Why does Apple need to cut prices on the iPhone

The statement of Apple CEO Tim cook about the desire to reduce the cost iPhone, which he made in an interview with Indian TV channel NDTV, I want to be taken literally — they say that the iPhone will be cheaper. However, it is worth considering how the context of the statements and the factors for and against a real price cut of these smartphones.

As Life writes, they talked about the situation in the Indian market, where iPhone are way more expensive than in the US, when comparing in dollar terms. For example, the 16-Gigabyte iPhone 6s in India costs about 62 000 rupees ($920), whereas in the US it costs from $ 650. However, in the same interview, cook explained the high prices the high taxes in India.

It is clear that it was a local issue. And it can have a local solution. Apple is a large Corporation, to bargain with India. Billion population of the country is a very attractive factor to take decisive measures, including the transfer part of the production — it is solely the assumption of the author — for example, recovery smartphones. Restored smartphones are sold at a lower price than new, even though they look the same and have the same warranty. In particular, they go well in Russia.

Can we consider the matter closed and leave the hope to see the cheaper iPhone in other countries? Do not rush. iPhone is not the first day are more expensive in India than in the US, and this is not the first country where that situation persisted.

Tim cook’s statement has sounded next day after the sad statistics Apple for Gartner, a major international company involved in the collection and analysis of data on the retail sale of goods. In the first quarter of 2016 Apple iPhone sales amounted to about 52 million smartphones, 14% percent less than the year before. The drop in sales of smartphones in the first quarter, the company showed last year, but over the past 12 months and it is still the market share lost: now it is only 15% instead of 18%. Jostle her manufacturers of Android-smartphones: Samsung, Huawei, Oppo.

On the one hand, it is clear that the market reaches saturation, the increase in sales of smart phones compared to last quarter was only 4%. But competitors of the Top 4 are rising and Apple falling. One of the reasons is the expansion of the market is possible only at the expense of those users who previously could not afford a smartphone. Most likely, for financial reasons. And with the budget models from the Apple conceptual problem — the brand does not want to associate myself with cheap phones.

An intermediate solution is found in selling the most smartphones restored. Another way of reducing the price — the release of inexpensive models. I must admit, with the iPhone 5c it did not work — overall, the market did not accept it, and continue she did not receive. But the iPhone model SE, which is similar to the upgrade of the old iPhone 5s, the first testers are perceived favorably.

We can assume the special edition model with a simplified camera and, for example, without a fingerprint scanner, but only for certain markets to not bring down the price of those where well go full-featured models. Yet to politics issue of regional models of the company have not been invoked, but before she and tablets with a stylus basically did not released.

Theoretically, the available funds of the company will be enough to pay for duties and taxes in India, reducing the price of smartphones to buyers. However, this will produce the following problem — significant cost reduction will attract less solvent audience, which is unlikely to buy in the required to payback the amounts of utilities and games. And the question of income from the App Store for Apple has the same importance as the income from the sale of the devices. Let’s not forget that, unlike Google, Apple maintains the entire ecosystem of their gadgets.

It appears that now Apple is running on the razor’s edge: you can not stop, but every mistake is a deep wound. Will the iPhone to become cheaper in other countries by analogy with India? Yes, in the course of the year we can see new low-cost model of Apple’s smartphone, which may be still designed for local markets, e.g. BRICS, including Russia.

Clifton Nichols

Clifton Nichols

Hi! I’m Clifton and I am a full-stack engineer with a passion for building performant and scalable applications that are beautiful and easy to use.

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