Cheap iPhone Rumors Resurface

Apple is said to be working on a cheaper iPhone, though it’s not clear exactly how it will cut the costs. It’s not the first time that the company has considered such an idea, though.

The rumors were reported in the Wall Street Journal, citing “people briefed on the matter.”

According to the story, one tactic Apple is considering is to make a new model that is fundamentally the same but uses cheaper parts. For example, the shell of the device could be plastic rather than aluminum.

The stories are backed by reports from Digitimes, a newspaper dedicated to the tech and electronics hardware industry in Asia. It says sources have seen samples of the cheaper iPhone and that although it has a “brand new exterior design”, the screen size is actually larger than existing models. It doesn’t say what the resolution is on the screen.

Apple is known to have considered an “economy” model iPhone before, but concluded that it would complicate the manufacturing process.

The most likely explanation this time round is that Apple is looking at producing a separate, cheaper iPhone for developing markets where there simply aren’t enough people willing to pay the prices charged in countries such as the US. It’s also possible Apple want to get the cost low enough that its affordable outright in markets that don’t have the culture of networks subsidizing handset costs and clawing the money back through inflated mandatory service charges.

Releasing a cheaper model in the US would be an amusing operation simply to find out how much some buyers would pay for a “premium” handset that didn’t offer any functional benefits, but wouldn’t make much business sense: it would risk deterring people from buying the full-price model, thinking they were being taken advantage of.

Apple already has a form of price discrimination in cutting the costs (both for outright sales and through network carrier deals) of existing models whenever there’s a new release.

There are also some questions about exactly how much Apple could cut production costs without affecting performance. ZDNet notes that the aluminum case makes up only a small proportion of the production costs and the only real way to make it much cheaper would be with a smaller screen.

That does leave the intriguing possibility that Apple would actually achieve most of the price cut by simply accepting a lower profit margin in countries where it wouldn’t otherwise get sales.