We have previous versions of the iphone for $99. How cheap do you want? It's the phone plans that are killing us, not the cost of the phone. (Curious what the Tmobile plan will be with their unsubsidized iphone plans...)
Another American who doesn't understand the real price of the iPhone.
I think Apple has already proven that you can have a tiny percentage of market share... and still make crazy profits.
Why? Because Apple sells hardware. And for the time being... rather expensive hardware. That's where profits come from.
Android has 75% smartphone market share right now... but I have yet to see much good come from that.
There are so many Android phones out in the world. With all that market share... developers should be making more money from Android than iOS. And the Google music store should be selling more songs than iTunes. And Google should be making more money from ads on Android.
But they're not.
Again... I haven't seen the result of Android having all that market share. The platform isn't doing as well as you think it is... other than having that larger number on the market share chart. (which is really a false trophy)
Some say Android is "winning" the platform war.... but I have yet to see it.
You haven't seen it yet, you will when they are 90% and rising.
1) It probably won't reduce over all profit as volume will compensate for margins.
2) It increases the market share of what is in fact a platform - iOS.
3) Multiple product upgrades a year allows Apple to compete with new Android models more rapidly.
4) It reduces the impact of bad quarters - those two quarters prior to the Big Launch of a new iPhone.
5) It reduces the risk of a bad, or mediocre, upgrade to the high end phone causing a collapse in revenue. ( think manufacturing snafus etc.)
6) It increases the number of people with 2 or more devices - which makes them much stickier see Seeking Alpha here. ( http://seekingalpha.com/article/1099961-apple-margin-pricing-and-product-strategy) [1]
7) It locks people into the system early and gets them for life ( at the cost of reduced margins now) - increasing Apples monetization of apps, videos and music over time, which is a growing component of Apple's business model ( see here: http://seekingalpha.com/article/1102111-app-monetization-drives-revenue-growth-for-apple).
Since the disadvantage is in fact eliminated by the first advantage, there are really no dis-advantages.
[1] An important aspect of this user experience, at least for AAPL's economics, is that it extends over multiple products. The chart below, from a Goldman Sachs survey in May 2012, show the lift to loyalty if customers own multiple devices. Of the customers owning a single device, 62% say they are highly likely to purchase another AAPL device; this figure increases to 75% for customers who already own 2 or more devices.
Those are all great points... but Apple's not exactly hurting because they are in 2nd place with 15% market share to Android's 75%.
It's not an "apples to apples" comparison anyway. Android is an OS... Apple sells hardware.
You know there are some of us who don't live in a third world country that find Android to be the better platform. I realize this is an Apple forum and a certain militant attitude towards the competition is warranted but the negative adjectives get old after a while.
No doubt... and I meant no harm against people or Android as a platform.
But these are reports of Apple building a cheaper phone for developing markets... areas that are primarily served by $100 unlocked phones. Let's be honest... those aren't spectacular devices.
Nonsense. In the absence of any 7 inch tablet competition there is no way that Apple would have introduced a 7 inch tablet. They reacted to competition there. Clearly. They don't have to match prices initially, but they will fall over time.
Its a platform war. Forget present day profits. Apple wants to win, or maintain, its market share.
I would bet that Apple doesn't have to drop its profits anywhere close to what the others do in order to sell more units.
Apple is winning by the way and you have to remember, if Tim Cook actually decides to chase a bit of market share then its my belief he could gut Samsung's sales in very little time. The caveat... it has to be done soon or Samsung will become too firmly entrenched.
[by the way... just as everyone is talking about the possibility of Apple introducing a cheap 5 inch phone, Sony brings out the Xperia Z... a 5 inch phone... true... but cheap... I sincerely doubt it.]
So leave the iPhone 4, free, with a Dock Connector, and replace the iPhone 4S, $99.
Uh, why keep the iP4 and replace the 4S with a new less expensive iPhone? That makes no sense.
If Apple releases a "less expensive" iPhone, it will replace the 4 and the 4S.
I guess you're suggesting the same scenario as the iPad Mini, keeping the iPad 2 around at a lower price?
But do we have hard data suggesting the iPhone 4 is the best selling iPhone? Not that I can recall reading.
Quote:
Has to be under $200 or it's a failure¡
People said the same thing when the iPad mini came out...
"if it's not under $199 for an iPad mini it's a FAIL".
Well, look what happened there.
Look what happened with the iPod Mini at first.
"who would by a iPod with significantly less storage and only $50 cheaper (than the standard iPod) that's much lighter and smaller?"
It became (after the Nano was released) the best selling iPod model to date.
