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Apple Marketing VP Phil Schiller Says No to Cheap iPhones

By - Source: 9to5Mac | B 27 comments

Schiller's comments indicate that Wall Street Journal's report on a cheaper iPhone is probably false.

Recently, the Wall Street Journal reported that it's heard rumblings from Apple insiders that the company was considering making a cheaper iPhone—a rehash of the same rumor that it reported back in February 2011.

The idea that Apple would make a less expensive iPhone seems ludicrous; after all, the company's products are built on the foundation of higher cost for higher build quality. Then again, Apple was willing to give a little bit of leeway with the iPad mini, so a cheaper iPhone doesn't seem wholly impossible.

However, in a recent interview with Shanghai Evening News, Apple Senior Vice President of Marketing Phil Schiller stated the contrary. He reiterated what Apple's core philosophy has been. "[E]very product that Apple creates, we consider using only the best technology available," he said. "This includes the production pipeline, the Retina display, the unibody design, to provide the best product to the market.”

"At first, non-smartphones were popular in the Chinese market, now cheap smartphones are more popular and non-smartphones are out.

"Despite the popularity of cheap smartphones, this will never be the future of Apple’s products. In fact, although Apple’s market share of smartphones is just about 20%, we own the 75% of the profit.”

Though Schiller's comments don't necessarily address the rumors, it seems pretty clear that he's against the idea of a cheaper iPhone just to target a larger market. But that doesn't discount the fact that he may be referring to an iPhone of lesser quality, like the one that Wall Street Journal suggests. Still, we're operating on a lot of "ifs" here, and we can never be sure what Apple is up to until an official confirmation.

Thanks to The Next Web for translated interview responses.


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Top Comments
  • 10 Hide
    joe nate , January 11, 2013 3:34 PM
    Quote:
    the company's products are built on the foundation of higher cost for higher build quality

    Quote:
    Apple’s market share of smartphones is just about 20%, we own the 75% of the profit


    "No, we won't make a cheap iPhone, because that would cut into our profit margins too much. Higher cost means higher markup! Where did you come up with this higher quality concept?"
Other Comments
  • 7 Hide
    Ragnar-Kon , January 11, 2013 3:32 PM
    Well, I suppose Apple can do whatever they want. Especially considering their plan has been working out for them quite well so far.

    But some people don't want the Cadillac overpriced smartphone, they just want the plain old Chevy. If Apple wants to stay that company that only sells the flashy Cadillacs, then so be it.
  • 10 Hide
    joe nate , January 11, 2013 3:34 PM
    Quote:
    the company's products are built on the foundation of higher cost for higher build quality

    Quote:
    Apple’s market share of smartphones is just about 20%, we own the 75% of the profit


    "No, we won't make a cheap iPhone, because that would cut into our profit margins too much. Higher cost means higher markup! Where did you come up with this higher quality concept?"
  • Display all 27 comments.
  • 0 Hide
    jakes69 , January 11, 2013 3:35 PM
    they should just marked down the price and called it the cheap phone. ;-)
  • 4 Hide
    shafe88 , January 11, 2013 3:37 PM
    "Cheap iPhones", ROFLMAO
  • 4 Hide
    WithoutWeakness , January 11, 2013 3:38 PM
    "Despite the popularity of cheap smartphones, this will never be the future of Apple’s products. In fact, although Apple’s market share of smartphones is just about 20%, we own the 75% of the profit.”

    They're ripping you off, people. And they know it, they've known it all along. And now they can just tell you it because they know you'll buy their stuff anyway.

    I'm glad we're hitting the point where users are starting to see the flaws of iOS and OSX and moving to other platforms. And I'm glad Linux is starting to see more growth into new markets. This is going to be a great new year for technology.
  • -1 Hide
    sliem , January 11, 2013 3:56 PM
    "[E]very product that Apple creates, we consider using only the best technology available"
    should be
    "[E]very product that Apple creates, we consider using only the best technology available at our price range."

    "In fact, although Apple’s market share of smartphones is just about 20%, we own the 75% of the profit."
    Which means
    "Our only goal is to make as much profit as possible."
  • 0 Hide
    Anonymous , January 11, 2013 3:59 PM
    The earlier iPads wiped out the competitions. People said Android based tablets were bad, catch up with Applet iPads, and that's why they don't succeed. Guess what, they're still catching up with Apple's quality, but they're eating some of Apple's lunch. The point is that earlier iPads were better than Android pads, but actually were cheaper (brand name stuffs, not no name), when compare similar models, or similar buyer targets (high end, mid end, etc). So that explains why Android tablets are eating Apple's lunch.

