Apple Inc. (NASDAQ:AAPL) is planning to start the production of the latest model of its iPhone in the second quarter this year. The company aims to launch the device as early as summer, according to report from Wall Street Journal citing information from sources who said the refreshed iPhone will sport a similar size and shape.
According to the sources, Apple Inc. (NASDAQ:AAPL) is also continuing its discussions with its manufacturing partners in Asia regarding the production of a cheaper iPhone in the second half of 2013. They cited that the cheaper device will likely use a different casing from the higher-end iPhone, and the company is considering different colors but the plan is still hazy.
According to Neil Mawston, analyst at Strategy Analytics, at this point there is no major differentiator between the players in the smartphone industry. He said, "The panacea is to transform the industry with a revolutionary design. You have to do the traditional business school implementations like manage costs and move quicker than rivals."
At present, Apple Inc. (NASDAQ:AAPL) is facing a great pressure on demands for smartphones with different price range. Its competitors in the industry are releasing different types of devices to cater the needs and fit the budgets of consumers.
During the previous investor conference last February, Apple CEO Tim Cook reiterated that the company “"wouldn't do anything that we consider not a great product." The Wall Street Journal cited that Cook and the other executives in the company have been fighting to preserve the premium image of the company.
Peter Misek, analyst at Jefferies said that most incremental growth for smartphone comes at less than $200 price based on the research firms’ global analysis of smartphone markets, incomes, and ecosystem strength by country. According to him, “a $350-$450 iPhone maybe too expensive,” and Apple Inc. (NASDAQ:AAPL) profits from the device may have peaked in CY212.”
According to him, the result of the research firm’s global analysis on the smartphone markets presents risks on their estimate for Apple Inc. (NASDAQ:AAPL) for the FY14, which is already 20 percent below the estimates at Wall Street for EPS and ASP -15% y/y.
Misek noted that the newly Samsung Galaxy S4 and HTC One are both excellent phones. Aside from the screen size, both devices have no major differentiators from the iPhone. He said, “Our quarterly proprietary survey shows that Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) and Apple Inc. (NASDAQ:AAPL) now receive equal customer satisfaction ratings. We believed this lack of high-end differentiation and developed markets being driven by smartphone replacements will lead to pressure on high-end smartphones ~700 ASP.”
Misek also emphasized that a less expensive iPhone may not be cheap enough for emerging markets where there is an incremental growth for smartphones. According to him, people in the incremental markets have lower income. There is a strong white box competition in China and India and less ecosystem stickiness outside the United States.
Jefferies recommended a hold rating for the shares of Apple Inc. (NASDAQ:AAPL) with a $420 per share price target.