Apple is planning to bring more versions of the iPhone to market, according to unnamed sources cited by Bloomberg. One of the new iPhone models will be smaller than the current iPhone 4, and cost significantly less. It might sell for the full retail price of $200 without a contract. That's hundreds of dollars cheaper than the current iPhone costs at full retail price. Without AT&T kicking in some cash, consumers would have to shell out $499 and $599 for the 16GB and 32GB models, respectively.
Even the most-capable, highest-end Android devices fall under the magical $200 price point (when subsidized). Apple's iPhone ranges up to $299 for the 32GB model, and its 16GB model is $199 with AT&T's support. While consumers can get an older iPhone 3GS for $99, carriers have dropped prices on stellar Android phones to $99, $49, and even $0.00.
Low price points on entry-level Android handsets have helped Google's Android platform penetrate into the smartphone market and steal would-be customers from the iPhone. Apple wants to stop that.
The unannounced iPhone in question would be about one-third the size of the iPhone 4 and lacks a Home button. In order to reach a lower price point, this newer device will use components borrowed from the current generation iPhone 4 (which have been discounted at this point). Apple will reserve the newest, more expensive components for the iPhone 5, for which it can continue to charge a price premium.
Having a device with a lower cost -- especially after carrier subsidies -- would no doubt help Apple continue to fight against the mounting pile of cheaper, entry-level Android devices. If the full retail price of the iPhone Nano were truly to be $200, then subsidies could easily push the retail price down to zero.
A low-cost device would also help Apple to expand in markets where it traditionally hasn't penetrated well due to the high costs of its products. Adding a pre-paid option would also give Apple's iPhone a better chance of success in some markets, where pre-paid (and not post-paid) is the norm.
That's not all Apple has up its sleeve, however. Apple is also working to create a device that can more seamlessly work with wireless networks the world over. This was perhaps first evidenced earlier this week when teardowns of the Verizon iPhone revealed a world-mode chip from Qualcomm. If Apple is able to make a single device that works on both GSM and CDMA networks, it will be easier for Apple to manage and less expensive for it to produce (one SKU instead of two).
The device is also said to include something called a universal SIM. Subscriber identity modules, or SIM cards, are used by GSM operators to link a device to an account and the network. It costs money to provision and distribute SIM cards. By switching to a universal SIM card system, Apple would save money for its carrier network operators, though how it would enable each device to be configured for the varied networks isn't clear.
It's also not clear if the universal SIM and dual-mode radio capabilities would be included in the iPhone Nano, or if they would only be available to the high-end iPhone 5. As it is, Apple had to switch from a standard SIM card to a micro-SIM card in the iPhone 4, as its engineers ran out of space inside the chassis. Apple needed that room for other components. Can it work miracles and shove a universal SIM system into a smaller iPhone? Unknown.
Apple didn't comment on Bloomberg's story.