Yes, a cheaper version of the iPhone could hurt Apple’s (AAPL) margins, but it could also open up several very important markets to Apple products. Asymco’s Horace Dediu looks at data showing how the iPhone’s market share in the United States has continued growing even as Android’s growth has stalled for the moment. He hypothesizes that having older iPhones available at lower prices is helping the device expand its reach to budget-conscious American consumers who don’t need to have the latest device.
“My suspicion is that it has something to do with the fact that the U.S. is one of the few (but largest) markets where the iPhone is available as a ‘low end’ offering,” he says. “At a minimum price of $0 (with a contract) many consumers are finding the iPhone attractive relative to a $0 (with a contract) Android phone. This price parity (illusory as it may be) allows iPhone to grow even faster than Android in this particular market.”
Dediu hints that if Apple were to launch a cheaper iPhone throughout the rest of the world, it could see its share in emerging markets similarly thrive and could take a large bite out of Android’s user base in countries such as China and India.
