Google Android’s first phone, the G1, is being priced at $200 $179 - virtually the same as the iPhone. This is most likely a strong indicator that Android phones won’t significantly undercut the iPhone on price.
However, it may say more about Apple than Google or T-Mobile. When Android was first announced, the general consensus was that an open and free OS from Google would allow third party phone manufacturers to develop cheaper phones without the “Apple Premium.” The question now is whether there still is an “Apple Premium” to circumvent.
2008 seems to be the year that Apple has begun shifting gears, making production efficiency a key competitive advantage across its product lines. From iPods and iPhones, to its computers, Apple’s products have increasingly closed in on their competitors’ pricing. The ultimate objective, likely being, to deliver “better” products at the same price points - while maintaining fat margins. Apple is increasing market share, which seems to be allowing them to increasingly dictate supplier pricing. Their recent purchase of PA Semi will also help widen margins, since they will at some point manufacture their own iPhone chips.
The question is whether Apple can continue to increase efficiencies enough to offset the downward pressure on its margins. My gut says they will, but they’ll have to remain on the high end of their markets.
UPDATE: It looks like the G1 is being priced at $179 with 1GB of storage, compared to the $199 iPhone’s 8GB.
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