Rumors of cheap iPhone continue to spread, but do they make any sense?

We can blame DigiTimes and the Wall Street Journal (and their anonymous sources) for the sudden surge in rumors concerning a cheap Apple iPhone. Potentially named the iPhone Mini, the not-quite-news has done its best to distract us from all the CES 2013 hoopla this week. Now it’s Bloomberg’s turn, as its sources – unnamed, of course – say Apple is eying a $99 or $149 price point for the unannounced phone.

The report states Apple has been working on an affordable alternative to the iPhone for two years, and it hopes to have a model ready for release later this year. It also says Apple has been chatting to at least one U.S. network about the phone, however it may primarily be aimed at attracting buyers in emerging markets where the iPhone is too expensive for the majority of potential buyers.

It continues to say the phone would use cheaper parts, be smaller than current models and work on, “Multiple wireless networks.” As existing iPhone devices work on just about every major network in the world already, we’re not sure what else Apple could have in mind. The Journal perviously indicated Apple would switch to polycarbonate for the phone’s construction, and reuse components it had produced for discontinued iPhone handsets.

What about the iPhone 4?

Let’s go back to the price. Neither Bloomberg nor its anonymous source states whether the $99/$149 price includes the subsidies provided by the carrier after signing up for a contract. It’s an important distinction, as right now, an 8GB iPhone 4 is yours for $0.99 with a two-year contract through AT&T, making it the perfect iPhone Mini. It has a smaller screen and lesser specs than the current phone, yet it’s still superior to many other budget smartphones. It’s the same argument which has always made a dedicated low-cost iPhone sound like a strange project, as Apple always has the ideal budget iPhone when it brings out a new, full price one.

So, does that mean Apple is planning a SIM-free or Pay As You Go iPhone for $99 or $149? Such a drastic drop in price (a 16GB iPhone 5 costs $649 from Apple) would inevitably mean a drastic drop in quality and performance – a sacrifice Apple doesn’t seem likely to make, particularly when you take the iPad Mini, it’s recent attempt to attract the budget crowd into account.

The competition should be worried

For the sake of argument, let’s say it has got a $149 phone ready for launch; which device is it supposed to be countering? It’s not the Galaxy S3, that’s what the iPhone 5 is for, and it’s not even the Galaxy S3 Mini, Samsung’s sub par cash in on the S3’s success, as it costs at least £250 on Pay As You Go in the UK, or $400. At AT&T, $150 on PAYG buys you the Samsung Galaxy Appeal, with its 3.2-inch screen, dual-core 800MHz chip, 3-megapixel camera and all its associated unattractiveness.

Of course, if an iPhone was available for the same price in that company, almost everyone would buy it over any other device, and the specs wouldn’t matter in the slightest. It would just look out of place alongside Apple’s other products. All this aside, the prospect of Apple producing the iPad Mini appeared similarly out-of-character, then the thing turned up to prove us all wrong. Perhaps Apple will do the same again with an incredibly cheap iPhone?

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