Rumor: Cheaper, smaller iPhone coming at $200 off contract

Friday, February 11, 2011, 8:05 by Tech Correspondent

Apple is working on iPhone nano, a phone that’s one-third the size of the iPhone 4, and that is expected to cost $200 without a wireless network contract in the United States.

Apple iPhone nano, it is rumored, will be out this summer. These days, $200 for a good smartphone without contract is dirt cheap. HTC’s Droid Incredible, for instance, costs about $300 with contract; and the original iPhone costs nearly $200 with contract, and $700 without. So the iPhone nano, reported about by Bloomberg, will be a really inexpensive device – and would be unlike how Apple usually prices its products.

However, Apple does sell at a scale that would make it possible to bring down product prices drastically. Bloomberg’s source, though, says he saw the iPhone nano last year, so there might be a chance that Apple has since then scrapped its plans. Also see: iPhone 5 features and rumors

apple iphone 4 photo

Photo: Apple iPhone 4

Although, what could be more ingenious than a cheap iPhone from Apple? Apple very likely earns a much higher percentage of profits from its content and app business, than from its hardware sales. The company has recently started charging a portion of the money that content and software developers earn by selling subscriptions through iTunes. Now more than before, Apple would want to just release as many products that can access iTunes as possible. Related: Competition for iTunes on the way

There is talk of iPhone nano being a miniature, cheap version of iPhone 4. This idea seems absurd, to say the least. First, how many people would pay twice the money for a somewhat larger screen; and why would a small screen device use the same battery as a large screen device – there will clearly be no need for many of the high-end features that iPhone 4 has.

Research firm iSuppli studied the new iPhone 4 that’s available on Verizon, and realized that the device costs about $178.45 per unit to make. This indicates that the approximate $20 of profit from the sale of each iPhone is actually divided among the retailer, wireless carrier, Apple and so forth, and isn’t a source of huge profits for Apple.

The iPhone 4 has a 3.5 inch 960 x 640 pixel Retina Display that costs $37.80, and is the second most expensive component in the device. The phone uses a Qualcomm MDM6600 baseband processor, which means that it can theoretically support both CDMA and GSM bands. Verizon Wireless started selling iPhone 4 this week, and is expected to sell 8 million units of the device this year.

The biggest profits from device sales are in the high-end range, in which the iPhone reigns supreme. Yet, there is a far more vast market that wants value for money, and ignoring this segment would make Apple lose its position as a mainstream phone maker.

Emerging markets promise massive scale, and there is greater demand in countries such as India for inexpensive goods. Apple, in fact, has been talking to Indian CDMA service providers RCom and Tata Indicom to launch CDMA iPhones here, even though the amount of money that a CDMA user typically wants to spend makes the original iPhone somewhat out of reach, especially since it is about twice as expensive as a reasonably good smartphone.

Apple iPhone 4 will be out on BSNL’s network in India within a month, a BSNL executive has reportedly said. The iPhone 4 will likely be priced around Rs. 44,000 though there will be different versions of the phone at different prices. At this price, an Indian consumer would rather buy a laptop than a phone!

Google Android OS is also quickly gaining ground in markets such as India and China, both of which seem promising markets for an iPhone nano. Related: Android topples Symbian as world’s No. 1 mobile OS

Other than iPhone nano, Apple is said to be working on a dual GSM+CDMA SIM device, as well as universal SIM technology which would do away with SIM cards, and make it possible to use the iPhone on any network in the world without having to get a physical SIM, similar to how American CDMA networks operate.

This rumor, though, was heard of before, when Apple patented its dynamic carrier selection technology that allows the user to choose wireless carriers. According to the patent, “The network address can identify a mobile virtual network operator server storing mobile network operator data for use by the mobile device. A request for network operator data can be sent from the mobile device to the mobile virtual network operator server, and in response to the request, network operator data can be received. A network operator for the mobile device can be selected based on the received network operator data, and communications can be conducted using the selected network operator.”

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