Apple Stock News: Apple, Inc. Has an Alternative Plan to Enter Emerging Markets

Apple Stock News

Apple Stock News

Low-cost smartphones have become popular in the recent years. For less than $200, consumers can purchase critically acclaimed handsets like a Motorola’s Moto G or Xiaomi’s Redmi 2.

Apple Inc. has rejected a low-cost iPhone. It discounts older models, but only by a small fraction: the iPhone 5s, at $450, is still more expensive than the average Android smartphone. This is not a problem in developed economies, where consumers are able to afford Apple’s high prices, but it limits sales in emerging market where not everyone can afford an expensive phone. Analyst have recommended the tech company to release a low-cost phone but this advices have been ignored. They want to increase the number of owners but they have an alternative strategy to do so.

Apple is expected to sell around 70 million iPhones this quarter. Most of them are new phones but some of the sales will be used phones that will go to emerging markets instead  of landfills. Firms like Gazelle, Glyde, HYLA Mobile, and Brightstar have been buying and selling used iPhones for years. Generally, phones are purchased from wireless carriers or directly from consumers in developed economies, then resold in emerging markets.

Historically, however, most consumers hold their phones even if they know they are not going to use them any more. In 2013, HYLA Mobile estimated that only 15% of consumers traded in their old smartphones when they purchased new ones, according to Bloomberg. That figure has likely risen in the last two years, and should rise significantly in the quarters to come.

New plans adopted by U.S. wireless carriers that allow for more frequent upgrades also force consumers to trade in their old handsets. Verizon will give costumers the opportunity to traded the iPhone 6s for the upcoming iPhone 7 next year.The same is true for similar plans from T-Mobile, Sprint, and AT&T.The popularity of these early upgrade programs is expected to rise in the coming months. Piper Jaffray believes more than half of U.S. iPhone owners will soon begin upgrading on an annual basis. That should mean tens of millions more used iPhones available to emerging market consumers.

Apple’s CEO Tim Cook spoke about this trend on the company’s most recent earnings call, arguing that it should provide a significant tailwind for Apple’s App Store business. He said “I would also point out that some of these upgrade programs that are in the market, they sort of began to look more like a subscription business in terms of the way they operate…we think that, in the aggregate, that they may reduce upgrade cycles…also, the iPhone that has been sold to someone else hits the price point that we’re not hitting today, largely, which could help further fuel the services revenue which we did quite well on last quarter.”

Later in the call, Cook said that used iPhones could provide tough competition for handsets powered by Alphabet’s mobile operating system:”We do like the fact that [early upgrade programs create] a market for…iPhone at a different price point…[that used iPhone is probably a] better product than [what the] customer may be currently buying, which would further help from an ecosystem point of view and that’s not to be underestimated.”


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