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Wednesday, 9 January 2013

A Cheaper iPhone - The Samsung Effect

It's interesting to note this morning that the Wall Street Journal has reported that Apple is rumoured to be working on an entry level smartphone.

In the Steve Jobs-era, things were very clear.  Apple wasn't going to sink to the bottom of the barrel for marketshare and this is why Jobs so vehemently spoke out against the netbook market when it looked like that was going to be the next big thing in mobile computing several years ago.

The response to netbook computing that Apple had was the launch of the Macbook Air and then the iPad.  Apple created two premium segments that more really begged the question as to why would someone want to buy a netbook as a secondary device.

Would you like Fries with that? Steve Jobs with the Macbook
Air. Image: www.businessinsider.com

In this case, when we've seen Tim Cook release a 7.9" iPad Mini to compete with all the 7" tablets that we saw emerge and now if these rumours are to be believed, an entry level iPhone could be launched because of the threat the Samsung poses.

Like it or not, Samsung has made major in-roads into the smartphone business and where Apple had the benefit of migrating consumers from one generation of iPhone to the next, Samsung has been successful in making consumers migrate from entry level smartphones to their premium smartphones over the period.

This must be what is worrying Apple because not everyone can afford to drop more than Dhs. 2,500 for an iPhone whereas with an entry level Samsung smartphone, you're talking about investing a few hundred Dirhams and working your way up from there.
Samsung's Galaxy Pocket. A smartphone that costs just Dhs. 299

Apple's solution till now has been to offer their older smartphones as an alternative in some countries, so if for example the iPhone 5 is the flagship model in the Apple line-up, it's possible to find the iPhone 4S, iPhone 4 or even the iPhone 3GS available at much lower prices in certain countries.  The problem with this is that no one wants to be walk around with a device that is a few years old when a brand like Samsung can offer you a newer model at a much lower price.

Apple's strategy of having one flagship smartphone has worked well for them till now.  However, things aren't static and the competition is certainly working as hard as they can to make in-roads.  If not Samsung, there is always the Microsoft-Nokia Lumia threat that remains so it would be a surprise to see Apple say a shift in strategy is the order of the day.

Posted by: Ashish Panjabi, Chief Operating Officer, Jacky's Electronics LLC