By Stephen Schenck | January 23, 2013 8:10 PM
The smartphone industry is one very much driven by specs. When a new high-end model arrives, we look for it to deliver faster performance, more storage, a higher-resolution screen, or some other quantifiable improvement over previous handsets. For more budget-priced phones, we’re looking for specs that were maybe high-end a generation or so back. That’s why I find it a bit odd to keep hearing announcements of brand-new low-to-mid-range devices – not that there isn’t a place for them in the market, but if those are the specs you think customers are looking for, why are you going to the trouble of creating a whole new product around them, when you could just be selling your flagship model from a year or two ago on the cheap?
Why It Makes Sense to Release New Models
I’m not so naïve to think that there’s this nice, linear relationship between age, performance, and price when it comes to smartphone components. SoCs are a great example, and as fabrication techniques improve, and dies shrink, new lower-end chips can be both cheaper and more power-efficient than comparably-performing chips from the generation or two prior. Unless you can get a deal on a couple truckloads of old stock, it could make a lot of sense to build a new low-end phone around a more modern chip.
Then there’s the problem that not all phone components depreciate at the same rate. While a low-res display on a older phone might still make sense for a budget phone of today, if it was running some sub-1GHz single-core chip, that might just not cut it with today’s software demands, making it a poor candidate for continued sales.
Another issue is when new technology emerges that demands a presence on even lower-end hardware. Radios are a big problem there, as carriers today seriously want everyone moving over to LTE. That can signal a death knell for models that feature obsolete connectivity options, even when their hardware is otherwise sufficient.
Why Old Flagships Should Become the New Budget Models
I’ve been thinking about all these rumors about a new iPhone model designed to reach emerging markets with an extra-low price tag. Irrespective of the argument over whether or not that’s the direction Apple needs to head, I can’t help but wonder: isn’t Apple already doing that? If you want an iPhone but can’t afford the iPhone 5, you buy the 4S, or even the 4. Apple still sells them, and the 4 is free-on-contract – there’s clearly a market for this sort of thing.
Apple could even be charging a whole lot less, making them even moreso “budget” phones, and still turn a nice profit. Back when the iPhone 4 first launched, a teardown estimated the cost to manufacture the phone as under $200; even today, Apple charges $450 for an off-contract iPhone 4, and I’m betting it costs less to produce than it once did.
Besides not cluttering-up product lines, what are the benefits to keeping old hardware alive like this? How about all the money that could be saved on advertising by continuing to get a return on your investment. Instead of needing to explain why the Samsung Galaxy Awful is the low-end budget Android to get this season, the company could trade on its previous efforts promoting once-high-end hardware – “Oh right, the Galaxy S. That was pretty hot a couple years ago. And look how cheap it is now!”
And it’s not that companies aren’t doing this; Samsung still sells older Galaxy models. I’m just wondering why it’s not even more prevalent than it has been, and why there seems to be just so many new low-end phones continually launching.
Another benefit is what a longer product life can mean for updates. When you keep selling an older model, time spent developing new software for it not only attracts new customers, but keeps your existing customers happy (and maybe that much more likely to buy from you again).
In the end, I can definitely see why there are several compelling reasons to develop brand-new lower-end hardware. Keeping that in mind, I still think that smartphone companies are a little too willing to throw older models under the bus without due consideration for how keeping them going could be beneficial to not only the manufacturers themselves, but also their customers, both old and new.