Though the iPhone 4 was released over three years ago, it remains an important driver of smartphone sales in emerging markets like India. Indeed, strong sales of the iPhone 4 helped Apple sell a lot more iPhones this past quarter than many analysts were expecting. Tim Cook even noted that the iPhone 4 remains an attractive device for first-time smartphone buyers worldwide.
Not that selling older models in emerging markets is a new strategy for the company. And it has potential downsides, as lower-priced phones can squeeze gross profit margins.
But Apple, despite its image as a premium player, is adopting more aggressive tactics to sell its oldest smartphone in markets where demand is growing quickly and many buyers have never purchased a smartphone before.
As mentioned above, the obvious downside to Apple’s reliance on the iPhone 4 as a sales driver is that the device, being three years old at this point, commands a lower price point than Apple’s more recent iPhone models. The Journal notes that while the iPhone 5S costs carriers $649, the iPhone 4 costs only $450.
Consequently, while the iPhone 4 — which is often offered for free with contract — is a great device to bring new customers in and generate sales on the cheaper end of the smartphone spectrum, it also has a discernable affect on Apple’s bottom line.
In the quarter gone by, for example, the average selling price of the iPhone fell to $581, a $32 drop compared to the March 2013 quarter.
Nevertheless, Apple’s iPhone 4 strategy appears to be working, especially because the device’s lower price point is attracting first-time smartphone buyers who might otherwise be drawn to more affordable smartphones from other manufacturers. iPhone sales in India, for example, appear to be booming.
This is especially important to Apple because once a user is ushered into the iOS ecosystem, they are likely to purchase other Apple products in the future.
All told, the evidence is rather clear that there is a huge market for a lower cost iPhone. Again, the downside to Apple is that older devices like the iPhone 4 don’t yield the same healthy margins Apple typically enjoys.
To that end, there are a number of rumors which suggest that Apple this fall will release a lower cost iPhone comprised of cheaper materials. The reasoning is that this will allow Apple to target emerging markets without having to sacrifice as much in the way of margins.