In present, Apple controls 42 percent of the high-end smartphone market with its existing iPhone lineup. Because there still is a market segment where the company does not compete until now, it is anticipate that Apple will launch a new, less expensive iPhone design this year.
In accordance with what several analysts stated Apple needs to launch a low-cost iPhone to boost earnings and market share as the lower-cost iPhone could add $11 billion in revenue to Apple’s next fiscal year, which kicks off in October.
As BTIG analyst Walter Piecyk believes, a product, which addresses to more than 70 percent of global wireless subscribers that are unsubsidized pre-paid, is required in order for Apple to grow its earnings per share next year. Offering as an example lower-priced devices as the iPad Mini and the iPod Nano, he also added that the launch of a cheaper iPhone does not necessary mean it will be compromising the Apple principles of “only making exceptional products”.
In a report released today, Gene Munster of Piper Jaffray said he expects Apple to sell a $300 non-subsidized iPhone starting in September. In his “ worst case scenario”, once the new cheaper iPhone is released, Munster believes that the iPhone price will drop from $788 to $688 because such a device is likely to cause a 30 percent cannibalization rate, which means that for every three low-cost iPhones sold, one full-price iPhone is cannibalized.
Furthermore, in calendar year 2014, Munster sees high end iPhone sales increasing by 6%. He thinks Apple sells 75 million low cost iPhones in 2014, taking 11% of the low end market.
An additional forecast for Apple is regarding its future earnings. Munster believes that Apple’s March earnings, which come out next week, are going to be weak, and guidance for June is going to be worse than anticipated. He expects Apple will lead June revenue below Wall Street expectations, to between $34 billion and $36 billion. At this moment, investors are waiting for an average guidance of $39.6 billion for the June quarter.
According to recent rumors, Apple will release a low-cost, non-subsidized iPhone this year geared toward developing markets such as China. Some of those rumors have been driven by Apple analysts. According to reports at Mac Rumors and Apple Insider, KGI Securities’ Ming-Chi Kuo asserted in January that the low-cost iPhone along with an iPhone 5S will be announced in June and be available by July.