There's always been something of a sense of irony with the Apple (NASDAQ:AAPL) iPhone 5c.
Although it was the most colorful iPhone ever, the handset's 2013 release somewhat resembled the "black sheep" of Apple's iPhone lineup. Surprisingly, the iPhone 5c's business model has proven more powerful over time than many initially believed.
Fast-forward to today, and the rumor mill suggests Apple is returning to the c-series platform for its fiscal 2016 iPhone lineup. And with the recent surface of purported Apple handset images, those iPhone 6c rumors are growing more credible by the day. Let's take a look.
New details, old innards
Earlier this week, Apple news site MacRumors recirculated a number of images that claim to represent the outer casing for the upcoming Apple iPhone 6c. You can see for yourself here.
Before we go any further, let me make it absolutely clear that these images are by no means definitive. They could be fake, doctored, or the result of any other kind of deception. However, such supply chain leaks nearly always precede any Apple product launch these days, especially the iPhone. If this is the real thing, what could the images tell us?
In looking at the images, two key differences emerge between last year's iPhone 5c and the supposed iPhone 6c. First, the opening for the purported iPhone 6c's LED flash output has changed in shape, from circular to ovular. Of seemingly equal minor note, the speaker openings of this alleged iPhone 6c feature a two-rowed configuration, rather than the single row of speaking openings found on the iPhone 5c. Now, I'd completely understand if you're yawning by now. These details don't seem to matter much. However, they could tell us something meaningful about Apple's pricing strategy for this upcoming device.
The design features in question were unique to the iPhone 5s, which strongly, but not definitively, suggests Apple plans to repackage the internal hardware from last fiscal year's flagship phone into the updated 6c.
Why does that matter?
I'm not the first to note Apple's curious and unique ability among smartphone manufacturers to upsell consumers into higher pricing schemes. Apple increases the price of its iPhone 6 by $100 increments based on its memory when said memory costs only a few dollars, but consumers have seemingly never balked at this long-standing practice. What's relevant in this context is that it appears Apple intends to leverage a similar tactic with the iPhone 6c's pricing.
Apple's pricing for its iPhone has historically been three-tiered. The newest high-end iPhones occupy the uppermost tier and typically begin retailing at $199 with a two-year contract. One rung below is where Apple typically places the past year's flagship iPhone, which it prices at $99 with contract. Lastly, Apple usually includes the iPhone from two generations ago, which costs nothing up front on contract.
If Apple sticks to its c-series iPhone playbook, it will likely price the iPhone 6c at $99 on contract, so on the second tier below the presumed flagship iPhone 6s. However, if Apple uses a lower-cost plastic casing and the now substantially cheaper innards from the iPhone 5s in this device, the margin profile could vastly exceed that of Apple's normal second-tier smartphone, and thus bolster the overall profitability of Apple's smartphone lineup next year. So while we have a long way to go before this storyline is to be believed, the early indications show Apple's supposed "low-end" iPhone 6c might actually be more financially accretive than many investors realize.