    Even a $0 "smart" phones cost money for about 2 year contract in the US, so there is not much point of making iPhone cheaper actually. They're already cheap comparing to other phones. They also probably makes lots of money for Apple if it's free (with 2 year contract). So, what Apple need to do is producing more variety like the iPods, at various price points (who say iPods are cheaply made, even with lower price?). The variety is about screen size. They need larger size. People laugh at 5" and 5.5" phones, until Samsung sells boat load of them. Who's laughing now? Apple rejected the idea, and upgraded to 4". Now, try to squeeze 1080p into that 4". 1080p is a rage for phones now, so Apple better watch out, regardless if it improves the quality or not. Where else you go? better screen, better cpu, better memory. So screen is a big factor, that Apple is behind.
  • 3 Hide
    wemakeourfuture , January 11, 2013 4:04 PM
    WithoutWeakness"Despite the popularity of cheap smartphones, this will never be the future of Apple’s products. In fact, although Apple’s market share of smartphones is just about 20%, we own the 75% of the profit.”They're ripping you off, people. And they know it, they've known it all along. And now they can just tell you it because they know you'll buy their stuff anyway.I'm glad we're hitting the point where users are starting to see the flaws of iOS and OSX and moving to other platforms. And I'm glad Linux is starting to see more growth into new markets. This is going to be a great new year for technology.


    Yah because a Galaxy S3 or Note II is soooo much cheaper than an iPhone 5?

    For each one, its the base model:

    iPhone 5: $699
    Note II: $729
    S3: $649
    LG Optimus G: $649
    Nokia 920: $599

    Yah the Apple is really ripping people off...

    Also, Linux's penetration on laptop and desktop for average users has not grown in any significance over the past 7 years, where as OSX share actually has.

    Android is very successful, no question about that, as long as its FREE for manufacturers it will be very popular with them. Also, if Google starts in anyways to block features or give advantage to their products with Android over competitors, you will see an exodus from Android, perhaps that would be good for Ubuntu or some Linux variant.
  • 1 Hide
    wemakeourfuture , January 11, 2013 4:36 PM
    nnullThe earlier iPads wiped out the competitions. People said Android based tablets were bad, catch up with Applet iPads, and that's why they don't succeed. Guess what, they're still catching up with Apple's quality, but they're eating some of Apple's lunch. The point is that earlier iPads were better than Android pads, but actually were cheaper (brand name stuffs, not no name), when compare similar models, or similar buyer targets (high end, mid end, etc). So that explains why Android tablets are eating Apple's lunch.Even a $0 "smart" phones cost money for about 2 year contract in the US, so there is not much point of making iPhone cheaper actually. They're already cheap comparing to other phones. They also probably makes lots of money for Apple if it's free (with 2 year contract). So, what Apple need to do is producing more variety like the iPods, at various price points (who say iPods are cheaply made, even with lower price?). The variety is about screen size. They need larger size. People laugh at 5" and 5.5" phones, until Samsung sells boat load of them. Who's laughing now? Apple rejected the idea, and upgraded to 4". Now, try to squeeze 1080p into that 4". 1080p is a rage for phones now, so Apple better watch out, regardless if it improves the quality or not. Where else you go? better screen, better cpu, better memory. So screen is a big factor, that Apple is behind.



    Apple has supply constraints which limit how much changes they can make since they're demand is incredibly high and manufacturing capacity is a significant restriction.

    iPhone 5 will sell close to 50 million units in the first 4 months or so, having enough displays and other components for the finishing product is a constraint to them.

    They were already supplied constrained on displays which caused shortages.

    If they had changed their display substantially they may have only sold 20-30 in the first 4 months.

    Its easier to come with a radically different product and only need to sell a few million units. Even the S3 has half the demand of an iPhone 5, if you look at the differences between the S2 and S3 its as incremental as the 4S and 5, except Apple was able to greatly reduce the weight with increased dimensions where Samsung had to do the opposite and increase the weight.
  • 0 Hide
    j2j663 , January 11, 2013 5:01 PM
    wemakeourfutureYah because a Galaxy S3 or Note II is soooo much cheaper than an iPhone 5?For each one, its the base model:iPhone 5: $699Note II: $729S3: $649LG Optimus G: $649Nokia 920: $599Yah the Apple is really ripping people off...Also, Linux's penetration on laptop and desktop for average users has not grown in any significance over the past 7 years, where as OSX share actually has.Android is very successful, no question about that, as long as its FREE for manufacturers it will be very popular with them. Also, if Google starts in anyways to block features or give advantage to their products with Android over competitors, you will see an exodus from Android, perhaps that would be good for Ubuntu or some Linux variant.


