Think different, Apple
Peak iPhone? Not yet. Time to go mass market.
Disclaimer: Opinion
Apple’s Q2 earnings are out. “Peak iPhone”, they say. According to IDC, Apple shed 3% off its global smartphone market share. While incumbents like Oppo and Vivo displaced Xiami and Lenovo to take 4th and 5th place respectively. Hold on, the verdict might be premature. I believe there is more room for iPhone growth. However, that growth might require Apple to think differently about its iPhone strategy.
The iPhone suffers from a conflict of ideas. It’s a platform. And a premium smartphone. A platform begs to be ubiquitous. A premium gadget begs to be exclusive. The thing with platforms is long-term market share counts. Google knows this. Microsoft is still enjoying this. Apple might have the majority of smartphone profit share, but Google’s Android platform dominates worldwide usage. Yet, most people will buy an iPhone if they could afford one. It is about time Apple started taking slices of that pie.
The iPhone SE is competitive at $399, but a new model at $249 focused on emerging markets will be a great Android killer. Plastic, with an A7 processor and a decent camera. No need for fingerprint and 3D touch. Historically, Apple has treated phones like the iPhone 5C and iPhone SE as second class citizens. A $249 iPhone should be Apple’s equivalent of Tesla’s Model 3; the mass market gadget. Apple should exert their marketing muscle here like they do with their flagships.
Apple’s cloud business is growing. More people on iPhones means more room for Apple to grow its cloud business. Apple Music, iCloud and App Store revenue will keep growing with more iPhone users. Apple should also double down on software innovation.
Apple loves to boast about its profit margins. A $249, toned down iPhone is unlikely to hurt Apple’s bottom line due to an advantage Apple has over its competitors. Vertical integration. Profit margins are cool, but when you own a platform like iOS, market share is probably more important. Scaling from a premium device manufacturer to dominating mass market mobile computing will give Apple an unprecedented advantage.
The iPhone enjoys a unique marriage of hardware and software. iPhones do not suffer the same fragmentation issues as Android. When Apple pushes an iOS update it reaches all users instantly. Apple’s App Store is unrivaled in quantity and quality. Reducing the barrier to enter such an ecosystem is a strategic move Apple should seriously consider.
In summary, Apple should make the iPhone a mass market mobile platform. Everyone wants an iPhone, but $399 is too steep a price tag for most people in emerging markets. However, $249 is a competitive entry point, that won’t damage Apple’s brand appeal. Apple should take cues from car manufacturers, like BMW, who sell compelling entry level vehicles. After all, it wants to become one.
