Is Apple’s Future Hidden in This Market?

As the market turns toward lower cost smartphones, Apple’s (NASDAQ:AAPL) rumored plan to launch a low-cost iPhone might be the company’s best bet to keep itself relevant.

According to a research note sent to Wall St. Cheat Sheet by ABI Research, it used to be that phones could be broken up into three categories: low-cost handsets, feature phones, and smartphones. But now, as the smartphone category gains more prominence, that grouping is splitting up into three categories of its own.

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The smartphone categories are based on price, with low-cost devices below $250, mid-cost devices below $400, and high-cost devices above $400. Low-cost smartphone shipments are expected to grow from 259 million units in 2013 to 788 million in 2018, while together mid-cost and high-cost smartphones will only grow from 635 million units to 925 million in the same period, according to ABI’s data.

The low-cost smartphones have a real edge in markets where a lot of consumers haven’t jumped on the smartphone bandwagon yet. The devices make it a lot easier for new customers to test the waters, and they also have an easier time selling in economies where most consumers can’t afford the mid- and high-cost devices…

Given that Apple’s iPhones have all been fitting in the high-cost category, the projected bottom-heavy growth of the smartphone market could make trouble for Apple, as its share of the market wouldn’t be expected to grow significantly . However, the rumored low-cost iPhone could help Apple dodge that future. More smartphones in the low-cost category could also help carriers, as the subsidies for such devices would be much easier to manage, and it would be easier to get more consumers on the more expensive data plans.

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The trend might drive down margins for a lot of smartphone makers — although it could improve carrier margins — but it could also prove to be a chance for Apple to target a market with its iPhones that it hasn’t been able to in the past.

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