A Cheaper, Smaller iPhone in the Works?

Earlier this week, sources told the Wall Street Journal that a slimmed-down iPhone is in the works. Think iPhone Nano, about half the size and half the price of an iPhone 4. The Wall Street Journal has a pretty good track record when it comes to Apple rumors, and so I’m inclined to believe it.

More than that, though, a cheap iPhone sounds exactly right.

My guess is that the once-powerful iPhone will end up as just another iPad casualty. That is, the iPhone, netbook, mobile apps, and maybe even laptops all lie in the iPad’s destructive path. Consider this scenario: If you can easily whip out an iPad from your purse, briefcase or backpack, who needs a powerful smartphone, too?

Forces are coming together to spell the end of the rise of the smartphone. The iPhone’s retina display is about as good as it gets with the naked eye. Professional photographers already use the iPhone camera. Of the more than 350,000 apps in the App Store, only a handful of apps are must-haves.

There’s no need for a lot of local storage anymore, given the free cloud storage options such as Dropbox and Box.net. Wall Street Journal sources said Apple is also thinking about making MobileMe, its online storage service, free instead of the $99 annual subscription fee. If you absolutely have to store data locally, use the iPad.

Here’s the kicker in the Wall Street Journal story: “One of the people, who saw a prototype of the phone late last year, said it is intended for sale alongside Apple’s existing line.”

Existing line of iPhones? Or iPads? The iPad can do almost everything better than the iPhone. Almost every app renders more beautifully on the iPad, especially Safari. Web browsing, reading, watching movies all play better on the iPad. Sure, you can file taxes on your smartphone, but would you want to? A 10-inch iPad screen makes all the difference when compared to a 3.5-inch iPhone screen.

Of course, there are some apps that work nicely on the iPhone. Location-based services come to mind. It’s also easier to check news updates on the iPhone than the iPad. The iPhone camera has become a go-to feature for quickly capturing moments in a nondescript way, compared to holding up a tablet to take a snapshot.

For these and other reasons, not everyone agrees with my premise. “I don’t see tablets impacting smartphones,” Gartner analyst Van Baker told me a few months ago. “They are used in a very different manner. The smartphone is used on the go in a very bursty fashion with short sessions and time-sensitive, location-sensitive information. The tablet is used in fixed locations, such as the living room, family room, classroom, coffee shop, meeting room. No one walks down the street with a tablet in their hand—well, almost nobody.”

Baker is right that there is a place in our lives for an iPhone, but it’s hard to argue that the iPad hasn’t at least diminished the iPhone’s role. In fact, the iPhone is taking a step back toward its communication roots, filling the blind spot of the iPad. Once again, the iPhone will be most used for voice calling, text messaging, emailing and social networking. With tethering, the iPhone can be a wireless hotspot for the iPad.

To do all these things, the iPhone doesn’t need to be super-charged like the iPhone 4 is today. The iPhone Nano—code-named N97, according to Wall Street Journal sources—would be a great iPad peripheral.

-TK