The Biggest Question About Apple's iPhone 5C

Alleged plastic rear casing of iPhone 5C. Source: BGR.

The leaks and rumors are numerous.

Apple's lower-cost iPhone likely to debut at tomorrow's Apple media event has little mystery left.

Rumors include:

  • The name iPhone 5C.

  • Plastic back.

  • Internals that compare with the iPhone 5

  • Five different colors.

Even a video of the alleged smartphone, powered on, surfaced this morning.

A still from C Technology's video of an alleged iPhone 5C. Source: YouKu.

But despite all the leaks, one big questions remains. What will the phone's price be?

How low will Apple go?
Everyone is referring to the iPhone 5C as the "cheap" iPhone. But it probably isn't going to be cheap. Most analysts are estimating that the phone will be priced somewhere in the range of $400 and $500.

Why not even lower? Wedge Partners analyst Jun Zhang identifies the $300 to $400 range as the mid-tier smartphone market segment. So if Apple does price in the $400 to $500 range, it will, at best, be tapping in to the mid-tier range. Given all the talk of the proliferation of cheap smartphones in China, why doesn't Apple aim for the top of the low-tier range?

After all, Apple's market share is faltering in China. Of all smartphone shipments in China during the second quarter, Apple's shipments amounted to a paltry 4.8%, according to data from Canalys. Two-year-old Chinese start-up Xiaomi, even passed up Apple in market share on the strength of its extremely low-priced smartphones. Its newest phone starts at an impressive $129.

Obviously, Apple won't be aiming to compete on price with competitors like Xiaomi. Even more, Apple has never been the type to give much on margins, so any price below $399 is probably unlikely. But even the consensus range of $400 to $500 is a fairly large range. So it's going to be very interesting to see where Apple prices the smartphone.

A $400 price for the iPhone 5C could launch Apple back to first place among smartphone vendors in China, according to some research from Morgan Stanley analyst Katy Huberty. She thinks the combination of a China Mobile deal and an iPhone 5C priced at $400 could increase Apple's market share in the country by 13.3 percentage points.

Her bullishness on the price point is based on a survey of 2,000 Chinese mobile phone owners that suggested Chinese consumers consider $486 to be an acceptable price point for the iPhone 5C, 22% higher than the $400 price point she thinks Apple will choose.

Lower price, new customers, and a better Apple
Whatever the price point, a lower-cost iPhone will be good news for investors. An iPhone 5C will undoubtedly expand the company's addressable market. And given Apple's impressive retention rates, new customers are often lifelong customers.

A $400 price point, however, would certainly attract more new customers than a $500 price point. On the other hand, margins would face greater pressure.

Where do you think Apple will price the iPhone 5C?

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