Low-cost iPhone in Apple's future as iPad mini succeeds

As the next release from Apple approaches after the most recent change in Apple's approach with a smaller-sized iPad in the iPad mini, analysts have suggested that a lower-cost iPhone has become inevitable. What Mark Moskowitz and Gokul Hariharan of J.P. Morgan have suggested this week is Apple's approach toward a segment in the market hit by the iPad mini since its release last year. As the iPad mini took the middle-market between the $199 tablets and the $499 tablets popular last year at this time, so too will Apple move in on the mass market once more with a new lower-cost iPhone.

Though the iPhone family currently on the market allows for several price points based basically on the amount of time a product has been on the market, a new release with a brand new name may be required to hit the market Apple has yet to touch. According to J.P. Morgan, Apple already has a relatively large iCloud userbase (300 million users strong), but risks losing ground as Android's ecosystem grows.

"Apple usually creates new demand when it steps into a price band — for example, the $300-$400 price range for tablets did not have much demand (most of the growth had been at the $499+ or $199 range) before the launch of the iPad mini. However, after the launch of Pad mini, this segment has become one of the largest parts of the market, even convincing many suers to upgrade from cheaper tablets to the iPad mini." – Mark Moskowitz and Gokul Hariharan

The Google Nexus 4 has seen significant success on the market as a relatively low-cost device in the off-contract segment. While most high-end smartphones cost upwards of $500 USD without carrier subsidies, the Nexus 4 rings in at a cool $299, completely unlocked and without contractual obligations. The least expensive off-contract Apple smartphone, the iPhone 4, costs $450 USD off-contract.

The duo of J.P. Morgan analysts suggest that a release of a low-cost iPhone will "come at the expense of margins in the short term" – so-called "cannibalism" of iPhone sales – but Apple will benefit in the long run from "non-product revenue streams." A very similar suggestion was made back in 2011 in SlashGear's column Why the iPhone 4S will be Free.

[via Apple Insider]