Tim Cook: Apple Will Never, Ever Make a Cheap iPhone

If the $550 price tag of the iPhone 5C hadn't already made it clear that the C stands for "color" (as in the case) and not for "cheap,"Apple CEO Tim Cook reiterated to Bloomberg Businessweek's Sam Grobart that the company isn't interested in making low-end phones for the masses.

If the $550 price tag of the iPhone 5C hadn't already made it clear that the C stands for "color" (as in the case) and not for "cheap,"Apple CEO Tim Cook reiterated to Bloomberg Businessweek's Sam Grobart that the company isn't interested in making low-end phones for the masses. "We’re not in the junk business," said Cook. "I’m not going to lose sleep over that other market, because it’s just not who we are. Fortunately, both of these markets are so big, and there’s so many people that care and want a great experience from their phone or their tablet, that Apple can have a really good business," he added.

Many had expected that with iPhone saturation in richer places like America and Europe, Apple would create a budget model for to sell in countries like China and India where for most people the price of an iPhone is out of reach. But, after last week's unveiling it became clear the company hadn't done that, exactly. "We never had an objective to sell a low-cost phone," Cook said. "Our primary objective is to sell a great phone and provide a great experience, and we figured out a way to do it at a lower cost."

There is a difference between "lower cost" and "low-cost." The 5C costs $100 less than the 5S: $549 compared to $649, without subsidies in America. But, in China, even with wireless company subsidies and discounts, the 5C start at a "much higher price than the domestic brands," notes Grobart. That's partly because of tariffs that raise the unsubsidized price, but also because of the nature of subsidies and phone contracts in China.

That, however, doesn't worry Cook — even though Android dominates both the tablet and smartphone market. The Google-made operating system runs on nearly 80 percent of the world’s smartphones and nearly two-thirds of its tablets, according to research firm IDC. That's because, when you look at actual usage, more people still use iOS despite the proliferation of Android-powered devices. "Does a unit of market share matter if it’s not being used?" Cook said. "For us, it matters that people use our products. We really want to enrich people’s lives, and you can’t enrich somebody’s life if the product is in the drawer." Apple owners spend more time with their apps and browsers. According to Experian it breaks down like this:

That makes the iPhone more valuable, especially since they have such tight control over all the things that happen in the gated iOS world. That, plus the high margins of a high-end phone business makes dominating the luxury smart-phone market well worth it for Cook.