I believe the iPhone 5s is a good phone. The iPhone 5c? Ummm let’s just say the iPhone 5s provides the better value and that’s where Apple’s emphasis is on. The mid-tier and low/free-tier phones are there only to provide coverage. But here are the numbers as to why I think Apple came out with the iPhone 5c.
Below is the pricing before the iPhone 5s arrived, the pricing if Apple had’t released the iPhone 5c, and the current pricing.
| Subsidized Selling Price | Unsubsidized Selling Price | iSuppli Est. Cost | Gross Margin | Gross Margin % | Gross Margin % Change | |
| IPhone 5 64GB | 399 | 849 | 238 | 611 | 71.97% | |
| IPhone 5 32GB | 299 | 749 | 217 | 532 | 71.03% | |
| IPhone 5 16GB | 199 | 649 | 207 | 442 | 68.10% | |
| iPhone 4S 16GB | 99 | 549 | 196 | 353 | 64.30% | |
| IPhone 4 8GB | FREE | |||||
| iPhone 5S 64GB | 399 | 849 | 218.3 | 630.7 | 74.29% | 2.32% |
| IPhone 5S 32GB | 299 | 749 | 208.1 | 540.9 | 72.22% | 1.19% |
| IPhone 5S 16GB | 199 | 649 | 198.7 | 450.3 | 69.38% | 1.28% |
| IPhone 5 16GB | 99 | 549 | 207 | 342 | 62.30% | -2.00% |
| iPhone 4S 8GB | FREE | |||||
| iPhone 5S 64GB | 399 | 849 | 218.3 | 630.7 | 74.29% | 2.32% |
| IPhone 5S 32GB | 299 | 749 | 208.1 | 540.9 | 72.22% | 1.19% |
| IPhone 5S 16GB | 199 | 649 | 198.7 | 450.3 | 69.38% | 1.28% |
| iPhone 5C 32GB | 199 | 649 | 182.85 | 466.15 | 71.83% | |
| iPhone 5C 16GB | 99 | 549 | 173.45 | 375.55 | 68.41% | 4.11% |
| iPhone 4S 8GB | FREE |
If Apple hadn’t released the iPhone 5c, they would have taken a 2% reduction in the gross margin of their mid-tier phone. But instead with the 16GB iPhone 5c they were able to pull off a 4.11% increase. Or 6.11% if compared against the alternate scenario. I don’t know about you, but I think 4% is pretty good! Notice that they were also able get modest increases in their top-tier phone gross margins.
This increase is mainly due to savings in the casing. That’s why the iPhone 5c and iPhone 5 are practically the same except for the casing. Apple bumped down their previous top-tier phone as they normally do but this time changed the casing. Plus, given the similarities between the iPhone 5s and iPhone 5 casings, there are production line benefits for the top-tier phone.
People were disappointed by the price of the iPhone 5c. It certainly wasn’t cheaper for them (or me). But it certainly was cheaper for Apple. To manufacture.