Apple Never Really Meant to Sell a 'Cheap' iPhone - Wired

Of all the praise lavished on Apple over the years, no one ever accused the company of being too democratic. From Steve Jobs' autocratic style to its top-down control of its hardware and software to its premium prices, Apple always has been about telling you what's good for you — and confidently expecting you to pay more for the privilege of having it.

Against that backdrop, the idea of a budget version of any Apple product stands out as an undertaking for which the company has had little practice. Based on some early data on the demand for Apple's "cheap" new iPhone, that inexperience appears to be showing.

In the weeks following last month's release of its new iPhone models, the more expensive 5s outsold the 5c in the United States by a factor of more than two to one, according to a survey conducted by market research firm Consumer Intelligence Research Partners. The 5s ($ 199) accounted for 64 percent of new iPhone sales, while the 5c ($ 99) accounted for 27 percent, the survey found. (The now free 4S made up the remaining 9 percent.)

The results are similar to the launch of the iPhone 5 a year ago. At the time, sales of the 5 ($ 199) amounted to more than two-thirds of total sales, compared to a little under one-quarter for the 4S ($ 99).

The glaring difference is that last year, the budget option was simply an older model sold at a cheaper price. This year, Apple introduced a "new" budget model to far greater fanfare. This was supposedly Apple's "cheap" iPhone — an attempt to expand beyond the possibly saturated market for its high-end handset and get more Apple products into the hands of more people.

By the standards of a "new" iPhone, the 5c has performed terribly. In Apple's U.S. online store, shipping on all models of the 5s appears to be delayed by at least two to three weeks. The 5c, by contrast, ships in a day. The relative popularity of the 5s isn't the only inference you could draw from that information. It's possible Apple just made more of the 5c. And there have long been questions about the 5s supply chain.

But the CIRP survey is far from the only report on the 5s trouncing the 5c, and not just in the United States. Even in China, where a cheaper model supposedly was key to cracking open a massive market that has largely resisted Apple's charms, it's the 5s that has been a hit.

So did Apple screw up? The $ 99 price tag for the 5c might suggest a dire misreading of the market. In a landscape where high-end Android phones sell for that price or less, 100 bucks hardly sounds like a bargain. It's as if Apple were trying to create a new category: "aspirational budget" — not cheap, just not as expensive.

The 21st-century version of Apple, however, isn't a company known for strategic blunders (maps are the exception that proves the rule). The earlier scare quotes around "new" to describe the 5c are due to the obvious fact that the 5c isn't new at all — it's a 5 with a plastic case and iOS 7 baked in. In other words, it's the same as it ever was: Apple introduces a new premium model with a few cool new features and sells last year's model at a discount. Except this year, for the price of a plastic case, Apple was able to sell itself as a twice-over innovator, a reputation it desperately needs to shore up to appease skeptical shareholders.

Was Wall Street dazzled by a little blue, yellow, pink, and green? It's highly doubtful that the 5c is the key driver of Apple's more than 45-point share price jump over the past month. But if a few cosmetic changes and the 5s fingerprint sensor are enough to restore more than $ 40 billion in value to the company, it's window-dressing that's worth it.

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