I'm at the point where I hardly use my iPhone for anything more than quick glances and replies. I check email, reply to texts, I play games while waiting for a train or in transit, I listen to podcasts(no music), I check the weather, look at Maps for getting my bearings or look up movie times. That's about it. If i want to do something more complex, it's there, but I rarely use it. And I have my iPad for that. I don't really even use the phone all that much. Maybe 40min/mo. on average but I need a phone number for phone's sake. More like a feature-phone.
That's the real question. With Hardware advances being what they are, and Apple's strategies in quality and design...I don't see hardware being the differentiating factor between the iPhone and a rumored "less expensive" model. And if you make iOS less feature-rich, you're not saving any more money than just keeping the full iOS. So how would they make it "less expensive"? Carbon fiber or polycarbonate uni-body...maybe save a little, but not $200. Drop GPS, gyroscope, less expensive camera? That wouldn't go over well. Go back to the iP 3GS screen? At this point, i doubt it...perhaps a cut-down retina iPad screen.
All I know is I would actually welcome a "less expensive" iPhone since I would clearly be the target demo for it. Someone who just needs a phone for phone's sake, and few extra features that keeps it competitive with other lower priced feature phones. Almost like the Gen 1 iPhone but with today's tech.
Since the disadvantage is in fact eliminated by the first advantage, there are really no dis-advantages.
[1] An important aspect of this user experience, at least for AAPL's economics, is that it extends over multiple products. The chart below, from a Goldman Sachs survey in May 2012, show the lift to loyalty if customers own multiple devices. Of the customers owning a single device, 62% say they are highly likely to purchase another AAPL device; this figure increases to 75% for customers who already own 2 or more devices.
[2] This huge number suggests that Apple is making considerable amount of money ($3 billion) by hosting these 775,000+ growing applications at its app store. This clearly shows a trend towards applications becoming the mainstay of Apple's flexing power. Though many of these apps are free, they feature advertisements, which generate revenue for both Apple and its developers. ( Thats just apps though, they also make money from videos, music, TV and Movies)
Great points, and many are likely the same that led Apple to diversify the iPod lineup nearly 10 years ago.
I don't think it's an "if" point anymore but a when and how, will they do it for the iPhone.
People said the same thing when the iPad mini came out...
"if it's not under $199 for an iPad mini it's a FAIL".
Well, look what happened there.
Look what happened with the iPod Mini at first.
"who would by a iPod with significantly less storage and only $50 cheaper (than the standard iPod) that's much lighter and smaller?"
It became (after the Nano was released) the best selling iPod model to date.
Great points. That's why I don't think we're going to see plastic or low grade materials in the smaller iPhone. Apple will keep it premium and people will be willing to pay the premium price.
Uh, why keep the iP4 and replace the 4S with a new less expensive iPhone? That makes no sense.
If Apple releases a "less expensive" iPhone, it will replace the 4 and the 4S.
I guess you're suggesting the same scenario as the iPad Mini, keeping the iPad 2 around at a lower price?
But do we have hard data suggesting the iPhone 4 is the best selling iPhone? Not that I can recall reading.
People said the same thing when the iPad mini came out...
"if it's not under $199 for an iPad mini it's a FAIL".
Well, look what happened there.
Look what happened with the iPod Mini at first.
"who would by a iPod with significantly less storage and only $50 cheaper (than the standard iPod) that's much lighter and smaller?"
It became (after the Nano was released) the best selling iPod model to date.
I'm at the point where I hardly use my iPhone for anything more than quick glances and replies. I check email, reply to texts, I play games while waiting for a train or in transit, I listen to podcasts(no music), I check the weather, look at Maps for getting my bearings or look up movie times. That's about it. If i want to do something more complex, it's there, but I rarely use it. And I have my iPad for that. I don't really even use the phone all that much. Maybe 40min/mo. on average but I need a phone number for phone's sake. More like a feature-phone.
That's the real question. With Hardware advances being what they are, and Apple's strategies in quality and design...I don't see hardware being the differentiating factor between the iPhone and a rumored "less expensive" model. And if you make iOS less feature-rich, you're not saving any more money than just keeping the full iOS. So how would they make it "less expensive"? Carbon fiber or polycarbonate uni-body...maybe save a little, but not $200. Drop GPS, gyroscope, less expensive camera? That wouldn't go over well. Go back to the iP 3GS screen? At this point, i doubt it...perhaps a cut-down retina iPad screen.
All I know is I would actually welcome a "less expensive" iPhone since I would clearly be the target demo for it. Someone who just needs a phone for phone's sake, and few extra features that keeps it competitive with other lower priced feature phones. Almost like the Gen 1 iPhone but with today's tech.
