back to article Dear Apple: Want to stay in business? Make an iPhone people can afford

Apple needs to start making bargain basement mobes because soon there won't be enough rich new iPhone customers left in the world to prop up its sales growth, a leading analyst has suggested. The claim comes in a report by Toni Sacconaghi, senior analyst with Bernstein Research, with the snappy title: "Are There Enough Wealthy …

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  1. eSeM

    Oh Dear ....

    This will upset Rik Myslewski who seems to think Apple is doing so well .....

    :)

    1. JeffyPoooh Silver badge

      Re: Oh Dear ....

      Apparently, there will be FIVE BILLION more middle class people in the relatively near future.

      The number of dirt poor is supposed to drop precipitously.

      1. Gannon (J.) Dick

        Re: Oh Dear ....

        What will the rich and the middle class eat ? There will be dirt left over of course, but before I sign up for Soylent Green recycling, I owe a huge Harrruuummmppphhh to middle class financial planners who might cause the rich to suffer a perfectly foreseeable protein shortage.

        FIVE BILLION rookie financial planners are an ethical nightmare for the Industry.

  2. This post has been deleted by a moderator

    1. Seanie Ryan

      Re: El Reg is getting worse....

      nope, they definitely are just getting worse.

      Ferrari should also make a bargain basement car , as they will soon run out of rich people to buy their cars.

      HORSESHIT

      1. Chad H.

        Re: El Reg is getting worse....

        Thats pretty much what I was going to post. Apple has no interest in being an everyman product. They make products they believe are stylish and desirable to go after the higher end of the market. To build an everyman product they'd have to cut corners that would ultimately hurt the brand.

        Ferrari, Mercedes Benz and Rolls Royce could all make a shit car anyone could by - but don't because it would hut their brand. Equally, Hyundai or Tata could build luxury sports cars, but wont, becuase the brand has certain expectations that aren't compatible with a higher end product.

        1. Goldmember
          Facepalm

          Re: El Reg is getting worse....

          "Ferrari, Mercedes Benz and Rolls Royce could all make a shit car anyone could by"

          Er, the A-Class...?

          1. JeffyPoooh Silver badge
            Pint

            Re: El Reg is getting worse....

            "Er, the A-Class...?"

            And the B-Class, or as we call them: "loaners".

            E

        2. h3

          Re: El Reg is getting worse....

          They are not really high end.

          Not like Ferrari or Meridian or Bentley or Lotus or whatever.

          They use 200$ parts + manufacturing every time for the high end models. another 10$ or 20$ worth of flash for the even more expensive ones.

          For another 10$ they could make the ipod touches phones.

          Tata does make high end stuff (Jaguar).

      2. Anonymous Coward
        Anonymous Coward

        Re: El Reg is getting worse....

        In fact at one point Rolls Royce cars did identify that the market was saturating, and went through a process of manufacturing improvement to reduce costs. (Their solution to getting good enough quality on the parts for the GM engines they used had been to buy loads of parts and throw away the ones that didn't make their criteria, and because they could not afford state of the art body presses, they had to spend a fortune manually filling each body prior to painting. I once went on a course run by the guy who had overseen the project, so this is not a myth).

        Even so, they ended up being bought out and what saved them was the "new" millionaires in emerging markets.

      3. JimmyPage Silver badge

        Re: El Reg is getting worse....

        Apples and oranges.

        The automotive market is completely mature. Any technological developments are going to be evolutionary, and as such the consumer base is well known.

        Telecoms - particularly *mobile* telecoms is still an emerging industry, and as such likely to see revolutions in technology. This makes it a far more volatile market.

        One possibility - and certainly a threat for Apple - is that a new revolutionary development is made, which can only work between two newer handsets. All of a sudden the lack of buying power for the new iPhone becomes an issue, as it prevents you from plugging your new technology.

        1. DougS Silver badge

          @JimmyPage "automotive market is completely mature"

          How is the smartphone market not mature? What major breakthroughs have occurred in the past five years? I can't name one. CPUs got faster, more cores, better GPUs, 64 bits, etc. You got more RAM, more flash, newer wifi and wireless standards. Screens got bigger and higher resolution. Cameras got more megapixels and better light sensitivity. None of this compares to when a GPS got small enough to include in a phone and made using it for mapping possible, nor when capacative touchscreens rid us of the keypad.

          All of this is just following technological progress. Cars get improved electronics every year too, its just that nasty mechanical stuff like engines aren't subject to Moore's Law so the improvements aren't as obvious when measured against the total driving experience. But most wouldn't be willing to give up their ABS and stability control that Moore's Law made possible. Modern cars make a lot of use of LEDs for exterior lights (and even in some cases headlights) which eliminates the problem of a single burned out bulb leaving you without brake lights or a turn signal.

          The smartphone market is mature, all of those who talk about how Apple needs to "innovate" in smartphones are missing the fact that no one else is innovating in smartphones either, unless you consider gimmicks like a curved phone to be innovation. Something like that is akin to Ford putting out the Mustang with a new body style, its not exactly the invention of AWD or even four wheel steering.

          Technological progress continues, but there isn't really anything on the horizon that we're waiting to integrate into a smartphone that isn't quite there yet. Not that there isn't progress for things that could be integrated, just that none are going to be a game changer. They're now able to make atomic clocks small enough to put inside a phone, but who needs that? Maybe someone will come up with a need for time accurate to the picosecond that our current ability to have time accurate to a few milliseconds wouldn't be good enough for - if so, coming up with that use will be the innovation, not the first phone to have an atomic clock in it.

          1. Jason 24

            @DougS

            I see your comments and raise you a bendy phone.

            There's still plenty of headway to be made in the computing industry as a whole.

            To use the car analogy I'd have to say fuel injectors were a major technological advancement, we refer to any post-2000 engine as "modern" and that's well over 100 years since the first engines.

            Even if we accounted for the idea that the computers themselves are allowing us to invent the next jump that much quicker we've still a long way to go before we're close to the level engines are today compared to their inception.

          2. DropBear Silver badge

            Re: @JimmyPage "automotive market is completely mature"

            You sir do have a point, but you're still wrong. I'm not sure how much room for real innovation there is currently in the automotive market, but I'm pretty sure we haven't seen the last of significant changes in the mobile industry in the near future. One example would be the integration of a projector - yeeees, I know it has been done and didn't really take off but I still find something like that rather handy; rather than the idea itself, I think only the specific embodyment was rejected the last time.

            Or there is the ongoing experimentation / push towards the fusion of desktop and mobile - once mobiles become capable enough (arguably already are) for the superficial, casual use that tablets keep proving is sufficient for a LOT of people, we might routinely start to dock our phones at home into HD peripherals - I do think that would be a rather major paradigm shift.

            Not to mention the perpetually-on-the-horizon flexible screens (they're bound to arrive eventually, even if this year's curved ones are a pale shadow of the real thing) - I'm still drooling over the idea of a tablet-sized screen rolled up into a stick, which I can unroll depending on how much of it I need - not all that much just to make a call, obviously. Oh, and I'm still waiting for a phone that can scroll lists or change the volume by a slide on its SIDE instead of its screen...

        2. JeffyPoooh Silver badge
          Pint

          Re: El Reg is getting worse....

          "The automotive market is completely mature. ... *mobile* telecoms is still an emerging industry, and as such likely to see revolutions in technology. ..."

          I think that you're "completely" wrong; or you spelled "somewhat" incorrectly. The only point that I'll grant you is that the mobile cycle time (~1 year) is quicker than cars (~5 years).

        3. JTUK

          Re: El Reg is getting worse....

          That's what the 5C is about. Corporates who don't need absolutely new shiny phones, were buying 4S or earlier as the corp phone. While they don't need / want the latest greatest phone, they would prefer the latest 4G compatible chipsets. This is only possible with the latest phone, hence why the 5C makes sense. A 16GB 5C is a relatively small increment on 8GB 4S.

          Jason

          1. Dave K Silver badge

            Re: El Reg is getting worse....

            The problem with the 5C is that it looks like a brightly coloured toy. Not good for a corporate COO or something who pulls out a bright green phone! I work for a huge international company and the 5C has been completely shunned so far. Not least because the 5S looks like a more serious phone (in grey) and is only a bit more expensive. For cheaper phones, the 4S along with Blackberrys are still the favoured option here, although I doubt the latter will last much longer.

        4. t.est

          Re: El Reg is getting worse....

          Well, look at WAG what kind of car they produce. They have the brands VW, Seat, Skoda, Audi, Porsche, Lamborghini, Bentley, Bugatti.

