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John Sculley: Apple needs to focus on emerging markets

So Apple’s adamant that it has no intention of building a low-cost iPhone, but if former CEO John Sculley is to be believed that philosophy could eventually cost the company its spot at the top of the tech pile.

Stuart Thomas: Senior Reporter
Stuart Thomas joined the Burn Media team in 2011 while finishing off an MA in South African Literature. Eager to prove his geek credentials, he allowed himself... More

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In an interview with Bloomberg, the man who led Apple between 1983 and 1993 warned that the market for the iPhone in developed countries in Europe and the Americas was fast becoming saturated.

If the company is to survive, he said, it will have to focus on emerging markets and that means diversifying its line-up of devices:

“Apple needs to adapt to a very different world,” Sculley said. “As we go from $500 smartphones to even as low, for some companies, as $100 for a smartphone, you’ve got to dramatically rethink the supply chain and how you can make these products and do it profitably.”

Going toward the lower end of the smartphone would be a drastic departure from the strategy that has seen Apple doing so well over the past few years: projecting the image of being a company that sells well designed products at high prices because they offer premium quality.

It’s not as if Apple’s battling in the faster rising emerging markets either. In China, where its products take slightly longer to arrive on the market because of regulations, the iPhone 5 could fetch up to US$1 500 on the so-called grey market prior to its official launch in the country.

Apple senior vice president Phil Schiller certainly isn’t worried. “At first, non-smartphones were popular in the Chinese market, now cheap smartphones are more popular and non-smartphones are out,” the Apple exec said recently. “Despite the popularity of cheap smartphones, this will never be the future of Apple’s products. In fact, although Apple’s market share of smartphones is just about 20%, we own the 75% of the profit.”

Sculley’s warning about Samsung isn’t exactly new, but it is interesting coming from the man who once ousted Steve Jobs: “Samsung is an extraordinarily good competitor,” Sculley said. “The differentiation between a Samsung Galaxy and an iPhone 5 is not as great as we used to see.”

Sculley isn’t alone in his concern about the way Apple is doing things at the moment. Markets have reacted poorly to news that the company was halving orders for iPhone 5 displays.

The company’s stock is currently sitting at around US$486 an 11 month low and a far cry from its US$600 plus peak.