Why did Apple just release a cheaper iPhone 5c?

 
Oliver Smith
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Apple added a brand new iPhone to its lineup today, but before you get too excited it’s only a marginally tweaked iPhone 5c with a reduced 8GB of storage (the previous entry model had 16GB).

The impact of this change shaves £40 off the 16GB version and brings Apple’s cheapest new iPhone down to £429 (off contract).

Cracking China

It is widely believed that Apple’s so-called ‘cheap’ iPhone 5c hasn’t reached the dizzying sales heights that Apple had expected it to.

Not in developed markets mind, Apple (and analysts) had hoped that the iPhone 5c would become a big seller in developing markets such as China and India.

Sadly the mix of iPhones sold in these countries has stuck firmly favouring the more expensive 5s.

Analytics firm Umeng shows that the iPhone 5c’s sales haven’t taken off in China in the same way that the iPhone 5 and 5s have.

Not cheap enough

But in the world of the $25 smartphone – and the very decent Nokia X and Motorola G both coming in under £100 – even Apple’s cheapest phone is a very premium product.

Analysts hope that Apple creeps down until it hits the right price point to ‘crack’ China (less than £150? less than £75?) and unlock a new wave of growth for the firm – absent a smartwatch or new product category device.

But with a mere £40 price drop Apple instead seems committed to a different strategy, waiting until China’s middle classes can afford its products, rather that further sacrificing margins for growth.

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