41 Comments

Summary:

An Apple computer starting at $799 would be a big deal, but it’s unlikely. And the idea that Apple would be “forced to” lower the price due to competition from Intel-based ultrabooks makes very little sense. Here’s why.

macbook-air-feature

With the next iPad model at least a year away and the next iPhone a few months off, the Apple rumor mill is pondering a new Apple product line: the MacBook Air. On Monday, Digitimes reports that Apple is considering selling a MacBook Air for $799, which would be $200 cheaper than the least expensive model available now.

Predictably, many are running with this. An Apple computer starting at $799 would be a big deal — the cheapest traditional laptop the company has ever made. The Digitimes report had few details, but the theme that’s emerging in the flash analysis around the idea of a $799 Air is that Apple wouldn’t do it by choice, but would be “forced to” out of some sort of response to the threat of Intel-based ultrabook notebooks — which, mind you, are direct rip-offs of the Air.

It’s not impossible Apple would make a $799 Air. They could, but if they do, it wouldn’t be for the reasons many think.

Apple is not scared of ultrabooks. Intel’s thin-and-light, optical drive-less laptop concept with a solid-state drive and all-day battery life isn’t a monolith. As Dan Ackerman wrote for CNET in March, the term “ultrabook” has been clouded as a marketing term thanks to its overuse by mainstream laptop makers, and there’s not even an accepted definition anymore — it’s essentially the catch-all term for new mid-priced laptops. Apple has never been worried about competing with mid-priced laptops from HP, Dell, Acer or Samsung.

Today, you can buy an “ultrabook” that’s thicker than an inch, is heavier than 4 pounds, has a 14-inch screen, a traditional spinning hard drive, and decent battery life. They’re also priced between $700 and $900, or slightly below the $999 entry level 11.6-inch MacBook Air. In other words — nothing has changed. PC makers have been making laptops for years that could beat Apple on specs and often price and still Apple has done its own thing and continued to rake in profits.

Ultrabooks aren’t actually selling very well. It’s old news that Intel’s $300 million initiative intended to jumpstart this category is having a rough go of it. Holiday sales of the devices were described as “ugly.” And why not, when some consumers are putting off new computer purchases as they migrate some computing experiences to mobile devices such as iPhone and iPads?

People are already buying the $999 Air. The Air is doing fine on its own after beginning life in 2008 as a niche concept and very expensive design. Once Apple redesigned it and lowered the price two years later, it’s apparently done decent business for the company. Apple has never said how many Airs it typically sells each quarter, though analysts pegged the Air as responsible for a little more than a quarter of MacBook sales back in October. It’s also the company’s entry-level computer, so it’s not unreasonable that the cheapest computer would also be one of its best-selling computers.

Apple doesn’t typically do price cuts as a response to competitors. The idea that Intel aiming for $699 ultrabooks would suddenly “force” Apple to move down in price on its successful MacBook Air doesn’t match up with Apple’s practices. Apple has indeed lowered pricing on its most successful products over the last few years. But the way in which it’s cut prices isn’t with a new model — it’s been by lowering the price of older devices.

Apple’s most important product, the iPhone, has remained priced between $199 and $399 (with two-year wireless contract) since 2008 for new models. In 2009 Apple first discounted its popular device for older models. While simultaneously introducing the typically priced new iPhone 3GS, it kept the older model iPhone 3G for sale for the discounted price of $99. The same happened with the introduction of a new phone in 2010 — the 3GS stayed around for $99 — and in 2011, the two-year old iPhone 3GS became free with contract, while the iPhone 4 went down to $99. It has followed a similar pattern with the iPad — with the introduction of the third-generation iPad in January, Apple began offering the year-old iPad 2 for $399 instead of the normal $499 entry price.

So if Apple does decide to price a MacBook Air at $799, it likely won’t be to replace the $999 11.6-inch model that’s selling just fine, but perhaps as last year’s model simply discounted. But in general, this is a Digitimes report we’re talking about — I wouldn’t hold your breath for a cheaper MacBook.

Note: This was updated to clarify that a $799 MacBook Air would be Apple’s cheapest laptop ever, not cheapest computer, and that the first iPhone discount was in 2009.

