Originally Posted by RadarTheKat
I agree with those who suggest both the 4 and 4S will go away with the next update. And also the 5. Here is a write up I did on the subject at the request of an analyst I sometimes communicate with about Apple:
Apple's historic strategy of adding a new iPhone model and dropping the two-generations-old model is about to be radically altered. Under the current strategy, the 4 and 4S both share their display, majority of their outer case, and several internal components, but they don't have the same processor, camera, antenna, etc. Further, they share almost nothing with the iPhone 5. This limits the economies of scale Apple can achieve across its iPhone line.
Continuing this strategy as a new iPhone model is released this year would drop the 4, leaving the 4S as the only 3G iPhone, the only iPhone with a 3.5" display, and the only iPhone with the 30 pin connector. The economies of scale Apple gained by sharing components with the 4 will be gone.
Of course, by creating a 5S, those economies of scale would shift to the two iPhone 5 models, presumably the 5 and 5S. But this presents a different issue. Both the 5 and 5S, with a larger display and 4G connectivity, might be equally attractive to those upgrading from older models, so many current 3GS, 4, and 4S owners may choose to upgrade to the discounted 5 rather than the full-priced 5S, hurting Apple's margins.
What to do?
The rumors and videos indicating a new polycarbonate iPhone shell in multiple colors got me thinking about how Apple might maximize its economies of scale, eliminate the problem of customers upgrading to an expensive-to-produce but discounted iPhone 5, and allow Apple to offer a mid-priced iPhone to expand its reach globally.
I believe Apple will discontinue the 4, the 4S, and also the 5, at least in its current configuration. In their place Apple will introduce a new flagship model; let's call it the iPhone Pro (for lack of a better name). This model will be what many are expecting the 5S to be. Basically a refreshed iPhone 5, with potentially a higher resolution camera, maybe a fingerprint sensor (either built into the home button or into the display), an NFC chip, and maybe some other internal modifications.
Apple will also introduce the polycarbonate shelled model, called simply the iPhone (no version designation). This model will be the 5 repackaged into the new much-cheaper-to-produce-and-assemble plastic shell. It may also carry an NFC chip so that Apple can make a push into mobile payments, unless they intend to use another technology to accomplish this, such as Airdrop (which utilizes low-power, short range wifi), in which case neither new iPhone would need an NFC chip.
By dropping both the 4 and 4S, Apple eliminates two of the final three devices using the old 30 pin connector (the third being the iPad 2), and avoids orphaning the 4S as the only 3.5" and 3G-only iPhone.
By replacing the 4, 4S, and 5 with a single polycarbonate shelled model in multiple colors, Apple increases its economies of scale, utilizing the iPhone's most expensive component (the 4" display) across the iPhone Pro, the iPhone, and the iPod Touch as well as reducing the number of different CPUs, battery form factors, cellular radios, antennas, and possibly other internals needed to produce its iPhone and iPod Touch lines.
The new iPhone, because it will come in a tough polycarbonate shell, will not require customers to purchase a protective case, reducing their overall outlay when purchasing the phone. And because it will come in multiple colors, customers will also have less need for a case to add their own fashion statement to the phone. And Apple can occasionally add or change available colors, as they occasionally do to promote a specific cause, like the (PRODUCT) RED color offered on the iPod Touch to support the fight against AIDS. (Breast Cancer Awareness pink might be quite popular.)
Apple's inventory management would be made simpler with just two iPhone models. Today, inventory management across three models (4, 4S, and 5) has implications deep into Apple's supply chain, as Apple must order separate CPUs for all three models, separate displays between the 4/4S versus 5, separate cellular radios between the 4/4S versus 5, etc. This in addition to the differences in cellular radios between carriers (Verizon versus AT&T, for example); differences that would remain but would be reduced with all iPhones supporting 4G. Overall, the number of components that reach deep into the supply chain would be significantly reduced. This would be offset only slightly with the added inventory balancing needed to ensure appropriate supplies of available colors, but both shell colors and storage options are easier to deal with. Both are readily sourced and can be stockpiled well in advance; both are relatively cheap so stockpiling would not incur significant costs to Apple. Stockpiling lots of shells in multiple colors means Apple can react more quickly to regional or demographic trends that affect consumer color choices.
The new iPhone, because it will be cheaper to build and because, as a single model, it will provide much better economies of scale versus the old strategy of two discounted models, can be priced lower while still yielding strong margins. I'm thinking Apple could offer this model starting at 8GB in the $429 price range, with the 16Gb model at $479, and then $100 more for each step up from there (to 32Gb and 64Gb). This will allow the phone to compete in the mid-priced tier globally while creating a price umbrella that nicely overlaps with the iPhone Pro, which would start at Apple's usual $650 for the 16Gb model, increasing by $100 for each step up in storage capacity.