This means that they can't afford or in some cases don't want to pay the full price of a new iPhone.

It's important to remember that in most of the world, an iPhone costs substantially more than it does in the U.S. and Europe. I've seen iPhone prices above $1,000 in some parts of south Asia and the Middle East. And remember the cost of the phones isn't subsidized as it is in the US.

Considering the relative income of most middle-class business users and consumers in these places, it's easy to see why a new iPhone 5S is beyond their means. But a refurbished iPhone 5 is less expensive and an iPhone 4 and 4S are less expensive yet. This means with these older phones, more people can own iPhones and, as Cook said, become part of the Apple ecosystem.

Cook noted when he spoke about the benefits of distributing refurbished and used iPhones to people in developing economies that once people buy one Apple product, they tend to buy more products.

Wayne Rash

Wayne Rash

Wayne Rash is a freelance writer and editor with a 35 year history covering technology. He’s a frequent speaker on business, technology issues and enterprise computing. He covers Washington and...