    If you really think that Apple isn't ripping you off then you are in iSheep denial. I'm not saying that other companies aren't bad at it but it is a well known fact that Apple is the worst with their markups. Case in point (this was on a TH article) it costs Apple $15-$30 to increase the storage capacity of their phones, yet the final price is $100 for the consumer to step up to the next tier. In fact, check this article out: http://www.ebnonline.com/author.asp?section_id=1893&doc_id=253759
    So much for Apple's superior hardware, it costs them $23/unit more to make the iPad mini than the Kindle Fire HD but iPad mini is double the price of the Kindle Fire HD.

    Oh and you are talking in circles when you say a mass exodus from Android will be good for a Linux variant. If you missed the memo Android is Linux variant, by far the most popular one right now. Plus, the fact that it is an open source platform means that even if Google stopped developing it, it would take a very, very long time to die.
  • 0 Hide
    blurr91 , January 11, 2013 5:08 PM
    Cheap iPhone? Hell no! That would cut into Apple's 50% profit margin.
  • 0 Hide
    robochump , January 11, 2013 5:34 PM
    Apple isn't a cheap device brand. Not meaning price wise but quality and functionality. What Apple needs to keep an eye out on is relying on Samsung and other suppliers intentionally creating a part supply shortage in order to under-cut Apple sales. Samsung has upper hand because they are based in the part of the World that can manufacture electronics cheaply and in abundance.
  • 0 Hide
    wemakeourfuture , January 11, 2013 5:39 PM
    j2j663If you really think that Apple isn't ripping you off then you are in iSheep denial. I'm not saying that other companies aren't bad at it but it is a well known fact that Apple is the worst with their markups. Case in point (this was on a TH article) it costs Apple $15-$30 to increase the storage capacity of their phones, yet the final price is $100 for the consumer to step up to the next tier. In fact, check this article out: http://www.ebnonline.com/author.as [...] _id=253759So much for Apple's superior hardware, it costs them $23/unit more to make the iPad mini than the Kindle Fire HD but iPad mini is double the price of the Kindle Fire HD.Oh and you are talking in circles when you say a mass exodus from Android will be good for a Linux variant. If you missed the memo Android is Linux variant, by far the most popular one right now. Plus, the fact that it is an open source platform means that even if Google stopped developing it, it would take a very, very long time to die.


    I am quite aware that Android is Linux, what I am saying is a Linux variant NOT controlled by a company that is directly producing products that are competing with companies using Android.

    You do understand at a very high business level the risk a company takes by using software from a company that has control of that software AND is making products to compete with you. Eventually there because a huge conflict of interest.

    Android is OpenSource, it is not the risk that Google will stop developing it, its the risk that they can in the future change upcoming release licenses causing other companies to use an older version and fork off that. This is a significant risk when that company is competing with you.

    Just like how people have suspicions on Oracle's control of Java and possibilities of what they can do. OpenJDK exists, but how much penetration and influence it will have compared to Java in the industry if Oracle made major changes to how Java is license, priced, etc.


    Apple, has and always does have higher margins. And most companies charge roughly +$50 for higher memory, Apple does charge $100. At the base model, the prices are not far off, when you go to higher levels you need to add about $50 more. Again, going from a $699 (32GB S3) vs $799 (32GB iPhone 5) is a 14% price increase, where as for the 16GB its a 7.7% difference. Is the price difference like 50%, no, its not even 25%. Just like a S3 (16GB) is 8.3% more than a 920, they're different products, different demands, different prices and companies can command different profit levels. Samsung has higher margins off its S3 than the Nokia 920, does that make them evil? No its makes them a company trying to make profit, because that's what companies do.

    Also, the iPad mini is not double the price of the Kindle Fire HD. The price difference comes since Amazon needs to get marketshare and wants to push content to make its money. They do not make as much money on the actual device since they want to push advertisements and content to their users, this allows them to subsidize their costs. Completely different business models.

    Hence why the Kindle Fire HD is not even readily available outside the USA.

    Why is the Nexus 7 more expensive than the Kindle Fire HD? Does that mean Google is price gouging its customers? No, different products, different levels of support, different, different, different.

