A cheaper iPhone! You really think so?

The Wall Street Journal and a number of other outlets reported last week that Apple was going to begin producing a cheaper iPhone, presumably going after the "economy phone" market. It would cost users nothing with a 2-year contract, and it would only cost Apple all of the ideals they hold most dear, and much of their current business model. 

I suppose that's a bit of an exaggeration. But not entirely. 

Story time! 15 years ago, Apple was on the brink of bankruptcy. Their stock price was in the single digits, and had been for essentially the entire nineties. They were lost. I was still an Apple fanboy, and purchased a Mac LC 3 to take with me to college. 

The Mac LC (which stands for "low-cost color") is precisely the kind of misguided product that the  low-cost iPhone - let's call it the "iPhone LC" would be. The computer was so underpowered that  a warning bubble popped up telling me that it literally could not run the MacPaint software that it shipped with in fullscreen on its 12-inch monitor. 

This LC wasn't from the same Apple that produced the Macintosh II, or the Apple IIGS, a couple of years earlier. Those were groundbreaking computers, doing things we'd never really seen before. The LC couldn't do much of anything, and it made its buyers feel like suckers. 

I was the biggest Apple fan around in the mid-nineties, and that LC even soured my opinion of Apple - especially when my roommates were using Windows 3.1 and blowing my LC out of the water. (And don't get me started on Windows 95 - by that point, I was running a Compaq.) 

You can't win loyal customers by selling them low-end products. Mostly, it just kills your brand. For another example, look at how Samsung's fortunes have risen since they re-branded as a Sony competitor 10-12 years ago. 

In 15 years, Apple has gone from a company on the brink of bankruptcy to the largest and most profitable company in the world - and they did it by espousing a philosophy that is as far from "sell cheap stuff and gain market share" as possible. 

The new, wildly successful Apple maintains its margins at all costs, and justifies those margins by creating and selling objects of desire. Technology with world-class software and (even more importantly) hardware design, that people are insanely proud to own and to be seen with.  

Laptops made from solid aluminum, rather than painted plastic. Phones with no buttons. Phones made entirely of glass. Powerful desktop computers that look just as good in your home when they're turned off. Objects of desire. 

A low-cost iPhone, made of cheaper materials, would not be one of those objects of desire. It would  announce to the world "I'm using that low-cost iPhone... yeah, things aren't going great." It would tarnish the brand, while in all likelihood cannibalizing at least some of those high-margin sales. 

And even more to the point - Apple already sells a cheap iPhone. You can get an iPhone 4S on the cheap, or an iPhone 4 for free, with a contract. Why would Apple go to the time and expense to develop and set up a new, parallel production line for an "iPhone LC", when they're already producing/clearing out last year's model at an economy price? 

These are the iPhones that - quite recently - were the finest you could purchase. The 4S, especially, has all of the functionality (and expensive materials) of the current iPhone 5, and it announces to the world "I was an early adopter - last year". Most of us are on 2-year upgrade cycles, anyway.  

Keep dazzling us with fantastic phones, and we'll keep paying for them. Fortunately, that is a lesson that Apple learned the hard way, not such a long time ago. I doubt that they'd forget so quickly. 


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