Apple’s rumoured $200 iPhone and its potential for Asia

The technology industry moves quickly, as they say, so much so that less than a week after explaining Why Apple won’t be primary driver of mobile connectivity in Asia, I’m reconsidering my position in light of new evidence.

Rumours of an iPhone Nano stretch back to the release of Apple’s first ever iPhone, but possibly even pre-date that to the day that the very concept of the iPhone was announced, yet the rumours gained some serious credibility when Bloomberg announced, via a leak, plans of a $200 “version [that] would be cheaper and smaller than the most recent iPhone”.

More details from that Bloomberg article:

Apple has considered selling the new iPhone for about $200, without obligating users to sign a two-year service contract, said the person who has seen it. Android phones sell for a range of prices at AT&T Inc., Verizon Wireless and other carriers, and typically come with agreements that include a fee for broken contracts. The iPhone 4, sold in the U.S. by AT&T and Verizon Wireless, costs $200 to $300 when subsidized by a contract.

While Apple has aimed to unveil the device near mid-year, the introduction may be delayed or scrapped, the person said. Few Apple employees know the details of the project, the person said. Apple often works on products that don’t get released.

The prototype was about one-third smaller than the iPhone 4, and it had no “home” button, said the person, who saw it last year.

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 person said. Component prices typically drop over time.

It isn’t just me caught unaware by the news. Apple apologists worldwide, who often claim Apple is happy looking after the affluent users, may need to reassess the company’s objectives should the rumours be true.

The potential impact of a new device requires little explanation. By reducing the cost, Apple opens its product range to a new user who can afford the reduced cost and may otherwise have chosen an Android, Nokia or BlackBerry device instead.

To those blogs/experts who claim that the $200 is too expensive to make a big impact, I beg to differ.

Apple, already aware of the relatively expensive cost of an existing iPhone for those in Asia, has specific financial options which break the down-payment on an iPhone into  a series of monthly payments. When applied to a $200 device, ten monthly payments of less than $20 clearly opens the potential of an ‘iPhone Nano’ to a whole new customer demographic, and one which is set to grow massively in terms of smartphone ownership and usage.

Of course, cheaper devices will exist on the market – such as Spriing telecom’s impressive $150 Android device which has already launched in Thailand – but the drop in financial barrier could increase Apple’s penetration in lucrative, growing markets like India, China, Asia and South America.

Then there are those claiming these rumours are unlikely to come to fruition.

Ignoring the ‘no smoke without fire’ analogy, precedent alone suggests that Apple will diversify its product range at some point to include lower-budget alternatives as it did with the iPod:

Apple has gone down-market before. In 2004, when sales of the original $299-plus iPod were still rising, the company introduced the $249 iPod Mini. In 2005, when the iPod Mini was still a bestseller, Jobs discontinued it in favor of the cheaper iPod Nano. Apple began selling the last version of the iPhone, the 3GS, for just $49 in January — though it required a two- year contract.

All in all, this news has potentially significant ramifications for Asia as, if nothing else, the increased threat of Apple devices on lower-end, entry-level smartphones will up the bar for quality and consumer expectation – never a bad thing.

That said, there is a chance that the project will come to nothing although it seems unlikely that the rumour and speculation of a iPhone nano will ever go away.