Will Apple Introduce a Lower-Priced iPhone?

Network World — Apple is moving ahead with plans for a less expensive iPhone, possibly with a plastic instead of metal body, according to a new report. But new retail options for consumers already are making even the flagship iPhone 5 more affordable.

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Citing "people briefed on the matter," The Wall Street Journal this week reports that while the idea for a less expensive iPhone model has been talked about at Apple for years, the plan for one now "is progressing" and could result in a product launch later this year, according to one of the people briefed.

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The speculation is that Apple could hold down costs by switching from the all-aluminum unibody, re-introduced with the iPhone 5 in September after moving away from the all-metal original 2007 iPhone, to a material such as polycarbonate plastic. Nokia's Lumia smartphone line uses the same material and has won praise for its build quality. The iPhone 5 is rare: Nearly all smartphones still use some kind of plastic or plastic and glass combination for their bodies.

As more vendors have introduced more advanced smartphones, Apple's share of the global smartphone market has declined. According to the IDC figures cited by the Journal, Apple's share of the worldwide smartphone shipments in the 2012 third quarter was 14.6%, down from a peak of 23% in the fourth quarter of 2011 and the 2012 first quarter. By contrast, Samsung Electronics' share rose sharply from 8.8% to 31.3% from the 2010 third quarter to the 2012 third quarter.

Samsung's Galaxy S smartphone line has been one of the few single models to challenge the iPhone's sales. Samsung, and other smartphone vendors, offer a wide range of smartphone designs and capabilities, using different materials, different processors, varying amounts of RAM and storage and other tradeoffs to cover a wide range of prices.

This drop in Apple's market share is widely interpreted as creating pressure for Apple to make the iPhone more affordable, meaning to create new models that carry a lower retail price tag. That's especially the case in non-U.S. markets, where carriers do not subsidize the phones they offer, so customers have to pay the full retail price.

So far, Apple's customary response, with its carrier partners, has been to lower the prices (both on- and off-contract) of two earlier iPhone models with each new iPhone release. Today, for example, iPhone 5 with a two-year contract is priced at $199, $299 and $399 (for 16GB, 32GB and 64GB models). Without a contract, the prices are $649, $749 and $849.

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