A lower cost iPhone may be coming, and it may have pretty colors

Lower cost iPhone shells?

As the predicted announcement and release dates for the iPhone 5S come slowly closer, new information on what else Apple might have up its sleeve continue to surface. This last weekend new photos of the rumored lower cost iPhone surfaced online (Google Translate). It’s still not well known whether Apple would actually begin competing on price by releasing a lower cost iPhone, but this recent batch of leaks may provide more fuel for that fire.

Hit ‘Read More’ to see what we think about these latest photos.

While I’m still a little unconvinced that Apple would jump into the “budget” smartphone market, the latest round of photos and information released does seem to suggest that Apple is at least testing this option. Prior to this recent round we’ve seen similar leaks, and things seem to be ramping up prior to the launch of the iPhone 5S in September.

Apple rumors tend to follow a certain cycle. Insiders and major news sites come out of the blue with reliable-sounding confirmations of something new. In this case, the lower cost iPhone. The smaller sites pick this up and it starts to spread everywhere. Once the floodgates open, pictures wind up leaking out of manufacturing plants and we all begin to guess their legitimacy. This lower cost iPhone has, so far, followed this cycle.

Is this the colorful new iPhone?

This colorful outer shells could absolutely be fake. While they may look real, they’re also made out of plastic. This means that it would be extremely inexpensive and easy for someone to order up a batch just to leak online. They may earn more than production costs in selling access to the first site, or actually publishing the article themselves and collecting ad revenue. Sounds profitable.

The innards do look quite detailed, with what looks like a place for everything – and even a QR code! -,  but it’s interesting that the “Designed by” line and FCC information is lacking. Recent leaks have shown that this information is present, at least in later-in-life unit photos that come out online. Why would these plastic shells not also have this information? This feels like a pretty major oversight for someone releasing photos of fakes. The pictured colors match Apple’s current line of colors available on the iPod Touch and Nano.

Inside the lower cost iPhone

What’s interesting is that there has been no information on the iPhone 5S also being available in a variety of colors. The only leak we’ve seen so far shows the iPhone 5S in its familiar, prone to scratching, black color. It may be that Apple is waiting for their next major release, the iPhone 6 in 2014, or has no plans to bring these colors to their flagship iPhone model at all. Requiring users to buy a downgraded iPhone hardware just to get to choose a shell color would likely disappoint many.

Apple has been expected to offer a cheaper iPhone option to help combat ever-increasing Android sales. It’s said that the iPhone is too expensive, but how does it compare to Android devices? The iPhone 5 is available for as little as $199 with a new contract. With the exception of the failed HTC First and sales on specific devices, it’s nearly impossible to find a full-featured Android phone for less than $199. The Galaxy S4, for example, starts at $199 on contract and $639 without a contract. The iPhone 5 costs the same on contract and a mere $10 more off contract – $649. The same example plays out for nearly ever other high-end Android devices. It’s hard to call the iPhone expensive compared to its competition.

Does Apple really need a cheaper iPhone to offset this wrongly-assumed high cost of the iPhone 5? It doesn’t seem like it. People are still buying the iPhone in droves, and it’s still the best-selling smartphone.

It would be odd to see Apple start competing on price – something they have never done. Apple is a premium electronics retailer that doesn’t focus on offering the cheapest product. You can already get a great iPhone for a low price. If you don’t want to pony up the $199 for an iPhone 5 on contract, the incredibly capable iPhone 4S is available for $99, and the iPhone 4 is still around for $0.99 (prices from AT&T).

Apple may introduce a lower cost model to replace the rolling availability of their last three models. When the iPhone 5S is released in September, it’s expected that the 5 will replace the 4S for $99, and the 4S will replace the 4 for $0.99. It might make sense for Apple to make this a little more simple, offering instead this new lower cost model as a single choice – instead of also selling the two previous models.

To help reduce the cost of the iPhone and make it profitable to sell for less than $199 on contract or $649 off, we’d likely see a number of features dropped from the list. Apple wouldn’t sacrifice the user experience, but it would not be surprising to see the last generation cameras, processors, and maybe even the lack of a Retina display. Though the current cheaper options for new iPhone purchases include a Retina display, Apple does appear to appreciate the popularity of a lower quality display in a cheaper device. The iPad Mini launched without – and still doesn’t have – a Retina display, but remains an incredibly popular option for new iPad buyers. Apple has not shipped an iPhone without a Retina display since the iPhone 3GS – which came out way back in 2009. It might be tough to convince users to take such a huge step back in display technology to save ~$100.

The thought that an iPhone that’s cheaper to manufacture is going to provide higher profit margins to Apple is likely not their reasoning for this latest rumored offering. The iPhone 5 is relatively inexpensive to build, costing $199 for parts and $8 to build, a total of $207. For each 16GB iPhone 5 that Apple sells, they get $649 from either the individual buyer, or from a wireless carrier when bought on contract. Apple’s profit margins are $442 per iPhone sold, which is incredibly high. Dropping the Retina display would likely save Apple considerably. It is currently the single most expensive part going into the iPhone 5, coming in at $44.

Apple’s lower cost iPhone, if we wind up seeing one at all, would need to be substantially cheaper than the higher end iPhone, especially if it ships without a Retina display. It’s expected that, on contract, the lower cost iPhone would cost around $99. To make off-contract purchases a feasibility, it would be surprising to see this entry level model retail for much over $300. My guess would be a cap of $350.

There’s been no hints from Apple that a lower cost iPhone is on the way. In fact, we’ve heard only the contrary. This is classic Apple – denying a new product multiple times before finally releasing it to great fanfare and reception. Since the “S” model upgrade events have been a bit lackluster (remember how nearly everyone expected an iPhone 5 instead of a 4S?), it would make sense for Apple to debut this new option when the iPhone 5S comes out on September 20, 2013.

Ultimately, we’ll have to wait and see. We’ll be covering it live when Apple’s new iPhone hardware is released this fall. Stay tuned!

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