Viability of a cheap iPhone

Benedict Evans discussed about how cheap iPhones would fare.

The narrative generally splits the market into four rough segments:

• $50-100 smartphones: currently these are dominated by companies you’ve never heard of using off-the-shelf chips from Mediatek, Spreadtrum and others, and though they run Android and have 3G they often have only 256 meg of RAM, which makes for a pretty poor experience. And the build quality and screens are not great.
• $100 to (say) $200 – this is where the branded companies start playing. At this price devices like the Lumia 520, the Xiaomi Hongmi and the Motorola X provide an experience that you would not, actually, be unhappy with. I describe these phones as like driving a Toyota or a VW: you know you’re not in a BMW (or a Bentley), but there’s nothing wrong with them at all and some of them are pretty cool.
• Then, $200-450 (or thereabouts) counts as mid-range, and
• $450-500 and up counts as premium. Arguably there’s a super-premium segment further up.

So what is the cheap iPhone that people like to talk about?

When people talk about whether Apple should do a ‘cheap phone’, it’s important to be clear about which of these segments you’re really talking about. When people say ‘Apple is missing out on the next x billion people’ – that is, the portion of the market that’s still on feature phones – they’re actually talking about the first category. Even Samsung doesn’t really play here, nor Xiaomi. This is is the land of the $200 PC – very low margin commodities with a poor user experience.

Where a cheap iPhone might come in:

However, the second and third categories are rather more interesting. Apple says, over and over, that the objective is not to sell the most phones, but to make phones that it can be proud of. In 2007 the iPhone was an MVP lacking industry standards like 3G and a decent camera, yet it still needed to be $600 or more to deliver the vision. Today Apple could perfectly well make a phone it could be proud of at $300. Indeed, there’s nothing that it would be ashamed of in the Lumia or Xiaomi at $150 and below.

Yes, if you were wondering, the existing iPhones are in the fourth segment.