          If you exclude the upper league there. Almost every car they make is just one car. It's a Golf.

          VW Jetta is a Golf, Almost every Seat model is a Golf, Same with Skoda. Audi A3 and TT are Golfs.

          How did these companies become actually survive? Is it buy making the cheapest car out there? Or is it by making ridiculously many facelifts to basically just one car model?

          Why are they all so expensive, though they all are just Golfs. Because most of the RnD money goes into facelifts.

          That is why I as a former Audi driver, when I couldn't afford Audi anymore, i did not want to buy another expensive golf. I got more value from my money, with a simple Ford, although the gearbox and engine is crap in comparison.

          Now to the big question, should Apple start making Kia's to stay in business, or should they start building Golfs in different shapes?

          What was that iPhone 5c if not just another Golf. With the 5c they made a Jetta. What is the current 5S if not an Audi RS5 with Torque vectoring.

          Has Kia yet reach break even, or is it still founded by it's investors?

      4. fandom

        Re: El Reg is getting worse....

        "Ferrari should also make a bargain basement car "

        They do, they are called Fiats

        1. Michael Hawkes
          Gimp

          Fiats

          Following that idea, maybe instead of introducing a low-end iPhone, maybe Apple should create a new lower-end brand, and put iOS on its devices. That way they wouldn't 'taint' the Apple brand with inexpensive products by creating a new gateway drug opening a new market.

          1. t.est

            Re: Fiats

            "Following that idea, maybe instead of introducing a low-end iPhone, maybe Apple should create a new lower-end brand, and put iOS on its devices. That way they wouldn't 'taint' the Apple brand with inexpensive products by creating a new gateway drug opening a new market."

            Not 'taint' the Apple brand?

            Who makes iOS, Microsoft? If so, that is a perfect plan, then they can 'taint' Microsoft for the crappy performance with their low-end brand. As they buyer "never" criticizes himself for buying to cheap hardware.

            Did you say Apple made iOS, it that the same company that makes iPhones? Oh...

        2. Anonymous Coward
          Anonymous Coward

          Re: El Reg is getting worse....

          Actually, it's the other way round: it's FIAT that makes Ferraris. FIAT bought Ferrari many years ago, and Maserati later. The same way Ford bought Jaguar (just to resell it because no money were made), Volksawage owns Porsche - it was Porsche after all who designed the first VW - he too understood low-end cars were needed and not only high-end ones.

          Many luxury brands are owned by less "luxury" ones, because often they can't survive alone. Look at how Ray-ban was acquired by Luxotttica, Contax by Kyocera (which got rid of the brand when it meant nothing to actual customers), Hasselblad by its distributor (now sold to a VC).

          After all, it depends on how broad you can keep your market. If it drops below a given level, the company may become small enough to be acquired by someone else. Apple right now is big enough - very big, but at the end of '90s it wasn't, and it risked to be acquired or merged with another one. One issue for Apple is very dependent on just a few product models. On one side is an advantage, on another is a big risk. If that model fails, it brings down everything. It may be now the Rolex of phones, but unlike watches, phones don't have the long term values of luxury watches. An old iPhone is an old phone, not a valuable vintage item.

          1. Matt Bridge-Wilkinson

            Re: El Reg is getting worse....

            True, also ironically it was the British Army who saved/ran the VW factory and mass produced the first beetles to try and stimulate the local ecomomy after WW2. The design was all but abandoned by Porsche. Interesting stuff.

        3. Gannon (J.) Dick

          Re: El Reg is getting worse....

          "They do, they are called Fiats"

          Excellent point, but then again Apple would be horrified to think people call iPhones what they call Fiats.

          1. Seanie Ryan

            Re: El Reg is getting worse....

            aha, so the solution is that Apple buy Samsung and they they have that "other" brand that they can sell crappy cheap shit phones through, by making no changes at all.... ;-)

            seriously, most markets are giving away iPhones for Free on a contract. who cant afford that?

      5. SoaG

        Re: Ferrari should also make a bargain basement car

        What kind of growth are investors pricing in for Ferrari vs Apple?

        The article isn't saying Apple is doomed if they don't broaden their market, it's saying they won't be able to maintain their recent growth rate. Growth failing to meet inflated expectations may well doom their share price, and thus the board/senior management's jobs, but not the company itself.

        The low-end market will eventually saturate as well, after all. It's a question of whether they want to be bigger and broader or remain (relatively) niche as they have in the desk/laptop market, and as Ferrari has done with cars. Either way, the choice has consequences.

      6. jonathanb Silver badge

        Re: El Reg is getting worse....

        The Fiat group does make bargain basement cars to cater for people who can't afford Ferraris.

      7. zb

        Re: El Reg is getting worse....

        Ferrari is owned by Fiat. Have you noticed Mercedes and their Smart Car or BMW and their Seies 1? Your car analogy is faulty

        1. Oninoshiko
          FAIL

          Re: El Reg is getting worse....

          On the contrary his analogy is great! His point is faulty.

          1. Michael Thibault

            Re: El Reg is getting worse....

            But don't they all use electronic ignition these days?

          2. Anonymous Coward
            Anonymous Coward

            Re: El Reg is getting worse....

            A better analogy is the camera market. The two top brands, Canon and Nikon, have products for the full spectrum of customers, from low-end cheap compact cameras, to the top of the line, high quality and very expensive professional DSLRs and lenses. No one would say that the Canon and Nikon brands are tarnished by the low-end products, the high-end ones show what they are capable of, and keep the brand value.

            Meanwhile other renowed brands that had not a product line broad enough failed. Pentax was sold to the less fashionable Ricoh, Minolta was sold to Sony, Contax was already owned Kyocera, which killed the brand when it didn't tell much to new customers. Leica, which only makes expensive cameras, is a niche market company. But that's a tech market that sells high-end items to tech users, not consumer ones.

            It looks Apple got its game book from fashion, not technology. In fashion price and design are used to select customers and create exclusivity, because there's after all little else to do. Sure, you can use better textiles and leathers, careful manufacture, but the differences today are not so huge like in some technology sectors. Till now it worked, because of PR and "free" ads from the media. Could it work in the future, especially when competitors with a broader product range makes comparable devices? Maybe, as long as the smarphone stays a "status-symbol". The risk for Apple is if it becomes another commodity device, then the premium price for "exclusivity" may not work any longer.

            1. Lusty

              Re: El Reg is getting worse....

              "A better analogy is the camera market. The two top brands, Canon and Nikon, have products for the full spectrum of customers, from low-end cheap compact cameras"

              Actually, neither Canon nor Nikon do have truly low end cameras. Everything they sell is still quality just lower on the spectrum, but neither would even contemplate creating a £10 compact like the POS ones available as it would tarnish their brand. Samsung on the other hand, create Android phones which people buy thinking it's a bargain and then regret later when they realise it doesn't do anything useful.

              1. Anonymous Coward
                Anonymous Coward

                Re: El Reg is getting worse....

                Actuallyt, the analyst didn't say "Apple needs to make $9.99 crap phones". Both Canon and Nikon do entry-level cameras, below the $100 mark, street price. What's against a $399, $299 or even an $199 one? Sure, if you buy an entry level camera you don't expect it works and perform like a pro camera like Canon EOS-1D X or a Nikon D3x (which cost *thousands* of dollars, plus the cost of the lenses, again thousands if not ten thousands of dollars). But anyway it's a way to get people into the "system", and then later move them to the more expensive models if they outgrow the cheaper ones.

                Not everybody needs a pro camera, as not everybody needs an high-end phone. Some people are completely fine with less poweful phones - not everybody use them for playing games or the like, which are the only applications that really need a powerful phone. Calling, messaging, web browsing, email, work perfectly with less powerful phones - and I guess a lot of iPhone users don't go much far from that.

                Apple may risk that if the smartphone lose its "status gadget" appeal, it may not sustain the sales of expensive devices only. Something like that happened about forty years ago, when in the '70s SLR cameras became fashionable, many people who don't really need one bought one (and never changed the kit lens in their life!). Later the market changed - and more than one company found itself in trouble.

                And even before, German manufactures of high-end cameras only couldn't compete with Japanese companies that addressed the market better. Zeiss-Ikon, Contax, Rollei are names that made the history of photography with legendary products, but couldn't keep pace with times, despite their technology.

                Apple found itself already in such a tituation in the '90s, when it had an outdated OS (that's the reason they had to buy NeXT), and a product line that was no longer enough above competition to justify the prices and the lock-in in proprietary technology.

  3. Yves Kurisaki

    I wonder if..

    ..there will be enough idiots left in the world to keep reading the results of crap research like that.

