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Apple Inc. (AAPL): A Lower-Priced iPhone Doesn’t Mean a Low-Cost iPhone

Rumors are still swirling about a lower-priced iPhone and investors are wondering whether or not Apple Inc. (NASDAQ:AAPL) will make it a reality. If the company does debut a cheaper iPhone, it could disrupt emerging markets and grab more market share worldwide­ — if the price is right.

Just North of a low-cost phone
Some have said suggested that a cheaper iPhone could be priced around $330, sport a 4.5-inch screen, and have a polycarbonate body. Apple Inc. (NASDAQ:AAPL) CEO Tim Cook recently said in an interview that quality products are the company’s North star. With this mind, even if Apple Inc. (NASDAQ:AAPL) releases a lower-priced phone, it likely won’t be a cheap one.

Apple Inc. (NASDAQ:AAPL)The specs, pricing, and even the phone are speculative at the moment. But investors can bet that Apple Inc. (NASDAQ:AAPL) won’t give up its estimated 35% to 50% profit margins on its iPhones just to launch a cheaper version. The more logical approach would be for the company to come in at around the average-priced Android phones and try to steal the Android-dominated smartphone market share.

Source: VentureBeat.

To maintain the profit margins Apple Inc. (NASDAQ:AAPL) is currently used to, the company would need to create a phone by incorporating some of its existing technology. Doing something like that has the possibility of turning into a newer, bigger iPhone with the same or similar technology that’s in the iPhone 4 or 4S. Taking that route doesn’t seem likely, considering Cook has said the iPhone 4 is still under “constant constraint” from customers, and shipments of the 4S out-shipped Samsung’s Galaxy S III in the last quarter of 2012.

Source: Strategy Analytics.

In China, the world’s largest mobile network, Android phones make up about 72% of the smartphone market share in the country, with the iPhone taking just over 23%. The average cost of an Android phone in China is around $223, compared to the iPhone 5’s launch price of $850. If Apple Inc. (NASDAQ:AAPL) were to release an iPhone priced around $330, the company would be in a much better position to steal sales away from Android-based phones in the country.