Apple's Cheap IPhone Is Going To Be Much More Expensive Than You Think

Earlier this week, venture capitalist Fred Wilson said, “I sure hope Apple does announce and ship a cheap iPhone that prepaid users can purchase for less than $US200.”

We’ve got some bad news for him: Apple is unlikely to go that cheap with its “cheap” iPhone.

When Apple announces a new low-cost iPhone, which we’re told is going to be called the iPhone 5C, it’s most likely going to be a mid-tier price, not a low price.

At Daring Fireball, John Gruber suggested the low-cost iPhone would cost $US349-$US399 without a smartphone contract. Gruber doesn’t seem to have insider knowledge, but his viewpoint is generally perfectly aligned with with Apple’s viewpoint.

Gruber got to his price point by looking at the iPod Touch price then adding a premium for cellular radios.

Gruber isn’t the only one floating this price point. In May, J.P. Morgan suggested the iPhone 5C would cost $US350. Mark Gurman, one of the best Apple reporters in the world also suggested ~$US350.

There are a number of reasons to believe Apple isn’t going to go too low in pricing.

The reason Android phone makers are charging less and less for their phones is that price is the only way to stand out. Apple would argue iOS is different, and better, than Android. It’s worth a premium.

Just last year, when everyone expected the iPad Mini to cost $US250 or less, Apple decided to charge $US329.

Apple’s business model is built on selling hardware. It has to protect its margin, and make some money on the devices its sells. A $US200 iPhone wouldn’t leave much, if any room, for a profit.

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