    1. Frank Bough

      Re: I wonder if..

      Come on, that graph is a genuinely great work of fiction!

  4. El_Fev

    This report is complete and utter rubbish

    The only thing that matters is does Apple continue to make a profit on its iPhone business. How exactly does making a bigger market with less profit and diluting your brand image by selling cheap phones help?

    Is BMW going out of business becuase its not selling some cheap junk ass £5 car to indians?

    As long as Apple keep their brand, keep producing quality, which people are prepared to pay for, then joining the race to the bottom is for idiots.

    Thats why they are Apple with 150 Billion in cash and he's a analysts earning 60K a year if lucky, what a cretin!

    1. Should b Working

      Re: This report is complete and utter rubbish

      Profit is one thing, but shareholders want growth too. This report shows that their growth is becoming tied to a fixed market size of replacement devices.

      1. Gordon 10 Silver badge

        Re: This report is complete and utter rubbish

        Thats not necessarily true - when a product turns from a rising star into a cash cow companies can respond by offering a dividend if they have nothing else to drive share growth. Infact if you're a defensive minded investor you are likely to favour high dividend stocks over high potential growth stocks.

        Like other posters have said this "analysis" rests on the assumption that Market growth doesnt have natural limits anyway.

      2. Anonymous Coward
        Anonymous Coward

        Re: This report is complete and utter rubbish

        You say 'this report' as if it's an actual fact - while iPhone users are loyal and would buy a new iPhone next time a huge number are to new users and those old iPhones (when people do upgrade) also get passed on. Someone is still using my old 3GS (4+ years old) and my 4S etc. In comparison most old Android phones get dumped in a drawer as they have little / no value and no support.

    2. Anonymous Coward
      Anonymous Coward

      Re: This report is complete and utter rubbish

      Yes, compare the article subheading: "Want to stay in business?"

      ...to the article itself: "This could mean that the fruity firm's growth will "invariably slow" unless it caters to the lower end of the market."

      The stock-market-driven obsession with constant growth has obscured the (blooming obvious) fact that there's a major difference between *growth* slowing and going out of business because your *sales* slowed to a halt.

      Growth *slowing* implies that sales are *still bloody growing*(!)... not likely to go out of business, then. Growth could grind to a complete halt, and you'd still be selling as many as you were before.

      Market share can also make things look worse than they are, since if the market grows and your sales remain the same (or even if they're growing, but not as fast as the market is expanding), you "lose" market share. In the case of smartphones, many- probably most- of the new customers that make up the expanded market wouldn't have been buying an iPhone anyway.

    3. Anonymous Coward
      Anonymous Coward

      Re: This report is complete and utter rubbish

      I'm guessing anyone can call themselves an anal-yst these days??

    4. Anonymous Coward
      Anonymous Coward

      Re: This report is complete and utter rubbish (NOT REALLY)

      Have you noticed that Mercedes came out with a C Class that starts at $29,900 USD?

      I guess not.

      It's not a "Race to the bottom" as you think, but a race for the "Rest of the Market".

      Why else would Apple even consider bringing out the 5C?

      Burn!

      1. Anonymous Coward
        Anonymous Coward

        Re: This report is complete and utter rubbish (NOT REALLY)

        Apple would have made the '5' into the lower / cheaper model but instead basically rebadged the '5' as a '5c' and not only gave a cheaper option but also opened it up to a wider market. I know people who really do not care about a fingerprint sensor but love the 5c colours.

      2. Chad H.

        Re: This report is complete and utter rubbish (NOT REALLY)

        >>>>Have you noticed that Mercedes came out with a C Class that starts at $29,900 USD?

        Have you noticed that a hyundai is half the price, and still has 4 wheels?

        1. Gronk

          Re: This report is complete and utter rubbish (NOT REALLY)

          Hyundai makes the Equus, starting at $61K, and the Genesis, starting at just over $34K, so they make expensive luxury cars, too.

        2. JeffyPoooh Silver badge
          Pint

          Re: This report is complete and utter rubbish (NOT REALLY)

          >>>>Have you noticed that Mercedes came out with a C Class that starts at $29,900 USD?

          >> Have you noticed that a hyundai is half the price, and still has 4 wheels?

          Yeah, but people might see you in it.

          I've seen a Kia Somethingorother parked in a mall display that was $42k !!!

      3. fandom

        Re: This report is complete and utter rubbish (NOT REALLY)

        "Have you noticed that Mercedes came out with a C Class that starts at $29,900 USD?"

        Haven't you noticed that Mercedes has a car that sells for half that? They are called "Smart" although I don't know if they are sold in the USA

        Seriously people, drop the auto analogies.

        1. t.est

          Re: This report is complete and utter rubbish (NOT REALLY)

          Smarts are utterly expensive for what they are.

      4. chr0m4t1c

        Re: This report is complete and utter rubbish (NOT REALLY)

        >Have you noticed that Mercedes came out with a C Class that starts at $29,900 USD?

        There was a reason for that: The BMW 3 Series.

        It turns out that a large number of people who buy luxury cars tend to be very brand loyal, once they start buying a particular brand they tend not to switch unless they have a really bad experience (or they have sufficient money to own several cars - a guy from Bentley once told me that they were typically the sixth car in someone's garage).

        BMW started at the bottom end of the market (with things like the three-wheeled isetta) and worked their way up. Mercedes were at the top end of the market and have gradually moved down.

        Why? Because the lower priced cars get "ordinary" people in to the brand and generally they work their way up. In the 1980's BMW's 3-Series acted as a feeder for the 5-Series and the 7-Series. Mercedes cheapest model was twice the price and once people were in BMWs they had to have a bad experience to even look at something else.

        In order to counter this, Mercedes started with the C190 and then as that still wasn't an low enough rung on the ladder, they followed that up with the A-Class.

        AFAIK, the mobile phone market doesn't really inspire quite the same brand loyalty at this point. I doubt there are many people buying a cheap Samsung who would automatically upgrade to mid-range Samsung next time rather than any other Android phone. A lot of people still just take whatever phone their operator offers them for free.

        So, unfortunately, not a terribly good analogy.

    5. Anonymous Coward
      Anonymous Coward

      Bias

      "The only thing that matters is does Apple continue to make a profit on its iPhone business. How exactly does making a bigger market with less profit and diluting your brand image by selling cheap phones help?

      Is BMW going out of business becuase its not selling some cheap junk ass £5 car to indians?"

      One way though, towards Apples butt!

      Of course BMW sell cheaper cars! This rant just highlights all fannybois bias toward Apple, you can not trust a fannybois comments.

      (and to confirm, i'm not a fandroid or any other fking tag you want to catergorise me with)

  5. Anonymous Coward
    Anonymous Coward

    So all luxury brands are going bust?

    Where are the cheap Ferraris? they recently decided to cut production numbers and keep the "cool" factor by not being so ubiquitous.

    1. Anonymous Coward
      Anonymous Coward

      "Where are the cheap Ferraris"

      They are called "Fiat". Check the company ownership. For Fiat, cutting Ferrari manufacture is a cost saving, not a loss of market share. The parent company has some rather good designs in current production, such as the 500 and the 4x4 Panda, which are rather successful.

      1. Anonymous Coward
        Anonymous Coward

        Re: "Where are the cheap Ferraris"

        So would you rather sell 10m units and make $10 each or 5m units and make $100 each?

        1. Anonymous Coward
          Anonymous Coward

          Re: "Where are the cheap Ferraris"

          This is what is called a "straw man argument". In the car industry it is more like "sell 10 million units and make money for the next 10-12 years on spares"(Fiat) versus "sell a few thousand units at most and make almost no money as most of them will spend their lives in a heated garage and do only a few thousand miles a year". (Ferrari). Five million Ferraris? No.

          I don't know if it is still true, but at one time Morgan made their profit from spares. The longevity and high maintenance needs of a Morgan meant that they could follow a Rolls-Royce (not the cars) sales model: superb customer service up front, keep drawing revenue from spares and service for the next fifty years.

          1. MonkeyCee Silver badge

            Re: "Where are the cheap Ferraris"

            Agreed, as I understood it cars are the best "razors and blades" model. The car causes you to chose which spares, the spares are what drives your long term profits. Hence why companies that use as many interchangeable parts (and the complaints that you end up driving the same car with facelifts) makes it both more convenient for the consumer and more profitable for the company.

            It's also why unofficial (fake) parts are a big problem. Also why your nice generic cars get nicked, since the bits can be chopped and flogged easily.

            Ferrari is worth more as a brand than in car sales. Probably more profit in the merch :)

  6. Anonymous Coward
    Anonymous Coward

    So the low end market isn't saturated?

