Originally Posted by kevt
Essentially Apple has taken the short term greed option. We can sell people a cheaper-to-make plastic version for the same price as we used to charge for a premium one. This will net a greater profit. But will not grow marketshare.
They might be transitioning to a two phone setup. With better margins on the plastic models, they can afford to bring the price down when the demand dies down.
This year, it's 4S, 5C and 5S. Next year, they can drop the 4S and bring the 5C in at the $450 entry point and have the iPhone 6 at $550. The following year, they'd have 6C and 6S. By the time they've settled into the two phone setup, they can just call them iPhone and iPhone C.
The cost of the parts will lower and they'll squeeze margins down again to avoid lowering units shipped YoY. As Tim said in the past, they have two special buttons inside Cupertino and they just need to push them to make the most units in any given category. They are kept hidden away in case anyone falls asleep or trips and hits them by accident. When the market demands that they push for more volume, they'll hit the buttons.
People are often under the impression that they aren't already shipping in volume because of how many phones Android is reported to be shipping. Both Google and Apple have announced their device shipments: Android has 1 billion activations, Apple will have sold 700 million units next month. There's not much between them when you think Apple is one company and Android is multiple companies.
Apple is only second in shipment volume to Samsung in the entire smartphone industry and the only reason for that is because Samsung ships lower-end smartphones, which eats into their profit margins. Apple outsells Nokia in smartphones by about 6:1 and people keep telling Apple to push for more volume. They'll do it when the market slows down.