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  1. I would trust this analysis more if it wasn’t filled with factual errors. A $799 MacBook Air would not be the cheapest traditional computer Apple has ever sold – that would be the $599 Mac mini. Similarly, the iPhone was first discounted in 2010: when the iPhone 4 was released, the 3GS dropped in price.

    1. John S. Wilson Etc. Monday, May 7, 2012

      True, but neither of those points discount her correct conclusion.

    2. Hi etc., you’re correct — I was thinking traditional laptop, but I wrote traditional computer. Also, it was 2010, not 2011 when they did the first discount. Thanks for catching that, post is updated with correct info.

    3. @Etc. When correcting, you might want to get your own facts right. The original G4 MacMini was $499.

    4. Hamranhansenhansenhamranhansenhansen Etc. Monday, May 7, 2012

      Cheapest [notebook] computer. The context is notebooks. Macs have been 75% notebooks for the past decade.

    5. Pierre French Etc. Monday, May 7, 2012

      I would always trust someone who drinks from giant beer glass.

      http://www.flickr.com/photos/mager/2794575176/

    6. adrianoconnor Etc. Tuesday, May 8, 2012

      Also, this statement is incorrect: “But the way in which it’s cut prices isn’t with a new model — it’s been by lowering the price of older devices.”

      Apple do sometimes lower prices with new models. I’m particularly thinking of the current Macbook Air, which of course came at a much lower price. Also, you need to fix the “it’s” ;)

  2. Idon’t Know Monday, May 7, 2012

    You can get the $999 11-inch as cheap as $900 right now.

  3. “The theme that’s emerging in the flash analysis around the idea of a $799 Air is that Apple wouldn’t do it by choice, but would be “forced to.”

    C’mon guys. (1) Nobody forces Apple to introduce products, (2) Apple doesn’t go for cheap, except on old models, as Erica said.

  4. Sooo, lemme get your points straight. Every laptop under 4 lbs with some metal on it is a “rip off” of the Air? Uh-huh. And Apple does not bow to market forces at all. Oookay. And anyway no one’s buying those Ultrabooks anyway. Okay gotcha. I see where you’re coming from…Cupertino.

    1. I don’t see anywhere that is stated or inferred. You and I must have read entirely different articles.

    2. No, not “every laptop under 4 lbs with some metal on it”.

      Just the “ultrabook” category, as defined by Intel… in 2011. After the MBA started selling like hotcakes with its new design.

      A new design that is, surely by purest coincidence, closely reflected in Intel’s own requirements for the Ultrabook spec – processor, size, battery, resume time?

      All remarkably like the MBA’s specs, and somehow those had never been a compelling market package before the MBA.

      (For further reminding, let’s look at some coverage of the first wave of Ultrabooks.

      Those Lenovo U300s look really familiar, and unlike previous Lenovo products. And unsurprisingly, the contemporary coverage viewed the entire category and marketing niche as competing with the MacBook Air and as a response to it.

      What does that design resemble? It’s an utter mystery… I can’t imagine, indeed, why anyone thought any of them were a “rip off” of the MBA.

      They’re so different, after all.)

    3. Well, I don’t know where *you’re* coming from, but it’s clearly a place where reading comprehension isn’t considered a useful skill.

    4. Pierre French James Monday, May 7, 2012

      You should consider learning how to read again pal. What that article said is that even clunky pieces of crap are marketed as ultrabooks, not that they are rip offs of the Air.

      Oh and by the way here’s a knock off of the Air. Amongst many others.

      http://www.theverge.com/2011/11/1/2528456/asus-zenbook-ux31-review/in/2326104

      That does not look like an MBA at all. Yeah, right.

  5. Thank you Erica Ogg. We steered clear of this at Ultrabooknews completely. Giving Digitimes any airtime doesn’t help anyone.

  6. Good God Almighty(some hyperbole needed). In order finish reading this Cupertino hack job, I have to force my breakfast down least it comes up. Excellent piece of work.