    More click bait research from these so called analysts.

  7. Doc Spock
    Alert

    Lies, Damn Lies & Statistics

    1.

    In raw numbers, 52 million to 85 million over two years is good growth.

    2.

    The percentage of repeat purchasers is growing year-on-year. This is also a good thing.

    3.

    While expanding market-share is all well and good, I think Apple would prefer to have people upgrade and remain within the iOS ecosystem. The number of iOS users is hardly small (especially since that number is not just iPhone users).

    4.

    A new user and a repeat purchaser both have to buy an iPhone. Hardware sales is where Apple make the vast majority of their money.

    1. Anonymous Coward
      Anonymous Coward

      "Hardware sales is where Apple make the vast majority of their money." I highly doubt that!

      1. Steve Todd
        Stop

        It's there in black and white in the company financial statements. Software and iTunes makes up only a small fraction of the companies sales.

    2. hungee

      Re: Lies, Damn Lies & Statistics

      A little bit of knowledge goes a long way...

      This analyst is talking about growth in markets for investors to get a significant return on investment.

      He is not bagging Apple's products.

      He is making a case for bigger dividends.

      A companies stock price is based on how much an investor can expect in return (either dividends or growth) over about 5 years.

      Since historically Apple have no/low dividends the investors can only really expect a return through growth in share price which is only driven by larger profits == market share.

      What this analyst is saying, is in order for Apple's stock price to keep its value/grow it needs to expand market share and with near total "high end" smartphone saturation the only market share Apple can pick up is in lower priced markets.

      He is not bagging Apple's products.

      He is making a case for bigger dividends.

      That is all.

      sheez.

      1. MonkeyCee Silver badge

        Re: Lies, Damn Lies & Statistics

        They decided to start paying dividends like a normal company in like 2012. A lot of the value in Apple is it's whopping great cash pile, which it uses as a bargaining tool (lower price for upfront payment) and control (buying out certain tech), or if a tax holiday is given, shareholders.

        So come a tax holiday, massive dividends. Until then, keep clamoring for more, and I suspect the board might even listen.

        Did make me laugh when they where valued at more than Exxon.

  8. Anonymous Coward
    Anonymous Coward

    Yes indeed

    I mean iphone user will be buying the same phone time and time again if you just add something flashy like a fingerprint scanner ....

    My that is a lot of torches and pitch forks

    1. tin 2

      Re: Yes indeed

      Most would buy the phone time and time again if they didn't add anything flashy to it. I'm not sure you get why repeat buyers are repeat buyers.

  9. I ain't Spartacus Gold badge

    Why growth?

    If Apple can sell say 50m top-end iPhones a year and make $200-$250 profit on each, then they are talking $10b profit at least. To make the same $10bn more profit on a cheap phone, that say only makes a $50 margin, they'd have to sell 200m more. Which is a lot. And that's assuming that the sales of the cheaper one don't reduce the sales of their high profit one. After all, for each sale of a top-end phone they lose to a cheapie, they've got to sell another 3 or 4 cheapies to make up for the drop in profits.

    I suppose the real threat is the lovely profits on the year old models. Where they only drop the price by about $150, and as components get cheaper it wouldn't surprise me if the margins don't actually go up. Certainly towards the end of year two.

    On the other hand, they could decide that endless growth is a bloody stupid dream, of analysts and idiots who expect stocks to rise for ever and ever and richer and richer. And accept that the iPad and iPhone market are only a certain size. Then instead of spending management and research time chasing $50 a device, they could go into some other market and try to make huge margins at the top of that. Or just sit where they are, and try to keep themselves doing well in PCs, tablets, phones and iPods. Plus the even more profitable business of selling horrifically expensive cables and adaptors.

    I'm not sure how 'premium' a brand Apple are, as they have become much more mass market than they used to be. But I think they do still have the reputation for the pretty shiny-shinies of above average quality, and so it would be a risk to their whole brand to do the cheaper phones. But maybe it would be worthwhile, if they can't find any other exciting markets to go into. It's hard to do any proper calculations, but I'd have thought it's more risk to their brand to do cheap phones, than to do nothing at all.

    1. Anonymous Coward
      Anonymous Coward

      Re: Why growth?

      "I'm not sure how 'premium' a brand Apple are, as they have become much more mass market than they used to be."

      -Yes

  10. Lord Zedd

    Yeah, sure,

    $130,000,000,000 CASH in the bank, means they are heading down the drain like your journalism reputation.

    Apple is in the business of selling luxury electronics, not crap junk everyone can afford.

    What will your next article be? "Mercedes will go out of business soon if they don't start making a $5,000 car so I can afford one!"

    Do some research before writing your next article.

    1. HamsterNet

      Re: Yeah, sure,

      Err the car analogy works perfect, except for the facts:

      Mercedes make the Smart car range....

      BMW make the Mini...

      Ferraria make Fiats...

      1. Steve Davies 3 Silver badge
        Mushroom

        Re: Yeah, sure,

        Fiat Group also makes Ferrari's

        Volkswagon Group also make Lambo's and Bentley's and Skoda's.

        BMW also make Rolls Royce Cars

        It is all about brand differentiation.

        The race to the bottom has not done HTC very well has it? They made a loss last Financial Year.

        Crap Article. There will always be a place for high end goods. For some people these are what they buy every day. For others they are an occasional treat that buying the item makes you feel good.

        If Apple continues to make good kit and slowly expands their product range then there is no reason why they can't continue to make good profits.

        These frigging analysts. What a bunch of <redacted> tossers. ---------------------------->>>> for them

        1. DougS Silver badge

          Re: Yeah, sure,

          The fact Fiat makes Ferraris (and all the other examples) is only because of all the consolidation in the auto industry. Fiat didn't start out as Fiat and then create the Ferrari brand, nor the other way around. Ditto for VW and Lambo, and so on.

          If one company owned both Apple and some no-name Chinese company making ultra low end $50 Android phones, it wouldn't mean Apple is operating at the low end of the market any more than Ferrari is.

          Not that Ferrari and Apple are really an apt comparison. Ferrari is more like one of the crazy ultra luxury phone brands like Vertu. Both sell only a very small number of units, hundreds or low thousands, and pretty much if you don't make a million dollars a year or something close to it you probably will never consider owning either. They may make tens of thousands per car and thousands per phone, but because of the low volumes profit is measured in the tens of millions at best.

          Apple's profit is measured in the tens of BILLIONS. Apple operates at the high end of the mass market, where successful sales are measured in 100+ million units a year. Its just that now people think 100+ million a year isn't good enough, when there are over a billion mobile phones sold each year. Problem is, most of those billion phones won't be sold for enough money to leave much profit at all for the seller. If lower priced Apple phones steal sales from their high end, they may make less overall profit. Market share isn't the goal, profit is.

          BTW, please don't try to claim Apple needs a high market share to make money from iTunes. iTunes barely pays its operating costs. Apple runs it to support selling more hardware, not the other way around!

      2. Anonymous Coward
        Anonymous Coward

        Re: Yeah, sure,

        But it's not a Mercedes Smart is it or a Ferrari Punto? VAG (VW, Audi etc.) also own Skoda but it's not a Audi Favorit is it?

      3. Evil Auditor Silver badge

        @HamsterNet Re: Yeah, sure,

        Neither the Smart nor the Mini are exactly cheap cars in their classes.

        But I admit, the fact is completely new to me that Ferrari makes Fiat cars.

        1. Anonymous Coward
          Anonymous Coward

          Re: @HamsterNet Yeah, sure,

          The actual fact is Fiat owns Ferrari not the other way around.

          Fiat also own these brands: Alfa Romeo, Maserati, Chrysler, Dodge, Jeep and Lancia.

    2. Philip Lewis

      Re: Yeah, sure,

      "Do some research before writing your next article."

      That would be a first.

      (This will probably get moderated away)

  11. Aggrajag

    What a crock of shite; all products serve a 'limited market' - admittedly this limit can vary greatly but regardless everything has a limited sales potential. Does this mean every manufacturer in the world will ultimately fail?

  12. Nezumi
    Holmes

    Enforced obsolescence

    Apple already do a few things to make sure that a product's life is shortened. Non-removable battery, no expandable storage for phones. Soldered on CPUs, GPUs and memory for desktop computers. I also recall reading a story on Netkas that some Mac Pro's weren't issued with a required 64-bit EFI upgrade a few years ago when this was trivial to implement.

    Of course they not the only ones. I'm reasonably sure they're the most aggressive users of this technique though. Apple devices are difficult to repair for a reason. They want you to buy a new one.

