Was Apple's "budget" iPhone priced too steeply to entice developing markets? That's been one of the key debates surrounding the 5c since its debut. But in today's earnings call, company CEO Tim Cook shot down the idea that the iPhone 5c was ever aimed at cost-conscious consumers.
Cook pointed to the iPhone 4s, which is now two generations old, as a "fantastic" entry-level phone.
This might seem like a retreat from all of the reports leading up to the 5c's launch. But Cook has a point. As Apple's lineup goes, the 4s is a much cheaper offering compared to the 5c, which retails at $550 before carrier subsidies. The 4s, meanwhile, sells for $100 less at unsubsidized rates and is still a strong product, accounting for 30 percent of Apple's total iPhone sales as recently as June.
In fact, Apple has a long history of retaining its older products as low-priced options. When the iPhone 3GS debuted in mid-2009, it kept selling the iPhone 3G for another year. Then, when the iPhone 4 came out, Apple discontinued the 3G but kept offering the 3GS for an additional two years — even after the iPhone 4s came out in late 2012.
Granting Cook's premise creates other problems, though. If he's right about the 4s being Apple's true entry-level phone, then why does the 5c — which is really just a 5s housed in plastic — exist?
More importantly, it's still not clear that the 4s is cheap enough to be competitive in emerging markets. China's version of the Apple Store advertises the iPhone 4s for $425, $100 more expensive than leading contenders like Xiaomi's Mi-3, which is $327. It's a lot closer to "budget" than the 5S, but still requires a hefty up-front payment.
It's not like Apple can't afford to reduce the price more. The 4s costs the company $188 to manufacture. Even at $425, that's a 126 percent margin.
Even if we accept that the "c" in 5c doesn't stand for "cheap" as we all thought it did, Cook still has some explaining to do.