  7. I suspect part of the problem with “ultrabooks” is that (as mentioned), too many manufacturers don’t “get” that the big appeal of the Air is that it’s tiny and light. Or the secondary benefit of the SSD, which is crazy-fast access, which makes suspend/resume amazing.

  8. “Today, you can buy an “ultrabook” that’s thicker than an inch, is heavier than 4 pounds, has a 14-inch screen, a traditional spinning hard drive, and decent battery life. ”

    What laptop has these specs and is being marketed as an “ultrabook?” I’ve been looking at this category a lot recently, and hadn’t seen such an example. Nothing like this shows up on the best list of ultrabooks I could find, either: http://en.wikipedia.org/wiki/Ultrabook

    1. Don’t forget the other ‘best’ list of Ultrabooks (and ultrathins)
      http://ultrabooknews.com/product-databank/
      Chippy
      ;-)

  9. Sohrob Tahmasebi Monday, May 7, 2012

    Well thanks for pissing in our cornflakes!

  10. LOLing at the rumor, that Apple is “forced” to respond to a non-existing product, in a market (slim notebooks that just work and are awesome) where it already has a upper hand?

  11. you do realize that 100% of all macbook airs contain intel processors right? either way, intel wins.

    1. Intel is winning *for now*…

      Intel is doing lots of hand wringing knowing that Apple can and will dump Intel at any point it’s deemed prudent, just like when they dumped PowerPC for Intel. This is one of the benefits of being in full control of both the hardware and software. Some aspects of the switch would be even easier this time around, given all of their experience designing ARM-based chips and the near certainty that they already have OS X running on ARM (since iOS is built on the same foundation).

    1. Ah, thanks for catching that. Fixed.

  12. Buncha incorrect “facts” in the article. 1) AT&T started selling theiPhone 3GS for $50 back in December, 2010. 2) The latest iPad wasn’t introduced in January, it was March. 3) To be called an “Ultrabook” a laptop has to meet certain stringent criteria, as Intel has trademarked that word and has very specific specs on what one is, which is not what you described in this article. 4) While holiday Ultrabook sales were low, current sales are doing very well.

    1. Hamranhansenhansen jdwelch62 Monday, May 7, 2012

      Intel’s specs still allow hard disks and are not up to MacBook Air standards.

      Ultrabook sales are not doing very well. You may like them, but they are not at all in line with Intel or PC maker’s expectations. All of the potential Ultrabook buyers already bought MacBook Air or iPad. MacBook Air runs OS X and Windows, has EFI and SSD, 3-year working life, $333 per year. If you need one, it is cheap. If you don’t need one, then likely an iPad is perfect for you.

      Intel’s Ultrabook strategy did not take into account Apple’s touché strategy where Macs run Windows. In the 1990’s, you could clone a PowerBook 3 years later and there would be a huge untapped market of people who really wanted a PowerBook for the past 2-3 years but couldn’t get one because they have to run Windows. But Macs have run Windows for 7 years now, and have been the leading high-end Intel PC for most of that time. People who wanted MacBook Air but had to run Windows have had MacBook Airs in some cases for 4 years now.

  13. Apple doesn’t lower the cost of its products until it can lower its own costs. Thus if Apple’s suppliers can create the iPad 2 at a lower than previous cost, then Apple will pass the savings to the consumer.

    Apple will never lower costs when doing so will reduced its profit margin too far. Remember that Apple has the highest profit margins in the business. It also has the lowest cost of producing its products. Thus any competitor that creates a lower priced product is simply cutting its throat by accepting a lower profit. This shows when it comes to trying to get after-sale support. There is often NO support for a competitor’s products. This makes the consumer very unhappy. Apple on the other hand provides consumers with a lot of support – for free at its Apple Stores.

    1. Hamranhansenhansen jameskatt Monday, May 7, 2012

      I don’t think any of that is true. I think all they do is pick a price point that can sustain the product long term. “iPhone” is not a single phone — they have to have a new model every year and a very new model every other year and new software, services, and the company has to be healthy.

