Will the "Cheap" iPhone Really Help Apple in China?

Perhaps the biggest question going into Apple's (NASDAQ: AAPL  ) Sept. 10 iPhone event is how much the alleged "iPhone 5C" -- otherwise known as the "cheap" iPhone -- will cost without a contract.

If it's priced too high, it'll likely limit the iPhone's growth potential in emerging markets. If it's priced too low, it could weigh on Apple's profit margin. Finding that happy balance will be key to pleasing users and shareholders alike.

According to KGI analyst Mingchi Quo, the iPhone 5C is expected to carry a price tag around $400 to $500. At those levels, it aligns well with a Morgan Stanley report that found $486 to be the sweet spot among Chinese consumers for the iPhone 5C. In other words, the iPhone 5C could be poised to do quite well in the Middle Kingdom (and presumably other emerging markets).

However, with two iPhone models currently falling near this contract-free price range, Fool contributor Steve Heller thinks the iPhone 5C may not be a home run product. Check out the video below to get his full thoughts on the issue.

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  • Report this Comment On August 29, 2013, at 7:11 PM, DanManners wrote:

    Steve, great stuff. But I disagree some. I understand your point. But the phone will not be the same as the two older phones.

    The new phone will be better than the older ones so I believe that is what people will buy. The older phones will have to be cheaper. This was what

  • Report this Comment On August 29, 2013, at 7:19 PM, DanManners wrote:

    Steve great stuff but I disagree some.

    First Marguerite Reardon of CNET said that the 5c will be much better. Faster service, faster chips and better features. The older phones are just that older. People want to buy the newest product for the right price. Since they did buy older phones when they could have gotten competitors' phones much cheaper, points to a successful launch of the 5c.

    I think the 5c has to cost more than the older phones. Also the older ones could be phased out. No one knows at this point but the older phones should become much cheaper and if they don't then they are not needed.

    Regardless what phone they come out with, they will not succeed to well as Jeff Grundlach has said Apple will have trouble going over 530. Thus Apple is now doomed because Grundlach has been 100% right so far about Apple. That is still $ 40 higher and not a bad run but with the potential for Apple to just tank around new product launches, one would do well by avoiding the stock.

    Tim Cook has been pretty bad for the stock price and I don't things will change. You can be sure there will be issues and Cook will be writing apologies once again. But what does it matter has he sold more of his personal stock so he won't have any impact on the stock going lower.

    My guess is that the stock will drop into the product release.

  • Report this Comment On August 29, 2013, at 8:00 PM, joverclock wrote:

    I completely agree. 500 is just too much for a "cheap" phone now a days. Since google dropped the nexus 4 down to $200 .cant imagine to many would pick the 5c over the nexus 4 or iphone 4/ 4s.

  • Report this Comment On August 29, 2013, at 8:01 PM, vrk3179 wrote:

    Selling a iPhone in China is like selling a Rolex in China, knockoffs, replicas and copycat products cost pennies on the dollars and are on every street corner. The junk replicas are made in china's back yard.

  • Report this Comment On August 29, 2013, at 9:47 PM, Thadiusjames wrote:

    I disagree, look at the reason people in Asia but Apple devices. It is a style thing why do you think there are so many knock offs. Everyone said the same thing about the non retina iPad mini and it is one of the most successful products In Apples line up. As for the previous comment about look at what Tim Cook has done to the Apple stock you probably need to read some charts because Apple has never been as successful stock price wise until his leadership. Steve could care less about stock price and never reinvested in shareholder value.

  • Report this Comment On August 30, 2013, at 12:04 AM, jabstrat wrote:

    The new iPhone will carry Qualcomm's new chip, making it compatible with China Mobile's two primary protocols. That's been the biggest roadblock to Apple's entry into their network. This together with a negotiated deal with CM will abe Apple's ticket.

  • Report this Comment On August 30, 2013, at 12:46 AM, vernr75 wrote:

    Seriously? Isn't that blog title a rhetorical question? The answer is obviously no. You can't gain relevance in any market where your lowest price point is hundreds of dollars too expensive to be considered for purchase by more than 90% of the population. Gaining market share in China and other developing countries now requires that you sell at price points of $200 or less. Otherwise, you're just a spectator on the sidelines.

    Apple couldn't crack the Chinese market with a metal glossy iPhone 4 sold at $450 at a time when the average smartphone selling price in China was significantly higher than it is today and there was much less competition...so some silly 'analyst' now dreams up the idea that they're going to somehow crack it this time with a plastic iPhone sold at the SAME PRICE at a period in the evolution of the Chinese mobile sector when the market is expanding because of the ever-growing existence of much much lower smartphone price points? Did this analyst take into account the fact that a very recent respected survey group has shown that the iPhone has lost significant popularity even among high end buyers in China while Samsung and several other local manufacturers has gained? Did the analyst take into account that Chinese carriers have already begun to cut the subsidies they give to the iPhone 5 (and thus effectively increasing the price consumers see), which is a sign that they may very soon do the same for other versions of the iPhone? And finally, did the analyst take into consideration the very important fact that the Chinese economy is experiencing a slowdown and that this will most certainly hit purchases of the high priced phones with increasing ferocity in the near future? I didn't think so.

    Apple's headed to single digit global market share - highest prices always gets you the lowest market share when a product category is no longer niche and becomes a commodity. I don't know why folks are acting so surprised and defensive of Apple. They should have been expecting this development years ago because smartphones were always going to replace feature phones and become commodities. Sure, they can still make big profits as long as carriers are willing to apply subsidies, but the market share need isn't for Apple's bank accounts; it's for their mobile platform to stay globally relevant...and they're rapidly losing that battle with each passing quarter.

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