Apple Prepping Smaller, Cheaper iPhone: Report

Apple is reportedly working on an iPhone model to compete with Google's growing Android handset market share.

In an effort to more directly challenge Google's Android-powered handsets, Apple is reportedly designing a smaller, less expensive version of its top-selling iPhone. Bloomberg News reported the new phone would also be easier to operate on various networks. "Instead of targeting 25 percent of the global mobile-phone market, Apple would be going after 100 percent," Needham & Co. analyst Charlie Wolf told the news service.

The prototype would be about one-third of the size of normal iPhones, the report said, and would lack a "home" button. "Apple would sell it at a low price mainly because the smartphone will use a processor, display and other components similar to those used in the current model, rather than pricier, more advanced parts that will be in the next iPhone," the Bloomberg article noted.

This week, Apple moved forward in its efforts to broaden sales by offering the iPhone 4 on Verizon's wireless network. Last week, Verizon stopped taking orders for the iPhone 4, reporting that it has already sold through its initial inventory. During a Jan. 25 conference call with media and analysts to discuss Apple's fiscal 2011 first quarter, Apple executives announced that the company sold a record number of iPhones during the quarter, and could have sold even more had it had the inventory.

According to Nielsen, Google's Android platform ran on 43 percent of smartphone shipments from July 2010 to December 2010, while Apple iOS grabbed 26 percent and RIM's BlackBerry took 20 percent. Nielsen's numbers came one day after Canalys published its fourth quarter smartphone shipments across North America, Asia Pacific, EMEA and Latin America, finding that Android became the world's leading smartphone platform.

While Apple expands its market share with new carriers and a potential lower-cost handset, Nokia, the world's leading handset manufacturer, is feeling the heat. CEO Stephen Elop recently announced plans to revamp the company's strategy, noting the industry had changed and Nokia needs to move faster to compete more effectively.

The Android platform is also helping push worldwide smartphone sales to new highs, according to IDC's Worldwide Quarterly Mobile Phone Tracker, released this week. In the fourth quarter of 2010, vendors shipped 100.9 million smartphones, up 87.2 percent from 53.9 million during the same period in 2009.

IDC research suggested further gains for the smartphone market in 2011, as vendors deepen and broaden their offerings. "The high end of the market has been important to help grow the smartphone market in recent years," said Ramon Llamas, senior research analyst with IDC's mobile phone technology and trends team. "IDC expects vendors to provide more midrange and low-end smartphones at lower prices to reach the mass market. In the same manner, even high-end devices will become available at lower prices. This will result in greater competition and more selection for users."

Android's market penetration, helped by the numerous handset manufacturers adopting the platform (including HTC, LG Electronics, Motorola and Samsung) has become a cornerstone of the smartphone market's growth, Llamas noted. Adding to the competitive landscape is the entrance of two refreshed operating systems, Symbian 3 and Microsoft's Windows Phone 7 platform.