      Right now, Apple is doing very well. They are 5 years ahead of their competitors and they are profiting from that. But even in lean times, they still have to honor the commitment they made to iPhone users to keep making future iPhones for them. So the company needs a lot of cash. It has made a promise to all of its customers to keep managing their phone, tablet, notebook, apps, media, etc. They are like a computing bank. Most people in Hollywood and Silicon Valley are Mac users. Apple is deep infrastructure. The extra profit they take compared to their competitors represents the commitment Apple has made to its users in the future compared to their competitors. They are huge commitments.

  14. Andrew Luciere Monday, May 7, 2012

    FYI the macbook air was only made because Intel made a ULT CPU design (special packaged Core2 – Penryn) and suggested apple use it for an ultr thin design…costs were high and other OEM’s did not want it…
    And The ultrabook is not simply defined as a thin laptop per intels definition, get your facts straight…

    1. Hamranhansenhansen Andrew Luciere Monday, May 7, 2012

      Incorrect.

      Apple went to Intel and asked them to make their smallest Core CPU even smaller, and Intel rose to the challenge with a custom part for the first-generation MacBook Air. Steve Jobs and Paul Ottelini discuss this at the launch of the first MacBook Air, which is available in Apple’s “Keynotes” podcast.

  15. Can I start a rumor?

  16. I would trust this analysis if it was more neutral. I suspect there is apple marketing involved in this article.

    I have been following the Ultraportable since 2000, the U71 etc with JKONTHERUN and in no way apple design or invent this category. The analysis probably think the chicklet keyboard was from apple as well i suspect
    Be more neutral erica, research your story first, too many factual errors.

    1. How on EARTH can you compare the Vaio U71 to a MacBook Air? It’s more like a PDA you can pound nails with.

    2. Hamranhansenhansen ausnote Monday, May 7, 2012

      Not “Ultraportable.” “Ultrabook.” It is Intel’s trademark on their MacBook Air clone reference design, which they created about 2 years after MacBook Air in order to generate more demand among non-Apple PC makers for the same exact parts Intel was selling to Apple. Other PC makers continued to use the bigger, cheaper parts. Look it up on Wikipedia.

      This is not an academic exercise in computer science. It’s pure business and marketing.

      And all notebooks descend from Apple’s notebooks anyway. Everything at Best Buy has the original PowerBook form factor. Your palms are resting on it right now.

  17. 最终冰器红豆 Monday, May 7, 2012

    Its not in Apple’s culture to say “hey look the competitors are doing xxx and we shall fight back.” No, it is so elegant to actually ignore what competitors’ are doing. Or more correctly there is no competitor in their eyes.

  18. Craig Miller Monday, May 7, 2012

    Great article

  19. Hamranhansenhansen Monday, May 7, 2012

    “Ultrabook” is just a word Intel made up so they wouldn’t have to say “MacBook Air clone.” If you can buy a MacBook Air for $999 then I would expect that fake MacBook Air’s would have to top out at $799, for exactly the same size, weight, and features. PC makers are not even doing that, though. There is nothing for Apple to respond to, even if they were inclined to respond.

    Also, the best-selling $799 PC for the past 2 years is iPad. Also the best-selling $699, $599, and $499 PC. So why would Apple feel any pressure at $799.

    Further, at $999 and up, for the past 5 years it has been 90% Apple. Apple owns high-end computing. Mac buyers want better Macs next time, not cheaper Macs. If you want a cheaper Mac you already have a $499 iPad with $5 Avid and $5 GarageBand and $30 office suite and $5-$10 3D games. There is no downward pricing pressure on the Mac.

    The next generation MacBook Air is almost certainly the same $999 but with double the RAM and double the SSD. Then the current model might be available for $899 retail or $799 education.

  20. Considering INTEL powers all APPLES computers it would be suicide to get into a war with INTEL, I hate to tell the Mac Fanboys, it is only a matter of time until INTEL has their own OS made for INTEL products only, and I don’t mean a OS like that garbage company MicroSoft, I mean Intel’s very own OS, be afraid APPLE, be very afraid, soon the people who made you richer than MicroSoft will show you just how you got their, yuk it up now fanboys, in a couple years INTEL will be yucking it up and APPLE fanboys will be crying and mortgaging their underpants, come back in two years and tell me how wrong I was, instead of acting arrogant and talking trash now just like you bozos always do.

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