According to Reuters Apple is readying a cheaper 8GB iPhone 4 to deploy in growing markets.
The move is an effort to increase or maintain the enormous growth Apple has experienced in the mobile field by taking advantage of growing markets in China and other developing nations. The Apple market space has always entailed high-margin, high-priced electronic devices. These cheaper iPhone 4s may sacrifice a small portion of Apple's high profit margins in order to gain market share in these emerging markets.
A lower-priced version of iPhone 4 seems to be a necessary evil at this point in the iPhone adoption cycle, especially in emerging markets where the average income of individuals is much lower. - Channing SMith, co-manager of Capital Advisors Growth Fund.
While the analysts are right in predicting that Apple will need a cheaper device to lure less affluent buyers in these markets, saying that it could have an adverse effect on profit margins ignores Apple's purchasing power and commitment to profit margins. Apple, if they do produce a cheaper iPhone 4, wont do so until the iPhone 5 comes out, allowing the latest and greatest technology to continue to be sold at a premium. Second, the smaller capacity means cheaper memory components, and Apple's purchasing power means cheaper prices of all other components. Also, the fact that all of the iPhone 4s components are already readily available will make the device even cheaper to produce as factories have already been pumping out millions of iPhone 4s over the last year and a half.
All of this equates to a cheaper iPhone 4, capable of everything its more expensive, brethren are. More importantly the cost of producing this unit has been driven down enough that Apple can sell it at a perceived "cheap" price, and still maintain their industry leading profit margins.