    I admit it's a very cynical view, but I'm expecting iOS to be 64-bit only in the next few years. That way nearly everybody has to buy a new handset for the latest shiny. I'm also expecting a desktop OS upgrade that actually requires a modern GPU (or maybe more than 1) for a similar reason.

    Personally I think El_Fev is right. Just keep shafting your existing userbase.

    1. DougS Silver badge

      Re: Enforced obsolescence

      No, they do those things to achieve the look they want for the product (thin, light, etc.) That may not appeal to you, but it appeals to many.

      I remember seeing some data that only a few percent of PCs ever had any sort of upgrade done, and almost all were to add memory. Probably much less common now that PCs tend to almost always ship with plenty of memory since it is so cheap. Almost no one upgrades the CPU. The needs/wants of the average Reg reader are not typical of the population at large.

      The lack of replaceable battery may be a problem for those who are on their phone all day and don't have easy access to a charger. The solution for that? Those people shouldn't buy an iPhone. Or the growing number of Android phones that are following suit and have a non-removable battery for the exact same reasons as Apple.

      If Apple's goal is planned obsolescence like you think, they're doing it wrong. You only need to look at the resale value of a two year old Mac laptop versus a two year old PC laptop that originally sold for the same price, and similarly check out say a two year old iPhone 4S versus a barely year old GS3 to see what I mean. How many people are still using a four year old Android phone? There are millions still using a slightly more than four year old 3gs - it just had its last OS update a few months ago, but unless there's some major exploit found for its browser, it'll be useful for years to come.

      I suppose the non removable battery in the 3gs may start crapping out at some point, but they aren't at all difficult to remove. Anyone able to operate a screwdriver and Google should be able to figure out how to replace it. $4.99 online with free shipping, and comes with the tiny screwdriver needed to open the case.

  13. Ali on the Reg

    I disagree

    Under Jobs, Apple kept high prices and pushed the whole 'aspirational brand' angle. It worked . They should instead continue to innovate (easier said than done) and increase their prices. The goal is to bring in a profit, not take over the world in terms of revenue or quantities sold.

  14. Shao

    Very poor article.

    The remainder of the market was always going to be from users of cheap feature phones anyway.

    Furthermore, the report fails to take into consideration the upgrade cycle of phones and that the definition of rich is relative. Hitting the top 25% wealthiest of customers isn't going to change.

  15. Anonymous Coward
    Megaphone

    But why must their be growth?

    It seems to be a general believe within some (usually US) companies that companies need to grow in order to prosper. Something which I've always considered utter nonsense. Because what's the matter with being able to maintain a status quo in which the company can continue doing what it does yet without expansion?

    The only thing which will hurt a company is the need to shrink. But that's something completely different from not expanding.

    1. Evil Auditor Silver badge

      Re: But why must their be growth?

      @ShelLuser, I completely agree with you regarding growth. Even divestment is not a bad thing as such - just like growth is not necessarily good.

      If your competitors in a certain market, however, all grow and you stagnate, you're probably doing something wrong. The others are increasing their market share and hence power and their potential future revenue. There may be good reasons not to grow in such a situation, e.g. if growth is not sustainable due to macro economy, if cost ratio is too high and no potential of reducing it, etc. But generally, your shareholders would be very right not being happy with your stagnation.

      So far, so good. Unfortunately, sometimes the growth of a company (or dismissed divestment) has (also) to do with the egos of the executives - "If I lose revenue (although for better profit) I will look daft on the golf course/in the club/where ever..."

  16. Torben Mogensen

    2nd hand sales

    While really old models aren't very sellable, iPhone 4 and 4S still fetch reasonable prices on the2nd-hand market and there are quite a few for sale on EBay and similar sites. So Apple doesn't need to introduce cheaper models to expand their market: They can rely on 2nd-hand sales to do so. While a 2nd-hand sale does not directly give Apple any income, sale of apps will do so over time, and purchasers of a 2nd-hand iPhone are likely to upgrade to a new model in the future.

    1. Mark .

      Re: 2nd hand sales

      Actually it's more than that - the older models are still on sale as new, so it's long been the case that Apple have had cheaper models (including much cheaper than the not cheap "C" - I wonder what else that letter might stand for). A few months ago, I saw the ancient 4 going for £15/month on contract.

      I suspect that much of their growth has come from people being able to buy at lower prices. When you see quarterly sales figures for Apple, there's certainly not all from the latest model.

  17. Anonymous Coward
    Anonymous Coward

    Well, the actual results show that Apples share of the market is dwindling all the time, now only 17% compared to Android's 70%+ so clearly all is not well. If Apple could understand that spending more money on quality-control and engineering instead of on marketing and paid fan-articles is just plain good sense then they might do better. Naturally the in-breeding effect of being a closed-shop only stifles innovation (never a strong point anyway), whereas diversity is of course the great strength of the Android world.

    Recent Apple products have so many disastrous problems with both hardware and software the company is struggling to bring out fixes for them all. To many people Apple appears to have simply lost the plot!

    1. Anonymous Coward
      Anonymous Coward

      So if their share of the market is down but they are selling more and more phones and making more and more money is that bad. More likely they basically (re)invented the smartphone we used now so at the start had a very high percentage of the market. Over time others follow / copy and product cheap phones at zero or low margins and at the same time people transition from basic candy-bar phones to full screen phones so the market has grown for this type of phone.

      Apple are still doing VERY well thank you very much...

      1. Mark .

        Interestingly this is exactly the same thing that was said of Nokia a few years ago - there the effect was even more dramatic, not only were their sales were growing, Symbian was also the number one platform until 2011 (which iphone has never been), but the media just reported how they were doomed because their share was dropping (the difference is that, unlike Apple, Nokia were the early starters of smartphones, at one point with as high as 60% or more share, where I don't think Apple have ever been much above 20% - they had some growth in the early years, but have now stagnated and may fall as Android races ahead). Instead back then Apple got all the praise, because they were growing, where as Nokia were falling, by market share. At one point in 2009, Symbian sales were increasing faster in absolute sales than iphones, but the market share still dropped, and so guess who got the positive publicity - statistics can be very misleading. I did wonder if this might turn round and bite Apple at some point - and indeed, it has.

        Reinvented the smartphone? The 2007 model wasn't even a smart phone or feature phone (couldn't do apps). They've introduced some new features over the years, but by that, you could say every company has (re)invented the smartphone.

        1. Anonymous Coward
          Anonymous Coward

          MtM (tm)

          Just when I was getting used to you not being here. I was hoping that you had been consumed by a large predator while on vacation, but alas ... not.

      2. Euchrid

        Further to what the second AC said, the share of profits needs to be considered. For the second quarter for the smartphone market, essentially, Apple and Samsung shared all the profit equally (see http://finance.yahoo.com/news/beyond-market-share-apple-iphone-152549596.html) – all other manufacturers either lost money or broke even.

        Apple’s market share (i.e. handsets flogged) was down, IIRC, from 16% to 13% (roughly). That’s not something I’m sure the company will be sanguine about – although it’s worth remembering that people were waiting for the new iPhones – but its estimated profit for that quarter was $4.6 billion. Is it better to be in that position or that of a hypothetical company that’s seen it’s market share increase but is losing millions of dollars?

    2. Anonymous Coward
      Anonymous Coward

      October 2013 12:43 GMT Anonymous Coward

      Stupidest, least correct post so far - sheesh.

      There are at least US$150B reasons why your post is utter bullshit.

  18. Arbee

    "invariably slow"

    "Invariably, we and most investors"

    You keep-a using that-a word. I do no' think it means what you think-a it means.

  19. Paul Hunter

    It's like any luxury brand. People want it *because* it's the most expensive. If they sold the iPhone 5S for £100, nobody would be interested.

    The 5C isn't that much worse than the 5S, and considerably cheaper (relatively speaking), so logically, it should have sold like hot cakes. Nobody wants it, though.

    The iPhone's most important feature has always been "look at me, I can afford to spunk £700 on a new phone".

    1. uhuznaa

      The 5s is twice as fast as the 5c (look at the benchmarks), has a better and faster camera (10 full-resolution photos a second is nothing to sneer at), a fingerprint reader, an alu case and is only a little more expensive (if you look at the real price for unlocked iPhones).

      I mean, if I were prepared to pay $549 for an 5c I would rather pay $649 for a 5s. I would consider a 5c if it was $299 maybe. It would fly off the shelves for that price and Apple stock would explode since THEN there would be confidence about Apple's future.

