marvin
Headphoneus Supremus
- Joined
- Feb 12, 2005
- Posts
- 2,580
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- 18
I'm going to take your cue and call the hypothetical iPhone/iTouch hybrid an iPhone Mini.
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Industry accepted doesn't mean it's not arbitrary.
DoMoCo featurephones have long had high spec hardware, high end mobile gaming, third party application support, and various forms of alternate connectivity. Brew MP featurephones, like the HTC Freestyle, have full HTML browsers, an application store, and specs mostly in line with the original iPhone and early Android phones. There's a lot of crossover in terms of features, and more than a few existing featurephones with smartphone characteristics. That number will increase in the near future as Brew MP phones and low end Android phones from ZTE and Huawei start replacing existing feature phones.
Arbitrary doesn't mean useless though. Just makes talking about products in the gray area difficult. Thinking about it though, "does it have WiFi?" would be a pretty good differentiator. Can't think of any featurephones that have WiFi.
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I'm saying it's the size of the smartphone subsidy that allows high smartphone profits. The average smartphone subsidy is in the ~ $350 range, significantly more than the average cellphone subsidy.
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I doubt supporting a variant with disabled mobile data, which they already have a user accessible control for, would be a major effort.
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Apple's R&D expenditure is ~ 3-4% of revenue these days. A couple billion is quite a bit of R&D, but doesn't account for much of the per unit cost.
In any case, products of similar technological complexity to smartphones have nowhere near the MSRP/BOM ratio of smartphones. Tablets are ~ 1.5-2x. Notebooks are ~ 1.2-1.5x. Smartphones are ~ 3x. It's also pretty obvious that an iPhone doesn't cost twice as much to make as an iTouch, but that's where pricing is with "what the market will bear" pricing. Market can (and does) bear a whole lot more when consumers are paying for hardware on an installment plan.
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Here's the market segment I'm talking about:
I think that's a pretty large underserved market segment. I think that ~ $350 MSRP ($200 upfront + $150 2-year contract subsidy) is enough for iTouch class device capability and user experience. You may disagree.
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Apple sells the Shuffle. Doesn't get more low end than < $50 consumer electronics. They also sell the $599 Mac Mini, which may not be the best value but is affordably priced.
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You've just described the iPhone 3GS. People didn't stop buying the iPhone 4.
The iPhone Mini would be situated even further away from the 4 in terms of marketspace than the 3GS currently is and would allow Apple to capture a market where it currently has no presence.
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Well, it's not arbitrary. It's the actual industry accepted definition of a feature phone.
Industry accepted doesn't mean it's not arbitrary.
DoMoCo featurephones have long had high spec hardware, high end mobile gaming, third party application support, and various forms of alternate connectivity. Brew MP featurephones, like the HTC Freestyle, have full HTML browsers, an application store, and specs mostly in line with the original iPhone and early Android phones. There's a lot of crossover in terms of features, and more than a few existing featurephones with smartphone characteristics. That number will increase in the near future as Brew MP phones and low end Android phones from ZTE and Huawei start replacing existing feature phones.
Arbitrary doesn't mean useless though. Just makes talking about products in the gray area difficult. Thinking about it though, "does it have WiFi?" would be a pretty good differentiator. Can't think of any featurephones that have WiFi.
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Also, just so we're clear, most phones are subsidized under contract. That's why you can get a free phone with a 2-year contract. Granted, the subsidy is often only $50 to $100 but it's still a subsidy.
I'm saying it's the size of the smartphone subsidy that allows high smartphone profits. The average smartphone subsidy is in the ~ $350 range, significantly more than the average cellphone subsidy.
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They would be taking away features and now having to support four variations of iOS where three of them are radically different.
I doubt supporting a variant with disabled mobile data, which they already have a user accessible control for, would be a major effort.
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As for the MSRP, there are a number of factors you may not be counting. Phones take a relatively decent technological jump every year or two. There is a great deal of R&D that goes into this and each company is, more or less, doing it on their own. In contrast, Blu-ray players, TVs and the like don't actually change that much and all use a lot of the same technology, technology that is shared in other sectors.
Apple's R&D expenditure is ~ 3-4% of revenue these days. A couple billion is quite a bit of R&D, but doesn't account for much of the per unit cost.
In any case, products of similar technological complexity to smartphones have nowhere near the MSRP/BOM ratio of smartphones. Tablets are ~ 1.5-2x. Notebooks are ~ 1.2-1.5x. Smartphones are ~ 3x. It's also pretty obvious that an iPhone doesn't cost twice as much to make as an iTouch, but that's where pricing is with "what the market will bear" pricing. Market can (and does) bear a whole lot more when consumers are paying for hardware on an installment plan.
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Again, if we're talking about people who are looking for a device that's as capable as, say, an iPod Touch they're still going to want the mobile data. You can say you don't think that's the case, and with a certain segment of the population you're right. But the majority do want mobile data, it's why they go for a smartphone in the first place.
Here's the market segment I'm talking about:
- Don't want required dataplan @ $300/year for 2 years
- Don't want required text plan @ $60/year for 2 years
- Want phone that doesn't suck
- Have $200
I think that's a pretty large underserved market segment. I think that ~ $350 MSRP ($200 upfront + $150 2-year contract subsidy) is enough for iTouch class device capability and user experience. You may disagree.
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Beyond that, what about Apple's business strategy makes you think they'd care about such a low-end market? They barely make computers that cost less than $1,000. The only areas where they are truly, really competitive in price are the iPad, iPhone, iPod Touch and the Apple TV (oddly enough).
Apple sells the Shuffle. Doesn't get more low end than < $50 consumer electronics. They also sell the $599 Mac Mini, which may not be the best value but is affordably priced.
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If Apple created a device that cost $100 and offered a subset of the features the iPhone 4 offered, and assuming people stopped buying the iPhone 4 and bought the iPhone Mini or whatever instead, where's that smart for Apple?
You've just described the iPhone 3GS. People didn't stop buying the iPhone 4.
The iPhone Mini would be situated even further away from the 4 in terms of marketspace than the 3GS currently is and would allow Apple to capture a market where it currently has no presence.