    Even though a GM may be the same size, shape and have the same HP as a BMW, I don't expect BMW to price their product at GM's level, they're actually different outside of a few common specs.
  • 3 Hide
    Vladislaus , January 11, 2013 6:04 PM
    wemakeourfutureYah because a Galaxy S3 or Note II is soooo much cheaper than an iPhone 5?For each one, its the base model:iPhone 5: $699Note II: $729S3: $649LG Optimus G: $649Nokia 920: $599Yah the Apple is really ripping people off...Also, Linux's penetration on laptop and desktop for average users has not grown in any significance over the past 7 years, where as OSX share actually has.Android is very successful, no question about that, as long as its FREE for manufacturers it will be very popular with them. Also, if Google starts in anyways to block features or give advantage to their products with Android over competitors, you will see an exodus from Android, perhaps that would be good for Ubuntu or some Linux variant.

    Could you please state the source of your prices. Because for example in amazon all phones you mentioned are cheaper than the prices you posted with the exception of the iPhone.
  • 2 Hide
    Vladislaus , January 11, 2013 6:13 PM
    wemakeourfutureAndroid is OpenSource, it is not the risk that Google will stop developing it, its the risk that they can in the future change upcoming release licenses causing other companies to use an older version and fork off that.

    Android is Open Source and it will have to remain Open Source, unless Google completely changes Android not to use software, like the linux kernel, that was already Open Source to begin with and protect by licensing agreement that forces everyone that changes it's code to post those changes to the community.
  • -2 Hide
    ericburnby , January 11, 2013 6:25 PM
    Android is NOT open source. You can get the Android source code and modify it any way you like (like Amazon here or Aliyun in China), but then you don't get access to all of Google's products/services. That side of Android is open.

    The other side of Android is what you get on your Samsung ot HTC phones. This version is not open source, and it's stupid for people to keep stating it is. These companies are members of the OHA (Open Handset Alliance) which has pretty strict rules about what you can do to Android in order to maintain compatibility. It's not open source because of these restrictions. Google also pushes its weight around if you don't follow the rules (remember when Acer had to cancel their Aliyun Android phone at the last minute because of pressure from Google?).
  • 2 Hide
    ericburnby , January 11, 2013 6:33 PM
    75% of the profits does noe mean they mark their phones up 75%.

    iSupply has done teardowns of numerous high end phones over the years and found that phones from Samsung or Apple (for example) have similar costs to build and similar margins. In fact, given that Samsung makes their own components it's likely their phones cost even less to make.

    The reasons Samsung's OVERALL margins are so low is because they sell a gazillion feature phones and dumb phones which have low margins due to their selling price. If Samsung only sold GS3's or Note II's, then they'd be raking in the money just like Apple.

    It doesn't help that Samsung makes 30 models of smartphone and another 60 models of dumb/feature phones, all with different screens, processors, memory, cameras, OS versions and so on. Apple only makes a couple models which means their economies of scale are the best in the industry. This also increases their margins.
  • 0 Hide
    wemakeourfuture , January 11, 2013 6:47 PM
    VladislausCould you please state the source of your prices. Because for example in amazon all phones you mentioned are cheaper than the prices you posted with the exception of the iPhone.


    Bell and Rogers the 2 largest Telecom companies in Canada who sell the most handsets in Canada.

    Bell: http://www.bell.ca/Mobility/Smartphones_and_mobile_internet_devices
    Rogers: https://www.rogers.com/web/content/Phones-Devices
  • 0 Hide
    wemakeourfuture , January 11, 2013 7:07 PM
    VladislausAndroid is Open Source and it will have to remain Open Source, unless Google completely changes Android not to use software, like the linux kernel, that was already Open Source to begin with and protect by licensing agreement that forces everyone that changes it's code to post those changes to the community.


    Android is under Apache Software License, whereas the Linux Kernel is GPL.

    http://source.android.com/source/licenses.html


    They don't even wanted contributed code to be GPL:

    Quote:
    How can I contribute to Android?

    There are a number of ways you can contribute to Android. You can report bugs, write apps for Android, or contribute source code to the Android Open-Source Project.

    There are some limits on the kinds of code contributions we are willing or able to accept. For instance, someone might want to contribute an alternative application API, such as a full C++-based environment. We would decline that contribution, since Android is focused on applications that run in the Dalvik VM. Alternatively, we won't accept contributions such as GPL or LGPL libraries that are incompatible with our licensing goals.

    We encourage those interested in contributing source code to contact us via the AOSP Community page prior to beginning any work. You can find more information on this topic at the Getting Involved page.


    http://source.android.com/faqs.html#what-kind-of-open-source-project-is-android
  • 1 Hide
    acerace , January 11, 2013 8:23 PM
    @wemakeourfuture You've open my mind. At least there're something good here rather than hate fest. Nice job, dude.
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