2014 and the “iPhone-Cheap” for China and India — Analysis

Piper Jaffray analyst Gene Munster is out with a new prediction that Apple will release a low-cost iPhone to tap markets where carrier subsidies can’t be used to sell smartphones as successfully as in the United States.

Business Insider has obtained a research note from Munster according to which Apple plans to tap the next three billion smartphone buyers in China and India with a cheap iPhone - “a $200, unsubsidized iPhone, coming in 2014.”

The details are scarce, and Munster doesn’t make any technical estimates. However, Apple’s tri-annual business model enables it to sell separate iPhone versions with different specifications at different prices.

The iPhone 4 - the first iPhone with a Retina display and custom A4 chip - currently sells for $0 with a two year contract. The same device is likely positioned to become a $200 smartphone without carrier subsidies in 2014.

Apple has never struggled to win hearts through cheap products, which makes it very unlikely that it will create a low-end device that aims to cater to the masses.

Profits aside, Apple cares deeply about its image, making this quite a difficult decision the company.

Cupertino had the hardware to make a cheap iPhone years ago. It still does, but it continues to sell three iPhone versions that can still be considered expensive.

Even the $0 iPhone 4 isn’t exactly affordable for some pockets, with its expensive two-year contract at AT&T, Verizon or Sprint.

Of course, competition in the mobile wasn’t as fierce two years ago as it is now. Also, patent litigation wasn’t at every corner.

And if Apple is looking to win the world over, Tim Cook will have to carefully manage his executive forces to churn up a product that doesn’t risk ridicule. After all, Apple is in the big league. And it wants to stay there.