Is the iPhone 5C Apple’s bid for emerging markets?

Like clockwork, September brings with it the unveiling of Apple’s latest iPhone iteration.

While it can certainly be argued that hype for the new products has been on the wane since the iPhone 4 – in large part due to a perceived lack of significant changes – there’s no question that any new version of the iPhone will be in demand as a status symbol in both developed and emerging markets.

This latest announcement was a first in that it revealed not one, but two new products – the iPhone 5S and the iPhone 5C. Particularly among developed markets, the ‘S’ upgrade iPhones are treated with far less fanfare than the full-fat ‘new number’ ones, but the 5C has certainly raised eyebrows. Whether the ‘C’ stood for ‘cheap’ was unclear, but it was an open industry secret that Apple was planning a lower-cost iPhone in an attempt to gain ground in emerging markets – and China in particular.

Many observers took the fact that Apple held a launch event in Beijing as a statement of intent. Upstream’s Markellos Diorinos described the move as “a clear indication of Apple's intention to penetrate the Asian market with its new 5C device”, noting that China represents a major opportunity to the tech firm.

Research firm Ovum has predicted that mobile connections in China will rise by almost 100 million by 2017, with smartphone penetration set to rise from 46% to 64% during the same period. However, Android's share of market growth is predicted to be more than double that of Apple over the course of the next four years.

Diorinos goes on to remark that Apple must therefore market the 5C at the right price: “Given that the average annual income in China is approximately $2,100, pitching the 5C in at the wrong price point could create serious obstacles as Apple tries to establish its presence in China and other emerging markets.”

A recent survey by Upstream found that around a third of customers across emerging markets would not pay more than $100 for a smartphone, meaning that the premium price point that Apple has attached to the 5C could be a stumbling block.

Carolina Milanesi, research vice-president at Gartner, has commented that the device “is not the cheap product that many expected”. It will retail in the US for $99 on a two year contract; without the contract it will sell for $549. In the past, a new iPhone launch meant a price reduction on the previous iteration. In a new move for Apple, the original iPhone 5 will be discontinued and the 5C is being pitched as a replacement lower-cost alternative.

Asked if the 5C’s price had exceeded expectations for a low-cost device, Analysys Mason Principal Analyst Ronan de Renesse replied: “I don’t think the iPhone 5C is positioned as a low-cost device, it is billed exactly the same as the iPhone 5 would have been billed post-iPhone 5S launch.”

However, he added that Apple may run into difficulty in courting emerging markets, saying: “the iPhone 5C is priced too high to make a significant dent in the smartphone market in emerging countries. This said, a potential deal with China Mobile would boost sales for Apple.”

This indicates that Apple is attempting to court specific high-income demographics from emerging markets, rather than introducing a mass-market low-cost device – in keeping with their strategy in developed markets.

 

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