      1. Anonymous Coward
        Anonymous Coward

        On contract in the US the 5c is $49-99 and the 5s is $199 - so to many people that makes the 5c look a lot cheaper - plus they appeal to different markets. The 5c is based on the 5 which was (is) still a great phone - it's just the 5s is even better.

    2. Joe Gurman

      Mebbe

      And mebbe not. There are undoubtedly people who buy iPhones because they like being seen with ones – thus the "champagne" color option on the 5S, but there are also people who like a phone that's part of Apple's software infrastructure (sorry, I forgot, this The Reg: "walled garden") and how seamlessly it hangs together across different classes of devices. As far as I can tell, they don't pay significantly more for that experience (in the US, at least) than people who buy top-end Android phones and deal with a different interface from every manufacturer that uses a different Android release.

      And this discussion, and the original article, both appear to be missing something obvious: Apple still offers a smartphone so cheap it costs "nothing," except, of course, with most US carriers, two years of monthly bills. The phone, though, costs nothing (or US$0.99 from Verizon).

  20. YoricHunt

    Great quote

    What a ridiculous quote - "only a finite number of users globally can afford a $450-plus smartphone"

    Yep, what a great conclusion from a study. How about, this, only a finite number of users globally can afford a $0.01 smartphone.

    1. This post has been deleted by its author

  21. AndyBeans

    Saturation?

    I can't see how the analyst can say the market for iPhones is becoming saturated; Apple's update-or-GTFO firmware policy means that older iPhones become embarrassingly slow after a year and defunct after two, thus "encouraging/freeing" customers to buy the next one.

  22. Julian Taylor Silver badge

    So no more Samsung either?

    Of course we should all be trashing the evil Apple mind control device with its flashing colour icons - after all who wants something that actually works?

    No, it's definitely the super, duper Nokia 108 for me ... now at only $29 with an amazing hightec 0.3MP camera - available here http://www.nokia.com/global/products/phone/108 ... please don't flood the internet with your demands for them.

    Well done Microsoft and Stephen Elop for buying up such an innovative cutting edge communications company at such a low price.

    1. Sporkinum

      Re: So no more Samsung either?

      Yeah, what a turd the Nokia 108 is...

      Maximum standby time: 31 days

      Maximum talk time (2G): 13.8 h

      Maximum music playback time: 40.8 h

  23. Anonymous Coward
    Anonymous Coward

    Samsung would hate Apple to drop it's prices. Face it - the average punter given the choice of an Apple iPhone or a Samsung at the same price is unlikely to buy the Samsung. Samsung can also charge high prices for it's high end phones because iPhones are that price - if Apple lopped £100 off each handset Samsung would have to do at least the same.

  24. uhuznaa

    As Steve Jobs once said:

    "What ruined Apple was not growth … They got very greedy … Instead of following the original trajectory of the original vision, which was to make the thing an appliance and get this out there to as many people as possible … they went for profits. They made outlandish profits for about four years. What this cost them was their future. What they should have been doing is making rational profits and going for market share."

    He said this in 1995 about the "old" Apple, but it sounds true again.

    Market share is everything. Apple got its reputation and its clout with developers and third parties just via market share (back when the iPhone was the only smartphone that counted). Without market share all of this will shrink too, and then less and less people will be willing to pay the premium prices. This will take a while, but it will happen. Apple is still milking what they got when they nearly had monopoly market share in modern smartphones, but this is in the past now. Compare to the iPod (more than 70% market share) and the power Apple had to basically dictate conditions to the record companies in the ITMS. Compare this to the total lack of power Apple has with movies, books and other content now. Apps will follow.

    The (lack of) confidence in Apple's future is easily visible in its stock prices. Profits are just an indication that you can sell your stuff for a good part more than it costs you to produce it NOW. Market share is an indication of the money you'll be able to make later. Apple's profits are outlandish but they'll cost them their future indeed.

    1. Charlie Clark Silver badge

      Re: As Steve Jobs once said:

      Market share is everything.

      While I agree with the general thrust of your argument I don't agree that market share is everything. Being in the right market is probably more important, though harder to define.

      Along with many I'm not convinced that Apple has managed to maintain the same pace of development that it had a few years ago. However, it obviously still has a lot of talented and dedicated people and is continuing to develop interesting and attractive products. But let's face it: Apple maps, Siri, fingerprint activation are headline grabbers only.

      Innovation is probably more rapid in other companies at the moment: Samsung Note's with split-screen software, ARM-based notebooks, etc. None of this is likely to mean imminent demise for Apple an, indeed, none of it is so extraordinary that Apple couldn't (re)capture markets by responding with similar improvements. Can you imagine an I-Pad pro which allow multiple windows or multi-core A7-based MacBook? I most certainly can and I can also imagine them flying off the shelves. But if something like them doesn't turn up relatively soon then other companies will start to look cool as well.

      1. uhuznaa

        Re: As Steve Jobs once said:

        The problem is that what Apple is selling is devices and people more and more want just a hardware interface to services and content and peers using the same services.

        Market share just defines which platform people will turn towards because there are the services and the content and other users. Look at MS and WP8: Google is trying to hold it down by not offering ANY of their apps for WP8, discontinuing ActiveSync support etc. and it works fine.

        In China Apple has less than 5% market share. Great hardware or not, what kind of weight Apple has there with third-party developers and content providers and so on? Not much.

        And all of this is very much the same as with the PC/Mac wars of old, just more so. Back then it was prices and software and hardware compatibility, now it's prices and hardware choices and services. Apple is doing the very same thing as back then (rake in money as long as it can) and it would be very strange to expect a different outcome.

        Apple's long term vision should be "an iPhone in the hands of every chinese peasant" and nothing less. The 5c would have been a perfect (maybe the last) opportunity to go full steam for market share with a much smaller margin, even if it would have meant smaller profits for a while. It's not that Apple is lacking money after all. And believe me, a somewhat cheap 5c would have been a bestseller and Apple's stock would have exploded.

        What irks me most here is the wasted potential. If you have only a handful of products to focus on and $30B laying around you can do things others can not. Not doing them is a sad thing then.

  25. chris lively

    With carriers subsidizing the phones, the actual price only plays a small role in who can afford the phone. It's a matter of who can afford the call plans - and apparently a lot of people can. And by "a lot" I mean pretty muh anyone that can be considered in the middle class or above. That's probably a few billion potential customers right there.

    No, Apple isn't running out of steam. They have a long ways to go before hitting any type of new user wall. Once they do, it's a matter of loyalty. If they can keep producing a device that works well and has appeal then they will be fine for a long long time.

    1. uhuznaa

      But in most of the world carriers are not subsidizing phones. People buy phones and then buy connectivity. Or they pay much less monthly for a cheaper phone.

      The US market is very special here and the fact that the price difference between the cheapest ("free") phone and the most expensive is just $199 artificially limits choice. Because the price delta between an iPhone 5s and a perfectly usable Android or WP8 smartphone actually can be as much as $400. In the US you're basically screwed either way, so it's almost clever to get the most expensive phone.

      THIS is the most important reason Apple's market share is still much higher in the US than elsewhere. If carriers would offer a contract with an iPhone 5s costing you $199 or with a Nokia Lumia 720 and handing you $200 in cash along with it (which would reflect the actual prices) things would look very different very soon.

    2. Anonymous Coward
      Anonymous Coward

      Carriers do NOT subsidise the phones

      "With carriers subsidizing the phones"

      Sigh.

      Can we get this straight, please?

      Carriers do NOT subsidise the phones. They LEND you the money for the phone, then make profit on both the carrier service and the loan.

      Do the sums!

  26. Mark .

    Only yesterday, we had an article with poor stats spinning things in favour of the iphone (sales in the US). I heard the claim that when there was next an article spinning things the other way, all the Android fanboys would be arguing the other way, taking the article as fact and using it to support their point of view.

    Well er, where are they? Whilst the iphone article yesterday had lots of people trying to defend it, there appears to be a complete silence from people trying to defend this article. Maybe the truth is that some of us do care about accurate reporting, and if someone wants to argue for Android, there's a lot better arguments and evidence to use.

  27. simon gardener

    reg@20thCenturyFish.co.uk

    Ah yes ... DOOMED again !

    Would these be the same bunch of analysts who said apple was DOOMED if they didn't release a netbook for less than 300$ ? Look how badly that worked out for them.

    its amazing how often Apple are DOOMED and yet their sales and keep growing and their profits remain obscenely healthy.

