It's time for Apple to really need a cheap iPhone

Apple is facing difficulties as iPhone revenue in China, its most important foreign market, is increasingly declining. Meanwhile, iPad retail sales also decreased significantly and Vision Pro did not achieve the expected success.

Therefore, the company has chosen to research new products such as Apple Car or Vision Pro. However, according to longtime writer Mark Gurman from Bloomberg , what Apple really needs right now is a low-cost iPhone capable of attacking new markets to restore sales.

Apple's dilemma

Apple is facing difficulties from all sides as it is constantly under scrutiny from regulators and lawmakers in many countries.

In addition, the company is also lagging behind in the field of artificial intelligence (AI) and is having difficulty finding new product categories, typically the termination of a year-long electric car production project. decade.

But what is most alarming is that the iPhone business in China, the most important foreign market for Apple, is also in the doldrums.

After a brief rebound during the holiday season, iPhone sales are expected to decline again. This will drag the company's total revenue down by about 5%, marking the fifth decline in the past six quarters, according to estimates from Wall Street analysts.

Market research firm IDC predicts that iPhone sales will decrease by 10% in the first quarter of 2024 even though smartphone sales in the overall market will increase by 8%.

The sharp decline in iPhone sales has a major impact on sales of Apple's other products and services in China, but there is another concern.

The ban on foreign brands at Chinese government agencies, along with consumers' acceptance of domestic smartphones, including Huawei, have largely contributed to this decline.

In the fourth quarter of 2023, Apple's sales in China fell 13%, the worst decline in the past 4 years. Analysts have predicted another decline in the first quarter of 2024.

The positive news for Apple is that current iPhone users in China are not switching to other brands en masse. The problem seems to be more about attracting new people to the Apple ecosystem and convincing existing users to upgrade in less time.

The pace of iPhone upgrades has slowed in recent years. There are many reasons for this, such as lack of promotions from carriers, rising phone prices, economic instability and the fact that the world is still recovering from Covid-19.

But it's also clear that Apple isn't giving consumers enough reasons to upgrade their phones. Its flagship product hasn't changed much since the iPhone 12 was launched in 2020. Before that, there had been no major improvements on the iPhone since 2017.

To make up for that, Apple has focused its efforts on services and accessories. Although users may not upgrade their iPhone every year or every two years, users can still spend several hundred dollars annually on Apple services, applications, and AirPods.

But even that strategy is reaching its limits. iPhone sales growth has stagnated and it seems Apple needs to change something.

The most obvious answer is a new product category, but nothing will appear in the near future. The company spent a decade and $10 billion developing an electric car that never made it to final production.

Apple also took eight years and many billions of dollars to create the $3,500 Vision Pro, a device that failed to meet sales expectations.

It's time for cheap iPhones

Bloomberg writer Mark Gurman suggests Apple a way to revive growth without creating a completely new device. According to him, the best way is to develop a cheaper version of the iPhone and enter emerging markets.

Since the first iPhone model went on sale in 2007, there have been many calls for Apple to develop a low-cost model. But that's not what Apple pursues.

The company's first effort is to lower the price of old iPhone models by $100 when the new version is released. Then, Apple launched the iPhone 5c in 2013, but this product was actually an older version using a plastic case for $100 cheaper.

Apple tried again in 2016 with the iPhone SE. The price of 399 USD has been well received as it is much cheaper than high-end models. But this design quickly became outdated.

The iPhone SE 2022 model priced at $429 is not a bargain because it has cut many features. Meanwhile, Chinese brands such as Xiaomi or Oppo launch devices with large screens and multiple cameras at much cheaper prices.

In 2025, Apple is planning to upgrade the SE line, switching to an edge-to-edge design with more powerful chips and premium materials. Therefore, the product will likely cost over 400 USD.

If it wants to penetrate emerging markets, Apple needs to develop an iPhone that costs around $250 or less.

This requires the company to forget its proud profit margin and only pursue revenue and market share. The move could help build the company's brand in developing countries.

Finally, Apple can sell more expensive devices to users in need. Even more, many of them will be attracted to the company's other services and applications.

The truth is that Apple avoided this move for fear of devaluing its premium brand. That's why selling an iPhone at a really cheap price is not yet applicable.

However, the market is changing. Apple's competitors have progressed and the level of competition is increasing.

Attack new markets

There are billions of people around the world who don't use iPhones, and this may not change without a more affordable option. Apple's biggest opportunity may come from India, where it is expanding its business and manufacturing operations.

India has a growing middle class and more and more people are buying smartphones every year. Apple has opened two stores in India in 2023 and is planning at least three more. Apple is also rapidly expanding iPhone assembly here and plans to produce more devices.

There are other interesting markets in the vicinity, such as Vietnam, Indonesia, Thailand and Malaysia. Apple already has 2 stores in Thailand and is about to add its first store in Malaysia.

In 2023, the company opened an online store in Vietnam. Like India, these markets increasingly serve as final assembly facilities for Apple products.

CEO Tim Cook recently went on a trip to Southeast Asia, visiting Vietnam, Singapore and Indonesia. He pledged to increase investment in these countries. This happened a few weeks after he made a similar trip to China.

This does not mean that Apple will abandon China, which will remain a key market for its iPhone business and production. However, the company needs to be less dependent on the country, and developing a low-cost iPhone could help with that.

Isabella Humphrey

Update 23 April 2024