Analyst Charlie Wolf says it would be “insane” for Apple to build a truly low-cost iPhone. Here’s why:
Wolf’s thesis was presented on Wednesday in a note to investors, a copy of which was provided to AppleInsider. In it, the analyst went as far as to say that building a cheap iPhone to capture the low end of the smartphone market would be an “insane idea” for Apple, destroying the company’s gross profits seen in its current strategy.
For example, to hit the so-called “sweet spot” of smartphone pricing in emerging markets, Apple would have to price a hypothetical cheap iPhone at around $350 without a carrier contract subsidy. If Apple were to target a hypothetical 40 percent gross margin with such a product, Wolf’s estimates suggest the cheap iPhone would need a bill of materials at around $90 — or less than half the bill-of-materials cost of high-end iPhones.
That’s just not doable for the kind of device Apple is willing to put its name on, either. There may come a time to sacrifice profit margins to market share, but this is not that time. Twice now I though Apple might go for it, before the launch of the iPad mini last year, and before this year’s launch of the iPhone 5c. I won’t make that mistake a third time. Apple will charge you less for a smaller device, but not that much less.
Strangely enough Apple does seem willing to part with fat profit margins on the Mac Pro, although that admittedly is not a workstation they’ll move in large numbers. But if you go to Dell or HP and try to build a similarly-outfitted desktop workstation, you’ll likely spend more money than you would for a Mac Pro — and without super-speedy PCIe SSD, either. The same was true at the time my five-year-old Mac Pro Nehalem came out — no Windows OEM could touch Apple’s prices for Xeon machines, which I suspect was due to a sweet deal with Intel. Oh, and instead of a sleek, quiet, 11-pound machined aluminum cylinder, Dell and HP will sell you massive ugly plastic boxes.
I should mention here that contrary to popular belief, the CPU, dual GPUs, and SSD are all user-upgradeable in the Pro.
And yet with all those positives, odds are I won’t be buying one.
I’ve done my research since Apple released the new Pros last month and even though I’m starting to get that upgrade itch, they just don’t suit my needs. The only really CPU/GPU intensive stuff I do is with Aperture and Handbrake. But Handbrake doesn’t (so far as I know) have the ability to really take advantage of that dedicated secondary GPU to offload from the CPU. And, really, two GPUs is serious overkill for still photography.
So I’ll likely end up with a new iMac, when the current i7 models give way to something with six cores — and a 4k screen. Or maybe I’ll build myself a Hackintosh. Fact is, the new Mac Pro is without question the finest video editing box (cylinder!) anyone has ever put out for under five figures.
But that’s not what I do.
It’s a shame, too. Because I’d like to have one on my desk, just so once a day I could look at it and say, “My God, it’s full of stars!”