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Apple Inc. (NASDAQ:AAPL) may not have representatives and leaders at this week’s Consumer Electronics Show (CES) in Las Vegas, but it doesn’t mean they’re not still part of the conversation and rumors.
This year, the rumor du jour was that Apple Inc. (NASDAQ:AAPL) will make a less expensive iPhone.
The phone was said to be targeted at emerging markets such as China, this week Apple marketing chief, Phil Schiller, and Apple CEO, Tim Cook, were visiting the country.
Schiller has previously said that that basic “feature” phones have been popular in Chinese markets but “cheap” smartphones are the most successful.
On Thursday, he tried to quash the rumors in an interview with the Shanghai Evening News. Schiller spoke to the paper on the possibility of a cheaper iPhone, “Despite the popularity of cheap smartphones, this will never be the future of Apple’s products. In fact, although Apple’s market share of smartphones is just about 20 percent, we own 75 percent of the profit.”
Analysts have previously said a cheaper iPhone wouldn’t be the worst thing for the company. Piper Jaffray analyst, Gene Munster, a huge Apple bull, wrote in a Thursday investor note that this phone would expand Apple to a large, new market and it could reach sales of 580 million phones in 2013.
He wrote, “We believe that the high-end smartphone market (above $400 USD off contract) for [calendar year 2013] will be about 320 million units, of which we believe Apple will capture 50 percent market share. We believe this means Apple is missing the other 65 percent of the market, or 580 million units, given its current product lineup without the lower priced phone.”
Munster predicts that Apple Inc. (NASDAQ:AAPL) will introduce a low-cost iPhone in 2013 to gain this market and next year, he estimates the company could sell 100 million of these lower-cost devices but it will depend on the smartphone market.
The analyst does note that the cheaper alternative will impair Apple’s gross profit margins during the next few years, but overall, the impact could be less than 1 percent; he still views this as a great opportunity for Apple, which could help the company hit 22 percent sales growth in 2013 and 23 percent in 2014.
But there’s more than Schiller’s words and Munster’s note. The Wall Street Journal jumped on the cheaper iPhone bandwagon this week and said the phones could be launched this year. It also gives some possible design ideas.
Why introduce this phone now? The iPhone is losing market share to the less expensive Google Inc (NASDAQ:GOOG) Android operating system.
In the third quarter of 2012, Apple Inc. (NASDAQ:AAPL) had 14.6% of worldwide smartphone shipments, down from its fourth quarter 2011 high of 23% and and 2012’s first quarter, according to IDC.
Apple is also feeling pressure from Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930), which saw its share increase from 8.8% in the third quarter of 2010 to 31.3% in 2012’s third quarter.
Apple usually keeps its old models around and sells them at lower prices. But this means its least costly one is the iPhone 4, first launched in 2010, with a current U.S. sales price of $450 without a service contract. This compares to the same device carrying a $490 price in China and $750 in Brazil when taxes have been included.
Not exactly a lower-cost alternative for these markets.
Apple Inc. (NASDAQ:AAPL) was up 1.60% on Thursday and closed at $525.35 .