    <sigh>

  28. Anonymous Coward
    Anonymous Coward

    I think the report is half right. At the moment, Apple sells itself as a premium hardware plus services company. I see a definite argument that this is unsustainable since the services, unlike the Apple hardware, are commodities. In this sense, Google and Amazon will, in the long term, be able to produce larger service offerings with greater economies of scale. Amazon is without a doubt the daddy, with respect to services.

    With this in mind, I think Apple needs to do one of two things:

    - Cheaper hardware, to expand revenues from its services

    - Or exapnd its services to other platforms (i.e. iTunes, iBooks and so on running on Android, Windoes Phone, Kindle HD and so on).

    I think the latter must be a more appealing option to Apple, since it avoids the risk of Apple cannibalising premium hardware sales.

  29. Anonymous Coward
    Anonymous Coward

    What a fanboy parade in comments here!

    Very, very afraid to lose their exclusive precioussssss one!

    1. Steve Davies 3 Silver badge

      Re: What a fanboy parade in comments here!

      There are still plenty of fandroids about hitting the downvote button.

      It matters little to me as I've given up using a smartphone and gone back to a dumb nokia.

      1. Anonymous Coward
        Anonymous Coward

        Re: What a fanboy parade in comments here!

        Why not given up living in a house and now live in a cave?

  30. Nanners

    Ridiculous

    This is the stupidest thing I have heard in a long time. I have been using apple since '97. Let me repeat... 1997. The reason apple makes gops of cash and is taking over the world is because once you are in the apple universe you have to upgrade every 3 yrs to keep it running. You have no choice, if you do not continue to upgrade your hardware and software every few years you will find your hardware getting so slow it's unusable and your software will no longer be compatible with anything. This is how they keep the income coming in. Secondly... they ARE getting cheaper.

    1. t.est

      Re: Ridiculous

      Nanners, they have indeed got cheaper.

      But I'm on a Mac from 2006. I'm running 10.7 not 10.8 as I haven't felt for hacking in a 64-bit EFI. However, non of the software I run needs 10.8.

      You definitely don't need to upgrade every 3 years, at least not with the mac line. With a Windows device thats a totally different story. Those who continue running Windows hardware older than 3 years, have not either upgraded their software. How many still runs WinXP? How many still run Win7?

      It's a totally different picture when you look at market Apple has. One big reason is that it's cheap to upgrade software with Apple devices. However mag users did upgrade much more than their windows counterparts in the days where a OSX upgrade costed $150. The only reason for this difference I can find is that Apple hardware actually is good enough to run software made years after the hardware was introduced. With the cheap PC's that could be a totally different story, as they are "designed for Windows XP, Vista, Win7 etc etc.

      There seems though to be a change in this trend for Windows 8 or later. PC users seems to have become happy with updating the software rather than go for new hardware each time they update. I just hope it will have an affect on the corporate market. We just recently upgraded from XP to Win7, and many have not yet got their update.

      1. t.est

        Re: Ridiculous

        PS. I've used Apple since the late 80 when I was a kid. Can't say for sure but somewhere between 1988-89.

        The first was an Mac SE, then later a SE/30.

        I am not seeing the cheapness of the Mac as a necessarily good thing. The Quality is not what it used to be, the 68k era was quality wise the best time to use Macs.

  31. Anonymous Coward
    Anonymous Coward

    "The report made the "surprising" claim that the majority of new iPhones are still sold to first-time fanbois and gurlz."

    These hipsters ares so cool, choosing a 2007 smartphone in 2013!

    Says it all.

  32. Fihart

    Already a fairly affordable iPhone.

    If my observation of friends' phones is representative lots of Apple sales are probably iPhone4 going out free on fairly low cost contracts.

  33. Anonymous Coward
    Anonymous Coward

    Cost is more about TCO than initial purchase price. iPhones have a much better residual value. You buy it today for £500 and it's worth half that or more to sell / trade in after 2 years and worth far more than Galaxy whatever phones. As soon as a new 'better' Android phone comes out the 'Galaxy' brand from Samsung will drop in value even more.

  34. Anonymous Coward
    Anonymous Coward

    Apple needs to start making bargain basement mobes because soon there won't be enough rich new iPhone customers left in the world to prop up its sales growth, a leading analyst has suggested.

    Alternatively that nice Mr Milliband could promise to pass a law cutting the price of iPhones

  35. john devoy

    Do Apples sales need to grow? They have such high margins on products they could rake in billions from the sales levels they have.

  36. Alan Denman

    Treat them mean, keep them keen.

    If Apple ever brings out a smartphone with a competitive functionality and screen quality it will be seen as sign of failure.

    Treat them mean and they will always be wanting next years model.

    Or is it last years Android model, what with the 2014 iPhone sounding suspiciously like a Nexus 7 clone?

    1. Anonymous Coward
      Anonymous Coward

      Re: Treat them mean, keep them keen.

      The screen that Apple uses in the iPhone 5 series is one of the brightest available on the market and it has the most accurate colors by a pretty wide margin (only the HTC One is anywhere close).

      Hopefully Apple will never release phones with "competitive" (i.e., inferior) screens.

      http://www.anandtech.com/show/6330/the-iphone-5-review/15

    2. t.est

      Re: Treat them mean, keep them keen.

      Allan Denman,

      You have no clue of the subject of screen quality, or you go by some weird benchmarks. Here the Apple line excels almost everything on the market.

      The benchmarks I look at when it comes to a mobile phone screen as regarding to quality is based on;

      Color accuracy

      Touch accuracy

      Touch latency

      To find references on Touch latency Google: TouchMarks Agawi

      Here is one reference which talks Color and a bit more http://www.displaymate.com/Galaxy_S4_ShootOut_1.htm

      I cannot find a fresher test than this on Touch accuracy, this one is 3 years old. I expect the Android phone makers have caught up with the iPhone 3G(s?). I do not expect any of the newer generations of iPhone to have dropped in this regards, i expect them to be the same or slightly improved.

      http://www.youtube.com/watch?v=JR1sJhtgkK4

  37. Anonymous Coward
    Anonymous Coward

    Rich buyers?

    I've just got home from sitting in the waiting-room at my local A&E for an hour.

    A chap came and sat beside me with his mate and a woman who was obviously in pain (not that that's relevant to the story). His phone goes off.

    Out come 3 iPhones. one 5 shaped and two 4 shaped, then his mate pulls out his phone - another iPhone 4.

    Judging by the clothes they were all wearing (I know, don't judge etc...) these guys were ordinary folks with a Tesco Bag-For-Life, no designer labels or high-end sneakers.

    I've also noticed recently that more text messages I send are in blue bubbles than before. They have probably doubled in the last 6 months or so. (for those not familiar with the blue bubble on an iPhone, it means that the message is going to another iphone via imessage rather than as an SMS (when the bubble would be green). I wouldn't class the people I'm texting as being rich either (well perhaps one or two, everybody has to have at least one rich friend).

    So yes, In my opinion the analyst is talking out of it.

    1. buyone

      Re: Rich buyers?

      At last, somebody who uses his eyes to see who owns iPhones. It is the chavs who have the iphones 'cos they are status seekers and at £30 a month it is less than an evening at Weatherspoons .

      And of course iPhones are good design with an easy interface and distinctive logo branding so the brand is differentiated and you are then "somebody" by owning a logo. Nike trainers - anybody? It is the great success of marketing iPhones that they are already down market but nobody realizes.

      1. Anonymous Coward
        Anonymous Coward

        Re: Rich buyers?

        Sorry, you would say that about any successful product. It is very easy to use the 'chav' tag on any product, be it Nike, iPhone, Burberry or Ford, especially when it is used with such a semblance of sneering, as you seem to here.

        Do I presume that a SkypoMicroNok phone is not 'chav'?

        1. DropBear Silver badge

          Re: Rich buyers?

          ANY gadget is a "chav" one when it's bought based not on what it does and how, but on who else has it. It's called a "status symbol" and iStuff in general has plenty of such appeal.

  38. Longrod_von_Hugendong

    dont know where he lives...

    But iPhones are affordable???

  39. Bullseyed

    The article seemed to miss a key point

    New users made up a surprising majority... because a growing percentage of Apple users are ditching iPhones for Android phones.

    1. uhuznaa

      Re: The article seemed to miss a key point

      "a growing percentage of Apple users are ditching iPhones for Android phones"

      I think this may be true in your environment, but the statistics are pretty much saying the opposite. First time smartphone buyers tend to buy Android, but after that they tend to buy iPhones.

      Luckily these days you can have both. For me a (smallish, pretty, comfortable, if limited) iPhone in my pocket and a Nexus 7 in my bag works very well. And should I get a Nexus 5 (provided it doesn't have a shitty camera and no battery life again) I certainly will use the opportunity to sell off the Nexus 7 and get an iPad mini instead. Having more than one device with the same OS is just wasted potential, isn't it?

