Apple's Schiller Denies Reports of a 'Cheap' iPhone

The Apple executive told a Chinese newspaper that despite reports, “cheap smartphones … will never be the future of Apple’s products.”

An Apple executive appears to be denying speculation that the company is planning to start selling less-expensive versions of its popular iPhone later this year in a bid to compete harder against Android-based products and to expand its reach into emerging markets.

Phil Schiller, senior vice president of worldwide marketing for Apple, reportedly told the Chinese newspaper Shanghai Evening News that the company has no interest in selling "cheap smartphones" in hopes of gaining a few more points of market share.

Despite shipments of Android smartphones continuing to outdistance those of iPhones, Apple is content with how things are unfolding in the highly competitive device space.

"At first, non-smartphones were popular in the Chinese market; now cheap smartphones are more popular and non-smartphones are out," Schiller said in the interview. "Despite the popularity of cheap smartphones, this will never be the future of Apple's products. In fact, although Apple's market share of smartphones is just about 20 percent, we own the 75 percent of the profit."

Apple spokespeople confirmed to the newsite The Next Web that Schiller's interview with the Shanghai newspaper was an official interview.

Schiller's comments came just days after both The Wall Street Journal and Bloomberg reported that Apple officials were moving forward with plans to create a lower-cost iPhone model that could be priced between $99 and $149, significantly less than iPhones currently on the market.

The news organizations, citing anonymous sources who had been briefed on Apple's plans, said that the smartphones would look much like current iPhones and would use many of the same parts, but that the outer shell would be made of cheaper material. iPhones now are housed in aluminum, but the shells for the lower-cost iPhones would be made of polycarbonate plastic, a less-expensive material.

However, in the interview in China, Schiller said "every product that Apple creates, we consider using only the best technology available. This includes the production pipeline, the Retina display, the unibody design, to provide the best product to the market."

Apple is still interested in growing its presence in the Chinese market. Apple CEO Tim Cook this week reportedly met in Beijing with Xi Guohua, chairman of China Mobile, fueling speculation that the two companies could be working on a deal to bring the iPhone to the Chinese company, which The Wall Street Journal reported has more than 700 million subscribers. The trip to China was Cook's second in less than a year.

In an interview with the Chinese news site Sina, according to the Financial Times, Cook said that "China is Apple's second-biggest market in the world, I believe in the future it will definitely become our biggest market. I cannot accurately predict when that will happen, but I have no doubt that this will happen."

According to the earlier Journal and Bloomberg reports, Apple executives have talked about the possibility of a less-expensive iPhone for several years, particularly as devices that run on Google's Android mobile operating system have proliferated and squeezed Apple's market share. Samsung, in particular, has become Apple's chief rival, with a 31 percent share of the smartphone market based on shipments in the third quarter of 2012, according to analysts at IDC. Apple was second, with a 14.6 percent share.

Other players also are entering the market, especially Microsoft with its recently launched Windows Phone 8 OS.

Gene Munster, an analyst with Piper Jaffray, said in a report in the wake of a the latest news stories that he put the chances of Apple releasing a lower-cost iPhone at 60 to 70 percent, and said that such a phone released in September would be very popular, accounting for 30 percent of the company's iPhones in the fourth quarter.

"We have the cheaper iPhone contributing about $6.5 billion in revenue in 2013 or 3 percent of total revenue," Munster wrote.

Apple products have always been given premium prices, and while officials had denied plans to offer a less-expensive version of the popular iPad tablet, in October 2012, the company rolled out the iPad Mini, a smaller tablet that came at a lower price—though not made with less-expensive materials.