Apple can’t lower prices until it starts making more products, more quickly

As is often the case with Business Insider, if you look past the sensational headline, there’s some smart analysis. Henry Blodget wrote a piece today about how Apple’s current pricing strategy is hurting its growth in emerging markets.

The simple answer is NOT for Apple to make low-end gadgets that it considers crappy. It is for Apple to use its phenomenal profitability as a competitive weapon. Specifically, the answer is for Apple to sell some of its gadgets — not the latest, greatest ones, but some — at prices that are highly competitive with local alternatives.

Basically, Apple should sacrifice some of its profit share in exchange for more market share. I’ve been a supporter of this argument for a while now.

The thought occurred to me recently that Apple’s inability and/or unwillingness to target lower price points more aggressively is directly related to the pace of its manufacturing output, which — as Apple executives are first to admit — has had trouble meeting current demand. (Hence this week’s soft release of the Retina iPad mini.) The thought goes, if Apple can barely make enough products to satisfy current demand, then lowering prices would accomplish nothing. Increased demand is only beneficial if they have the manufacturing capacity to meet it.

So, if Apple wants to be more aggressive on pricing, it can’t do that without first ramping up its supply chain. This is just a theory, and it obviously doesn’t preclude Apple from doing things like lowering prices regionally, as Blodget suggests. But it’s something to keep in mind.