Originally Posted by penchanted
Jobs has commented in relation to other products that Apple will strive to eliminate price umbrellas. I think a less-expensive iPhone is just an extension of this plan with iDevices in general.
This is the first thing I thought also. I'm not sure if they are indeed making a smaller iPhone but there are plenty good reasons to do so.
I think the article gets the it wrong (as do many of the commentators), when they simply imagine a smaller, lighter version of the same iPhone for less money. This is a ridiculous idea. If they could do that they would simply sell the iPhone that way.
It stands to reason that if the iPhone cannot be made substantially smaller without losing some of it's key features
, (and it clearly can't), that a smaller iPhone or nano-phone is going to be a different thing altogether. It would of necessity have a different screen size, different UI, different apps and a different purpose in life to match.
The most likely target is the feature-phone, so a smaller iPhone product that does phone, music, photos, and text messaging (and maybe even no apps at first), would be expected if they enter the market. If they can churn out a product like that at a low price or free with subsidy, they will vacuum up large portions of the feature-phone market.
The phone would also serve as a sort of entry level drug to the Apple ecosystem in that everyone needs to have a phone, even those that don't have a smartphone.