Apple's iPhone 5c Fails Where It Matters Most

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Combining tech giant Apple's  (NASDAQ: AAPL  ) strong brand with a product that's affordable enough for emerging market consumers seems like a homerun business decision in the making, right?

At least, that appears to be the logic behind Apple's iPhone new-kid-on-the-block, the iPhone 5c.

However, investors are increasingly noticing that something clearly isn't resonating with the iPhone 5c in this market that it was practically designed for.  

Apple's emerging markets flop
According to a recent report from Chinese analytics firm Umeng, Apple's iPhone 5c today accounts for an alarmingly low number of the overall iPhone's operating in the Middle Kingdom.

How low you ask?

Source: Apple

According to its figures, the iPhone 5c represents an embarrassingly low 2% of the Chinese iPhone market place. Now given that the bulk of the market is still made up of older iPhones that could in theory still be upgraded in the months or years ahead. And to be fair, including the effects of handset subsidies on some carriers, Apple's iPhone 5c certainly looked like a device tailored made for this high growth part of the smartphone market. But in reality, Apple's low cost iPhone clearly hasn't struck the chord Apple had hoped as a recent ream of data now suggests.

In the video below, tech and telecom analyst Andrew Tonner looks at this news and what it could mean for Apple's iPhone 5c.

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Read/Post Comments (9) | Recommend This Article (1)

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  • Report this Comment On March 24, 2014, at 7:53 PM, skepticaleye wrote:

    Can we stop calling the 5C a "mid-priced" phone for "emerging markets?" It was clearly never intended for that role, no matter how much the media expected that. It's a less expensive way for Apple to offer a good/better/best price strategy in developed markets. And, as others have pointed out, it sells better than the Samsung Galaxy 4 and every other high-end phone except the 5S.

    If Apple were serious about creating a mid-priced phone for emerging markets, it would have to strip out some capabilities and produce a less-expensive phone. Sort of the way it did with the iPod nano. I'm sure that has occurred to folks at Apple over the years. Since the company hasn't produced such a marvel, it has decided it wouldn't sell or wouldn't be profitable.

  • Report this Comment On March 24, 2014, at 8:18 PM, djtetsu wrote:

    Bright colors was probably meant for the younger generation.

  • Report this Comment On March 24, 2014, at 8:28 PM, ComeOnMan wrote:

    The first three paragraphs of the article are simply Mass Media Echo Chamber Reverb... annoying and painful.

    The only people that have perceived the iPhone 5c to be intended as a inexpensive low-cost product designed for emerging markets are Analysts and members of the Tech Media.

    Apple has never.. and I repeat, Never been about low end low cost products. The iPhone 5c was designed to be a cool looking alternative to the iPhone 5 (the basic tech in the 5c is iPhone 5) and to add contrast with the new tech in the iPhone 5s.

    I think that anyone who knows Apple will understand that to make an inexpensive product would require cutting corners somewhere in the design and materials. For the long term investors in Apple this could be a nightmare. What makes Apple the Most Valuable Company in the World is that it makes products and provides service that are reliable and a step above everyone else. Damage that image/reputation and you have nothing more than another tech company making "gadgets" for profit. I am sure if you know anything about Apple, it products, and it's people that just making gadgets for profit is not what they are about.

  • Report this Comment On March 24, 2014, at 9:15 PM, vernr75 wrote:

    @skepticaleye - The price you see on the final price of the iPhone has nothing to do with the cost of the materials used to make them. The latest iPhones have always cost just under $200 to manufacture. They then take that affordable $200 hardware and charge folks the universally unaffordable $650-$850 price for them simply because it works well and looks good on the surface. The idea that iPhones are expensive hardware is merely a marketing gimmick (albeit a successful one), since the only thing keeping the iPhone's cost high is Apple's desired profit margin. Apple gets away with it because of the existence of the phone subsidy system that only exposes the real $200 cost of the hardware as the upfront cost to consumers and hides Apple's high margins in customers' monthly bills. The iPhone fails miserably in the markets where those high margins cannot be hidden because of the absence of a hefty subsidy system. Since it's the only mobile platform that now depends completely on subsidy systems, it's getting left behind at the global level and may even disappear from the market if these subsidy systems are rendered extinct by competing platforms.

    Therefore, if Apple were serious about creating a low cost iPhone to keep iOS from becoming totally irrelevant to the world at large, they'd have to do just one thing....lower their prices by cutting their ultra-high margins. They'd make the same amount of money they do now, but instead of having just 260 million iPhone customers and instead of watching first time buyer numbers fade away each year, they'd have several hundred million more phone customers that they have no chance of getting now without such serious price cuts. A much larger customer base would make iOS a far more relevant player when it comes time to expand into other sectors such as cars and appliances bought by billions of people around the world. But in cutting prices, Apple would destroy the illusions and public ignorance they have been using to justify their high prices. The illusions fueling acceptance of the high prices of the brand will be gone. Apple's not going to do that because they're really in it for the money and nothing more. Why else would they be so willing to completely sacrifice the future global relevance of their iOS platform for more cash they don't really need?

  • Report this Comment On March 24, 2014, at 9:47 PM, larryw101 wrote:

    Another worthless Motley Fool article.

    When is Motley going to start hiring truly talented journalists to write for them?

  • Report this Comment On March 25, 2014, at 1:21 AM, deasystems wrote:

    This article fails (twice) where it matters most—starting with a reasonable assertion then successfully defending it.

    Better luck next time, Andrew…

  • Report this Comment On March 25, 2014, at 2:59 AM, fauxscot wrote:

    Second day in a row with this theme.

    Let's just say you had a lousy phone and wanted to make it better or charge more. That would be hard, right?

    On the other hand, if you had a decent phone and wanted to charge less, that would be easier, right?

    You're following my reasoning here, I hope. Frankly, I am skeptical.

    The 5C outsold every flagship smartphone out there and you insist on calling it a flop. Including the Galaxy S4.

    Seeking Alpha has a persistent bear named Blair. I think I've found one here at MF. Reality has no influence on some folks. Shame we can't rate the articles via any means other than the comment thread and a yellow sticky on the monitor to remind us who to ignore.

    Fails, indeed. There's a fail here, alright.

  • Report this Comment On March 25, 2014, at 6:26 AM, larryw101 wrote:

    Andrew Toner is Michael Blair's nephew.

  • Report this Comment On March 25, 2014, at 5:48 PM, lgb wrote:

    I hope makes cell phone cases for the new iPhone 6 too! They are really cool cases that stick on mirrors and metals (for selfies.) It also protects my iPhone 5 really well and it comes in many different colors.

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Andrew Tonner

Andrew Tonner is a tech specialist for The Motley Fool. He is a graduate of The University of Arizona with a degree in Finance.

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