iPhone: $325 subsidy; 10m ship in Q3; competitors deeply challenged

Apple’s move to introduce subsidised iPhones has dashed the hopes of competing companies to deliver a true ‘iPhone-killer’, analysts believe.

Why? Well, competing firms will be required to not only blend advanced software technologies, but to deploy sophisticated hardware components – but Apple’s new low price strategy means competitors will be force to sell their devices at prices that match – or undercut – those of Apple; and that limits their options.

First effect of the new wave was felt today at Synaptics, where the analysts at Oppenheimer have slashed estimates on the company’s stock, driving it to fall $2.72, with the brokerage anticipating shares will fall to under $30 each. Synaptics shares have climbed in hope the company would be able to sell its technologies to Apple competitors.

Oppenheimer’s Yair Reiner also notes that the iPod nano is due for a Q4 refresh, and that Synaptics  may no longer be a supplier on the device. The iPod nano accounted for $15-$20 million of Synaptic’s Q4 2007 revenue, just under one-fifth of the company’s total sales.

Returning to the iPhone, Oppenheimer says AT&T is paying Apple $325 per handset, reflecting a level of subsidy that’s 50 per cent higher than available with most other smartphones. Once again, this means Apple competitors face a much tougher challenge than they originally anticipated.

Reflecting Apple’s moves to stake a strong space in the smartphone market, DigiTimes reports that ten million iPhones "should ship in the third quarter alone", citing the Commercial Times. That tallies well with morgan Stanley’s estimate this week that Apple may ship as many as 27 million iPhones in 2009, also reflected by Needham & Co.’s claim of 30 million iPhone sales next year.

Craig Berger, a semiconductor analyst with Friedman Billings Ramsey, estimated in a recent report that Apple will build 3 million iPhones in calendar Q2, and another 8 million combined in Q3 and Q4 as sales climb.