Android affect : Cheaper iPhone on the cards

Call it the Android affect or Apple being vigilant, a cheaper iPhone is definitely on the cards. iPhone 5 which is due for September of 2011 might have a poorer cousin, iPhone Mini. It might cost $300.

Emerging markets and especially Asia is a hotbed for smarphone market. Android has almost swept away the emerging markets based on the single factor : it’s cheap to put Android on a smartphone. Though many tout Android’s openness as the biggest factor but openness for majority of users doesn’t really matter. Asia is a price sensitive market and the single biggest thing that will drive the market is the price. With Android being ‘free’, the software part is taken care of and all the hardware manufacturers had to concentrate on just the hardware.

Micromax, Spice and Videocon have all launched their Android phones. The cheapest Android powered phone in India costs around $110. Few other players have vouched to bring the cost even further. Nokia’s emerging market success has a lot to do with the price. Nokia has offered cost-effective handsets with ageing Symbian operating systems. This did the trick. Nokia’s music phone series of 5300 is still popular in India. Look at any ad metrics report and you are bound to find one of those phones. Those phones are priced at $220.

Apple has a different challenge. It has to take care of the software and hardware at the same time. Of the both, software is the most easies part as it almost has a non-liner growth pattern. You can build once and deploy it multiple times. Some efforts are required to tweak the software to fit a smaller phone or a lesser hardware, but Apple can always go back to their old source code to tweak. I am not saying it’s that easy but that’s my educated guess. As for hardware, Apple has enormous clout with the suppliers and it can get cheap and efficient hardware at the prices it want.

Even if Apple doesn’t get the hardware prices down as much as it wants to stay profitable, Apple can still stand to gain with economies of scale. The kind of thing Apple has never done till now. May be Apple has to sell few million more iPhone mini’s to recover its costs – research, development and distribution.

Asia will take a iPhone Mini

Asia like the rest of the world loves iPhone. South Korea, China and Japan are one of the biggest markets for Apple. China is now the second largest iPhone app store market. Japan is the most lucrative iPhone app market with an app average selling price $3.3. Japan also downloads quite a few paid apps. For every 100 apps downloaded in Japan, 6.05 are paid apps. Asia as a whole generates two third revenues of what the US generates. That is with a $600 iPhone. Imagine the scenario with a $300 iPhone.

In app purchases are also well received in few Asian countries. Singapore and Malaysia for example are better placed than the United States in terms of in app purchases. Of the $100 revenue generated, Singapore generates $79 from in app purchases, US generates 68%.

iPhone App demand is already established. The smartphone demand is already established. Cheap smartphone demand is already established. Isn’t a cheap iPhone a logical extension?

What would a cheaper iPhone mean to HTC and Samsung?