NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Friday, September 13, 2013

Since 2007, Apple’s annual unveiling of its new iPhone has been the company’s biggest event. Year after year, Apple has made its smartphones available in more countries, with more features, in new designs, on more carriers, and at lower prices.

The first iPhone started at $499; now, shoppers in countries whose carriers subsidize handsets with two-year contracts can get last year’s iPhone for as little as $99, and two-year-old iPhones for free.

On Tuesday, Apple added a sweetener; instead of offering last year’s iPhone 5 at a subsidized $99, it gave the older phones a colorful redesign and a solid boost in battery life, calling it the iPhone 5c. The company is not merely clearing out older inventory; it’s offering a brand-new iPhone at a lower price point.

Apple observers have long been hoping for a cheaper handset to take advantage of a burgeoning global market for inexpensive net-connected mobile devices. For most people throughout the world, these devices are their first and primary encounter with computers.

When news of this release first bubbled up, many people—from investors and analysts to customers and app developers—excitedly predicted that Apple could finally bring its high-quality devices to customers all over the world. It looked like good business for Apple and good news for millions, if not billions, of people.

Yet after the event, even the analysts were unhappy with Apple. Why?