Is Apple working on a cheap iPhone?

Here we go again. The Wall Street Journal is reporting that Apple is planning a cheaper version of the iPhone using less expensive parts, according to "people briefed on the matter." The move would diverge significantly from Apple's traditional emphasis on quality, and is meant to offset momentum from competitors like Samsung, which is expected to post its fifth consecutive record quarter thanks to the selling power of its Android-powered Galaxy series. The Journal's sources say the new iPhone will debut sometime in 2013.




Meanwhile, Bloomberg reports that a more affordable version of the handset has been in the works since February 2011. Citing a "person familiar with the plans," the new handset will cost between $99 and $149. Apple has already spoken with at least one major U.S. wireless carrier about its plans, says the source.

Just how seriously are we supposed to take these rumors? Remember: Apple already sells cheap iPhones in the U.S. When the iPhone 5 debuted last fall, the iPhone 4S was given an immediate price drop — its $199 price tag fell to $99 with a two-year contract. The iPhone 4 from the previous year became available for free with a similar two-year deal.

Furthermore, offering a new device with lower-quality replacement parts — in this case, a plastic polycarbonate shell instead of a glass or aluminum backing — represents a major shift in strategy, given that Apple has built its global empire on the polished quality of its electronics. Writing at his blog, TechCrunch columnist MG Siegler posits that a "cheap" iPhone, if indeed in the works, might be intended for emerging markets outside the U.S.:

Perhaps this is all simply meant for other markets where the iPhone does not sell as well (and subsidies matter far less, or don't exist at all). As WSJ notes, the iPhone is still the top selling smartphone in the U.S. But that’s not the case in other markets, and China has been particularly troublesome. Apple probably doesn't want to just cede a billion potential users to cheap Android devices.

Taiwanese newspaper DigiTimes, which has a dodgy track record when it comes to Apple rumors, has reported that a low-cost iPhone is in the works for China. According to its report, the budget phone would support a "brand new exterior design," and come with a larger display in line with the current trend for 5-inch models.

Last year, Apple sold 270 million iPhones worldwide. The best-selling handset accounted for half of the company's revenue, reports Bloomberg, generating $80.5 billion in sales. The company is hardly hurting for cash, and making cheap-o phones would only reinforce criticism that Apple has lost its soul in the post-Steve Jobs era. In other words, it's probably best to treat this latest batch of iPhone rumors as you normally would: With a dose of healthy skepticism.