Apple Looking at Low-Cost iPhone Later This Year: Reports

Apple reportedly wants to expand its customer base worldwide and push back against the growing Android tide with a less-expensive iPhone.

Apple reportedly could release a less expensive iPhone later this year as it looks to stave off competition from the growing number of Android-based smartphones hitting the global market.

According to reports in the Wall Street Journal and Bloomberg, Apple executives are moving ahead with plans to create a lower-cost version of the popular smartphone that could come with a body made of less-expensive material that could come priced as low as $99 to $149, significantly less than traditional iPhones, which can cost hundreds of dollars more.

Citing anonymous sources who had been briefed on the plan, the reports said that the new iPhones would look much like their more expensive brethren—and use many of the same parts, or parts recycled from older phones—but that the outer shell would be made of less expensive material. Currently, iPhones are housed in aluminum. The shell for the new iPhones could be made of polycarbonate plastic, according to the Journal report.

Apple executives have been considering a lower cost iPhone for several years to offset the growing popularity of Android-based devices—particularly from Samsung—and to help generate sales in emerging markets like China, a country that CEO Tim Cook has indicated is a key part of Apple’s future. Cook garnered a lot of attention in March 2012 when he traveled to China to talk to leaders there, and in the first three days after the iPhone 5 went on sale in the country, Apple sold 2 million units.

However, sources told the Journal that company executives could still decide not to follow through with the plan. Apple spokespeople declined to comment to media about the reports.

Samsung and Apple continue to dominate the smartphone market. According to IDC analysts, in the third quarter 2012, Samsung held a 31 percent share of the market based on shipments, thanks in large part to its Galaxy S III device and other smartphones that run on Google’s Android mobile OS—which was more than double Apple’s 14.6 percent share. The competition will only get more heated, with Microsoft looking to make inroads into the market with its Windows Phone 8 operating system and backing from device-maker Nokia, which is looking to reverse its falling fortunes.

Emerging markets—not only China, but such places as India and South America—are becoming highly competitive areas for smartphone makers. In a Dec. 16, 2012, report, analysts with Canaccord Genuity said Apple had already begun growing its distribution channel to bring more products to foreign markets, and that more competitively priced versions of the iPhone could come this year.

"We believe Apple could launch a refreshed iPhone 5 along with a more mid-tiered priced competitive iPhone for prepaid-oriented international markets this summer,” analyst T. Michael Walkley wrote in the report. “We believe Apple is in the early stages of testing prepaid-oriented international channels for potential future iPhone launches. In fact, we believe Apple can generate strong iPhone sales growth in large under-penetrated markets such as Eastern Europe, Latin America and Southeast Asia over the next several years."

After the latest rounds of reports about less-costly iPhones, Piper Jaffray analyst Gene Munster in a research report put the chances of Apple launching such devices this year at 60 to 70 percent, though he sees the price coming in more at $199 than the $99 to $149 mentioned in the reports. Still, that would be a significant discount over current prices, where an iPhone 4 off contracts runs from $490 in China to $750 in Brazil, he said.

Munster wrote that the new device would probably come with both a screen and a body made of cheaper materials.

He also said that, if Apple were to release such an iPhone in September, it could account for as much as 30 percent of the company’s iPhone sales during the fourth quarter.

"We have the cheaper iPhone contributing about $6.5 billion in revenue in 2013 or three percent of total revenue," Munster wrote.