What Really Held Up the Cheap iPhone for Years

By Jessica E. Lessin

Apple has done it. It’s selling a $99 iPhone.

I have always been fascinated by this project, and not because I’ve been secretly longing for a plastic blue iPhone. Rather, I’ve followed it closely because the debate within Apple over branching the iPhone line was always more complicated than it seemed.

Reporters, analysts and Apple watchers have long assumed that the company held back because it didn’t want to tarnish its high-end image with a plastic phone until growth was drying up and Samsung was eating its lunch. Today’s comments in the blogosphere that Steve Jobs would be rolling in his grave if he saw the cheaper iPhone 5C represent that view.

But Apple executives, including Mr. Jobs, were seriously considering selling a less-expensive but similar phone as early as 2009, according to former executives involved in the plan. Then, the manufacturing teams were most opposed to it.

Their concerns, which I previously reported on in the Wall Street Journal, were about manufacturing complexity: how could Apple build so many models with so many different components? Apple’s relatively simple supply chain had always been a big competitive advantage. Having relatively few products allowed it to focus, buy parts at scale and keep things secret.

The operations team, which Tim Cook was running at the time, was worried another model could complicate that and the effort got tabled.

Fast-forward to today. Sure, technology has improved. That means the feature gap between today’s cheaper phone and the high-end iPhone is smaller than it would have been a few years ago. (The $99 iPhone 5C has a very high resolution “retina” display and a pretty fast processor.)

But what has really changed is how Apple makes its products. It has broadened its base of manufacturing partners beyond Foxconn to Pegatron and others. It starts building its products earlier to ensure enough supply to stock shelves. Last fall, when it launched the iPhone 5, it sold more than five million in the first weekend, about a million more than the launch of the previous model.

Apple executives have blamed this ballooning supply chain for the slew of product photos leaked before launches. Because Apple has more partners, device parts are getting into more hands.

The lesson here: there are as many internal reasons why companies launch or don’t launch products as external ones. Apple is a complex organization that’s becoming more so by the day. With or without competition from Samsung, only now, was Apple ready to take this on.

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