      1. Anonymous Coward
        Anonymous Coward

        Re: The article seemed to miss a key point

        Indeed, I find email, messaging, and the camera to be superior on the iPhone vs. Android phones. Basically all the things I do with a phone, not a tablet.

        I use a tablet for reading long web pages, Kindle books, and the Economist. For these activities, Android is just as good as iOS.

        iPhone for a phone and Nexus 7 for a tablet strikes me as a pretty ideal combination.

  40. Henry Wertz 1 Gold badge

    Yeah I don't buy it

    I don't buy the premise of the report. Apple has made VERY expensive (frankly overpriced) computers for decades. People will complain they are short on cash for EVERYTHING ELSE while at the same time showing off a (usually) $1000+ Apple computer they've just bought. People buy them like clockwork. A lot of people buy the ipads and iphones like clockwork despite the very high cost too. This will of course limit Apple's market share, but it doesn't mean the existing market will suddenly collapse on them. If their market share DOES start collapsing (i.e. because of some problem in future products) then making them cheaper would likely not help either.

    1. Anonymous Coward
      Anonymous Coward

      Re: Yeah I don't buy it

      Lots of Apple haters spout off about these hypothetical hipster fanboys who trip over themselves to spend every last dime on the latest Apple hardware but I don't see it.

      I live in a relatively affluent neighborhood and most of the iPhone users I see are still using 4s and 4Ss even though the 5 has been on the market for a while.

      When I go to coffee shops, probably half the MacBooks I see are the plastic variety, i.e., the base model that Apple stopped selling a while ago. Sometimes I see a black MacBook which I believe Apple stopped making circa ~2008. Most of the aluminum MacBooks I see are the 13" model with an optical drive, i.e., not the nice new expensive retina models.

      Maybe you live in a poor area? I remember reading a sociology article a while ago about how poor people are more likely to buy expensive, highly visible things as status symbols (designer sneakers, etc.).

    2. MarketingTechnoDude

      Re: Yeah I don't buy it

      Yes ... but they did have to move the MAC product line from what were to all intensive purposes proprietary PowerPC processors to commodity Intel processors. The volumes they were shipping were not commensurate with the wafer pricing they needed or were the ongoing development costs for the PowerPC processors to compete with the Intel x86 processors.

      They have managed to sidestep this issue to some extent in the iPhone market, by introducing the IPad sector which essentially leverage the technology/devices developed for the iPhone... But guess what, the competition have also followed suit (plus a plethora of new low cost entrants) in the Android Tablet market.

      The dominant costs will be the main processor system-on-chip (SOC) and the screen in these devices. The cost paid to the silicon foundry for the manufacturing of the SOC device is one thing, the cost of developing the proprietary chip must also be recovered. It is hideously expensive to develop/design deep sub-micron SOC devices! Also if there is a screw up in the next generation design which necessitates either several respins or a major redesign, then they can find themselves one generation behind in technology/performance, which could leave them very vulnerable.

      It will become increasingly hard to keep ahead of the competition who leverage high volume low cost commoditised SOC devices. They need to be able to develop a commodity sector to utilise their own silicon to achieve low cost wafer prices to match the competition whilst not damaging the value of the Apple brand.

      Maybe they simply need to run IOS (one generation behind) on a commodity SOC and sell/license it to second/third tier handset manufacturers?

  41. This post has been deleted by its author

  42. Sarah Davis

    They already do,..

    it's called the iPhone - according to some sources it cost less than £150 for all the parts, the construction (using under paid workers on contracts with a 'non-suicide' clause), the packaging, and the P&P to anywhere on the planet - the rest is pure profit - so they could sell it for under £200 and still make a profit

    I'm sure NTC, Nokia, et al, also have a massive mark-up. Hands up how many bought a sub £200 phone for £500 ?

  43. MarketingTechnoDude

    Don't forget the chips ...

    I read several comments saying it is OK to focus on the high end in technology. Well ... there is a problem with such a strategy and it all revolves around silicon chip wafer pricing. If you develop your own proprietary chip set for your product, then you need to achieve two major milestones in the project.

    1) Buy enough wafers, to ensure that the silicon foundry is comfortable setting up the production and test equipment to warrant it's production time slot.

    2) Have a wafer volume throughput that matches your competition in the market to ensure that your bill of materials for your device is not disproportionately more expensive so that either you are unable to match price or live with the inflated wafer costs even operating at higher margin product selling price.

    The costs of designing the SOC (System On Chip) are in the 10's or millions of dollars, plus IP (Intellectual Property) licensing costs, verification (lots of!), cost per seat of EDA tools, software development, product testing, compliance tests etc.

    So the big issue that Apple will have, is trying to recoup all the SOC and product development costs on a total volume of product sales much less than the competition who will have a reduced development cost by several vendors sharing the same SOC device. In time, as the market matures, a semiconductor company (usually fabless) will produce a device product family which will satisfy the volume segment of the market. Manufacturers using a standard OS (e.g. Android) on a commodity chip set from a fabless semiconductor company will represent the largest volume share of the market and will be able to operate on thinner R&D margins, focussing their spend on deals with operators and consumer marketing/promotions. It may not happen this year or next, but within the next 5 years it probably will as the smartphone market matures.

    The only way this will not happen, is if there is either some breakthrough new patent protected feature on the high end products which renew customer demand to such an extent that the users feel compelled to upgrade from today's smartphone to some ultrasmartphone. (akin to moving from a feature phone to a smartphone). What could the killer new feature be though? It is getting harder each time for the product designers/app developers to bring out an absolutely must have new feature. Thinner/Bendy/Bigger Screen? Faster Processor? Killer App? .... ????

    Ultimately the market will saturate just like what we are seeing in the laptop PC market. When technology is good enough and it lasts long enough, there will be a temptation not to bother upgrading unless there is a financial benefit in doing so. Certainly there will be a large hand-me-down sector (to younger siblings or parents/grandparents etc.) which will erode demand for new phones for new customers. The only big Ace up the sleeve of the phone tech vendors, is that the phone has become synonymous as a fashion accessory which is almost like the pedestrian version of the Executive car. Years ago, certain types would lob their BMW/Audi/Merc/Jag keyfob on the bar when ordering drinks. Now they just pull out the latest greatest smartphone to make the same statement.

    So Apple should ideally maintain their Exec car status versus the Ford/GM competitors along with their ecosystem (app store and apple stores etc) and also find ways to create more wafer volume for the custom chips they develop. So another brand which is lower end, but essentially uses the same core SOC devices (which could be speed reduced or feature inhibited), would allow them to enjoy lowest possible wafer pricing whilst still enjoying high margins on Apple branded products. Rather than creating their own brand, they would be better off licensing the chip(s) to a commodity sector companies operating in an emerging market Apple wishes to develop. So for instance they could bundle the previous generation of IOS with the chip so that Apple are always one step ahead on the latest and greatest. They SHOULD never offer a low cost Apple phone as it would destroy brand value. Overtime it may transpire that 50% of their revenues would actually come from licensing their older technology to the commodity sector. That way they keep their shareholders happy, the fanbois have the latest greatest, the wafer foundries are happy (more wafers in the fab(s)), new markets are developed ....

    Will they do this? Hmmm maybe not ... arrogance usually follows success and failure usually follows arrogance. When you are at the top of the mountain you tend to spend a disproportionate amount of effort throwing boiling oil down the mountain side, rather than building another mountain away in the distance.

    Back in the days of CRT TV, Sony were busy throwing boiling oil at anyone attempting to ascend mount Trinitron, whilst meanwhile Samsung were building a new mountain in the distance call LCD TV.

  44. Anonymous Coward
    Anonymous Coward

    Pathetic

    What a pathetic, blinkered little person Toni Sacconaghi, senior analyst with Bernstein Research, must be.

    Listen Toni, "pile it high, sell it cheap" is only one of very many ways businesses can make money.

    Look back at Apple's history. They've made their money from innovating leading edge products that ooze "I-want-one" appeal. Apple hasn't done too badly with this approach; It's doing a bit better than Bernstein Research, for example.

    Can Apple continue to produce leading edge products that people will lust after? Now THAT is a good question to discuss.

  45. Smitter

    Not Too Worried About Apple

    Is the Author seriously concerned about whether Apple "Want to stay in business"? I don't think there is any danger of them going out of business. Yes the iPhone has lost its luster (thus the need to add faux gold), but this of the most successful/profitable companies in history. They aren't going away any time soon.

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