Apple CEO Cook on why he doesn’t care about cheap phones: ‘We’re not in the junk business’

The iPhone 5C isn’t exactly the cheap iPhone we’ve all been waiting for. But Apple chief executive Tim Cook wouldn’t have it any other way.

“There’s always a large junk part of the market,” Cook said in a lengthy Businessweek profile published today. “We’re not in the junk business.”

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The iPhone 5C will sell for $99 on-contract and $549 off-contract in the U.S. — but when it comes to rising markets like China, it will still be out of reach for many with an off-contract price of around $733 (the higher price is due to Chinese tariffs). Compare that to Chinese smartphone maker Xiaomi, which is offering its latest smartphone with a 5-inch screen and quad-core processor for $330 without a contract (Xiaomi’s earlier phones are even cheaper) and the iPhone 5C’s value seems negligible.

Apple won’t be able to compete directly against Xiaomi when it comes to price, and it still doesn’t have the iPhone on China’s largest carrier, China Mobile (that deal is expected to be announced soon). Even though there are plenty of signs that ultracheap smartphones are a major threat to Apple, Cook isn’t interested in competing in that martphone market.

“There’s a segment of the market that really wants a product that does a lot for them, and I want to compete like crazy for those customers,” Cook told Businessweek. “I’m not going to lose sleep over that other market, because it’s just not who we are. Fortunately, both of these markets are so big, and there’s so many people that care and want a great experience from their phone or their tablet, that Apple can have a really good business.”

Instead of targeting smartphone customers looking for the cheapest device possible, the iPhone 5C smartly enables Apple to continue selling its hardware from last year’s iPhone 5 with a fresher, more colorful exterior. The 5C shows Apple is taking a more active role towards courting midrange smartphone buyers — in the past, it would simply offer the previous year’s iPhone at a discount. Now, there’s an entirely new product running on older hardware (and there’s a very good chance that it will end up outselling the higher-end iPhone 5S).

Cook’s comments aren’t surprising to anyone who’s followed Apple over the years. During the PC wars, Apple held steadfast with its focus only offering its higher-end machines, while Microsoft sold Windows to everyone from bargain-bin manufacturers to high-end boutique makers. Microsoft won that war. The question now is if history will repeat itself with Apple’s current campaign against Android.