It turns out Apple still can surprise people.
At today’s big iPhone event, it announced that the iPhone 5C would cost $US99 with a two-year contract, or $US549 without a carrier contract.
Most people were expecting the iPhone 5C to be a low-cost phone to expand Apple’s market share. Some people dreamt of a $US200 off-contract phone, but most realists warned that it would be $US400-$500.
We didn’t see anyone predict $US550 off-contract. At that price, it won’t expand Apple’s addressable market.
So, yeah, surprise!
At $US55o, the iPhone 5C is a bit confusing.
In the past, Apple would have just knocked the price of the entry level iPhone 5 down to $US99. This year, it’s killing the iPhone 5, going with the iPhone 5C in its place.
Apple didn’t really give any explanation for why it’s producing a 5C. In a video for the phone, designer Jony Ive says, “The iPhone 5C is in many ways the distillation of what people love about the iPhone 5. It’s simpler, more essential, yet it’s more capable, and certainly more colourful.”
He then continues with more superlatives about why the iPhone 5C is great. However, he fails to deliver an explanation for why Apple did the iPhone 5C.
Later in the video, however, Craig Federighi, who leads iOS software engineering, alludes to what may be the reason Apple decided to go with the iPhone 5C.
He says, “We’ve added more LTE bands than any other smartphone in the world.”
That suggests that Apple decided to sell the phone all around the world, potentially on new carriers. To do that with the iPhone 5 would have meant redesigning the iPhone 5 to fit the new LTE bands in the casing.
Apple probably decided that it was better off with a plastic casing that costs less to make, and more easily packs in all the bands it wants.
It was going to make a new phone, so why not go with playful colours and a casing that was more profitable?
Update: On Twitter, Benedict Evans says the new bands don’t matter. Apple is just making additional models of the phone.
If that’s true, then our alternate theory is this: Apple just wanted to segment the iPhone market like it segments the iPod market.
We don’t really get why Apple did it though since a new fun, colourful version of the iPhone could eat into sales of the iPhone 5S without meaningfully expanding its market.