Analyst: Apple ‘missing out’ by not releasing low-end iPhone 4

Apple’s iPhone 4S revision may end up satisfying loyal customers, but market analysts at IHS believe the company dropped the ball by ignoring the burgeoning low-end smartphone market. The group expects Apple will maintain the top market position regardless, declining to tweak an earlier forecast that predicts 169 million iPhone models will reach store shelves in 2015.

Analyst: Apple 'missing out' by not releasing low-end iPhone 4
Photo: Apple

Calling the low-end smartphone market “the fastest growth segment of the global cellphone business,” Francis Sideco, senior principal analyst for wireless communications at IHS, criticized Apple for its failure to produce a legitimate offering to address that reality.

“Apple really didn’t need 4G to provide a compelling user experience in the iPhone line,” he said, adding, “but it did need a low-end model to cash in on the fast-growing demand for inexpensive smartphones.”

Sideco and company didn’t dismiss the iPhone 4S altogether, calling it “a strong premium-featured product.” However, IHS’ take on the unexpected reveal (rumors suggested Apple would bow a true successor in the iPhone 5 this fall) speaks volumes: “S is for Slight changes,” the group quipped.

Lowering the price of the vanilla iPhone 4 to $99 with a two-year service contract was also a misstep, said Sideco.

“To compete in the low-end smartphone market, a company must offer a product that can be sold cheaply without a subsidy,” he said. “The iPhone 3GS and iPhone 4 are still expensive if you don’t buy them with a contract.”

Apple confirmed on Tuesday that the iPhone 3GS would be completely free for customers who inked a two-year service deal. IHS pointed out that another two years is all the 3GS might be relevant for.

“Any successful smartphone, whether it’s a premium or low-end model, must have at least a two-year lifespan,” said Wayne Lam, senior analyst, wireless communications for IHS. “While the 3GS certainly has had a run longer than that, it’s not clear if the 3GS still will be able to run the latest and greatest software for another two-year period.”

Unless Apple reconsiders the low-end smartphone market, competitors could take advantage.

“Without a true low-end smartphone offering, Apple has left its flank vulnerable to competition from Samsung and other companies that are supplying inexpensive Android-based handset,” said Sideco.

The iPhone 4S goes on sale October 14th and starts at $199. (via IHS iSuppli)