The iPhone - Ouch!

This may be a week late but I'm sure you've had your share of iPhone news already. So Wow! - the 4GB iPhone is selling for $299.

The "ouch!" in the title is not about the early adopters getting screwed, forget them for a while here. I'm talking about the huge "ouch!" that went up from Apple's newest competitors - that would be Samsung, SonyEricsson, Nokia, Motorola. Apple is putting the squeeze on these guys with their pricing!

Apple is muscling its way into the cellphone market building on its strengths that have been on display with the iPod rollercoaster. Apple is on course to buy up 25% of the world's flash memory pretty soon. Let that sink in for a few seconds. A quarter of the world's flash memory is bought up by Apple. Apple has a great manufacturing model - design in California, use their manufacturing partners in China/Taiwan to get equipment manufactured at low costs (they're experts at this), reuse components across product lines to get economies of scale - all of this while maintaining a ridiculously high profit margin (compared to its competitors) anyway. They can do this because they're selling millions of these things while still making just a handful of products (talking hardware here).

Back to the iPhone, how is this going to affect the big players? Let's look at Nokia - they sells more cell phones than anyone. They have a lot of models - the lower end ones will sell the most, but Nokia has a lower margin on those. They sell a lot of their N series phones which I'm betting are far more lucrative than the $100 phones. This is the market the iPhone is going to eat into. They don't sell enough N-Series phones to be able to price compete with the iPhone. To do this they would have to reduce the number of models they have, work on cutting the manufacturing costs and bring the price to consumers down drastically. Few companies are ruthlessly efficient at this as Steve Jobs' Apple.

Why would a consumer such as myself pick an iPhone when there are so many choices in the marketplace? One overwhelming reason that is usually never associated with Apple - cost!!
The iPhone certainly doesn't have all the features I want from my phone. I have been shopping for a SonyEricsson Walkman phone in the $350 range. If I buy that phone, I probably would plan to spend $70 on a 4GB memory stick so I can load songs and videos. The total cost runs near $420 for a Walkman phone with memory.
At $299, however, with the 4GB of memory - I just might be ready to forget some of the features I wanted and give in to the iPhone's lure - the wonderful screen, wifi, Google maps, browser etc. along with the low price would make it worth it for me. The only catch right now is that I am T-Mobile customer. Oh wait, isn't iUnlock out already? :)

Fun times in the world of consumer electronics, I tell you :) Apple is fast becoming a giant here!