April 9, 2013
It wasn’t that long ago that when Apple released a new iPhone, the previous model was taken off store shelves. That all changed in 2011, when Apple released the iPhone 4S. Since then, Cupertino has offered three handset models, each at a different price point. In 2012, Apple launched the iPad with Retina display. At the time, they discontinued the so-called new iPad, which had arrived just seven months previously. However, the iPad 2 remained. The Motley Fool’s Adam Levine-Weinberg recently offered a unique perspective on where Apple is going with the iPhone. Based largely on what Apple did with the iPad, he suggests that when Apple releases the so-called “iPhone 5S,” they will also announce the demise of the iPhone 5. He suggests that Apple’s falling gross margins makes it prohibitive for the company to keep the iPhone 5 around. Levine-Weinberg states:
If Apple were to drop the iPhone 5 price by $100, many customers would take the discount rather than buy a similar, if slightly more powerful, iPhone 5S. That would reduce the iPhone's average selling price and pressure gross margin even more.Under this scenario, the iPhone 5S would become Apple’s flagship smartphone, while the iPhone 4S and iPhone 4 would stick around as low-cost alternatives. This makes a lot of sense. However, I think that the writer misses an important point. Apple is also likely to release a so-called budget iPhone this year. This, in my opinion, would make the iPhone 4 unnecessary. Therefore, while I agree with Levin-Weinberg’s assessment that keeping the iPhone 5 around doesn’t make a lot of sense, I offer a different conclusion. When the iPhone 5S is released, Apple would probably offer the “iPhone mini” as their mid-priced alternative. The iPhone 4S would then be offered as the company’s “free” handset, while the iPhone 4 would be retired. As an iPhone 5 owner, I wouldn't want to see it go away just months after it arrived. However, as long as Apple were to offer iOS updates well into the future, I'd be fine with the move. This assumes, of course, that the iPhone 5S looks very similar to the current model, which has been rumored. See also: What Would A Wraparound iPhone Display Look Like? We're Hoping Like This, and There Is A Big Difference Between The Name 'iPhone 5S' And 'iPhone 6'.