Early Prime Day Deals Laptop Recommendations AT&T vs. Xfinity Prime Day Deals on TVs 4th of July Sales Best iPhone VPN 2023 Acura Integra Review Best Fitbits

Why Apple's got skin in the iPhone case game again

Apple took a year off from making cases with last year's iPhone 5. But it's back again with new cases for the 5C and 5S, and for good reason.

Apple's Phil Schiller debuting the new iPhone 5C, and the 5C cases last week.
Josh Lowensohn/CNET

One of the only surprises at last week's very predictable iPhone unveiling was that Apple's once again making its own cases.

Along with the two new iPhone models, on Friday Apple is also releasing 11 cases -- six at $29 a piece for the iPhone 5C, and another five at $39 for the higher-end iPhone 5S.

That may seem like a small part of the bigger iPhone picture, but it's notable given that Apple debuted last year's iPhone 5 without any sort of protection, breaking a two-year pattern it had going with "bumper" cases for the iPhone 4 and 4S.

Those $29 bumper cases, many of which Apple gave out shortly after the iPhone 4's launch as part of "antennagate" (and later as part of a class-action lawsuit settlement), were easy money for Apple, and part of a technology business that's growing fast.

According to the NPD Group, the case business brought in $1.3 billion in sales for the 12 months ending in July. That's a 53 percent jump from the year ago period, boosted in large part by a big jump in demand. One simple reason for why that's happening is the rise of the smartphone, a market that's still growing and revolves almost entirely around products with increasingly tough (though still very breakable) glass screens.

"The full glass screen is the best thing that ever happened to the repair industry," Alex Iser, the CEO of repair chain Phone Doctors, told CNET in an interview back in May. "It was also the best thing that ever happened to the case industry," he added.

That industry is dominated by five companies according to NPD's data: Otter, Lifeproof (which Otter acquired earlier this year), Belkin, Speck, and Incipio. But it's also changing dynamically, with new companies getting into the case business all the time -- from small-time projects on places like Kickstarter, to incorporated companies with worldwide operations. There were 34 new brands in the past year, said Ben Arnold, a director and analyst at The NPD Group.

"Perhaps this speaks to the turnover in the category- that there is a lot of opportunity so a bunch of brands are in the market, but due to all the competition, we also see a decent number drop out," Arnold said.

So, will Apple's reentry into this business -- which it's also helped grow by pumping out new devices and stocking third-party cases at its physical and online stores -- irk these case makers? In short, no.

"First-party cases are nothing new to the smartphone industry and we've seen this done by many other OEMs," Otterbox told CNET. "We don't anticipate a significant impact on OtterBox case sales. OtterBox is the No. 1-selling smartphone case in America and we tend to appeal to those seeking out the most trusted name in the protection space."

Arnold also points to the relative simplicity of Apple's cases as something third-party case makers like Otterbox can rival with various utility features.

"We've seen cases with batteries, like the one from Mophie, which has been well received, as well as Otterbox and Lifeproof. People seem to like having those features, so does a standard case have the same impact that it used to?" Arnold asked.

For Apple, that "impact" is found in the case for the iPhone 5C, which has circular holes in the back to let the color of the device be seen, even when the case is on. That also trims the amount of materials used. For the 5S, Apple opted for more muted leather colors, and a price tag that's $10 higher.


So how much does it cost Apple? According to Ahmed Abdallah, a senior analyst at IHS, Apple's old bumpers cost "less than one dollar, but not quite 10 cents." It's the same for the newer cases, though the 5S leather case is estimated to involve more production steps than the silicon one for the 5C, since the leather needs to be bound to the inner plastic shell.

It's a similar story for other accessories that Apple once abandoned and has now returned to. That includes the new docks for the 5S and 5C, two separate products that sell for $29 a piece and are estimated to cost between $2 to $3 to make.

There are, of course, other considerations beyond how much it costs to actually manufacture a product, from research and development, to marketing, shipping, and paying for retail stores. But don't kid yourself into thinking the margins are tight, says Abdallah.

"The accessory business is a lucrative one offering generous margins. Cell phone service providers realized and capitalized on this years ago. This is why cell phones no longer include leather cases and car chargers in the box," Abdallah said. "Perhaps Apple is also coming to this realization."