It would defiantly be a hard sale if they would hinder the OS, there really isn't much to take away feature wise anyway. I'm with you, I use my tablet a lot more then my phone, I would love to see the Mini get a GSM. The 3G model technically can be a phone it would just take some hacking. Asus has such a model the EeePad Memo, interesting idea, good luck finding one though. It has a second piece for phone calls and listening to music.
The most likely scenario IF Apple decides to go after the emerging markets with a lost cost phone is to use the 3GS. They wouldn't need to do much to it to make it a $200 unsubsidized phone AND get great margins doing it. The phone probably costs around $100-$125 to produce now. No need for extra design time, testing, sourcing parts, manufacturing tooling, ramping etc…all of which costs money. Just make a few tweaks and it's good to go.
The smartphone market is quickly moving toward market saturation (particularly in the U.S. and parts of Europe). Many people who want a smartphone (and can afford the phone and monthly cost of the plan contract) already have one. It's not quite there yet, but it is coming quickly.
As the smartphone market reaches saturation, sales will not be able to keep pace with where they are at today. Apple can always continue to sell the latest iPhone model to current smartphone customers and try to convince users of other smartphone devices to switch, but the kind of sales expansion that has taken place to date will begin to dwindle.
Apple is likely looking for ways to keep the sales momentum going with a new product category -- expanding to people who would not buy the full iPhone (or could not afford the typical phone+contract plan monthly cost). This includes those in developing countries who typically purchase a phone at full cost (i.e., not subsidized by phone carrier). And hopefully those people once hooked will continue to buy other Apple products.
However, while they will address a different part of the phone market, my guess is they will still do it in a way that is completely Apple -- that will uphold their overall brand and will avoid cannibalizing their other products as much as possible.
Apple has to have a forward-looking approach for products or they will not be able to sustain the growth they have been experiencing in recent years. Shareholders expect it -- and the health of their future business depends on it. They know market saturation is coming and need to be a step ahead of it by expanding into other categories.
Businessweek is speculating that this phone could be $99 or $149. If there's any truth to that seems to me this would be a nano like phone with basic capabilities and probably no App Store. Seems a bit underwhelming to be honest.
Apple has made most of its money on the strength of its brand,i know people who have never used a iphone and assoicate it with quality, iv never drove a audi but i know its a quality car, once apple gets into the cheap phones games they are going to be in the same boat as samsung
If gaining market share is really that important, a better idea would be to knock off profit margin from the 4 and the 4S.
But the fact that the rumour says that Apple will create a cheaper phone with a larger display doesn't stack up quite well. It would mean making it out of Android-phone materials, which sounds unbelievable in the case of Apple.
Businessweek is speculating that this phone could be $99 or $149. If there's any truth to that seems to me this would be a nano like phone with basic capabilities and probably no App Store. Seems a bit underwhelming to be honest.
After looking at the article I think they meant subsidized price. There's no way Apple could make a phone that price. Even good flip phones cost $200+.
Anyway if that's the subsidized price that means the phone would still cost $550-600 assuming Apple retains their $450 subsidy.
But if its subsidized voice only, meaning it doesn't require a data plan, the actual price would be somewhere between $350-$400 (assuming a $250 subsidy) which I think would be more believable.
If Apple went with a Non-Retina display, it could easily attain larger/cheaper.
Not sure about this rumor -- but I'd do it just to grow market share. Sure the premium profits are nice -- but you've got to keep mindshare and we all know that the iTouch was a gateway device for other iDevices.
So by using the prior years state of the art (whatever surplus is on hand) and a plastic case, Apple can definitely have a cheaper larger phone. I don't think this would ruin the brand as long as it was sturdy.
Its a platform war. Forget present day profits. Apple wants to win, or maintain, its market share.
Actually it's a content war, of which platform is a part.
iTunes currently accounts for twice the profits of the entire iPod division, and will only continue to grow. If Apple sells less hardware (no matter the profit), they will sell less content, and that's the ultimate prize.
Apple goes out of its way to make sure customers can do whatever they need as easily as possible so that they retain their customers and tie them into their content service. They may not accept lower profit margins in general, but arguably they are subsidizing their software and services. If they charged a fair price for both hardware and software it would probably work out about the same as it does now.
But if Apple cannot attract new customers to the platform, then they can't lock them into their content and thus profits will eventually fall. I maintain that Android is catching up to Apple so quickly, especially if their UI patents keep getting thrown out, that Apple will eventually lose market share from less affluent users who chose cheaper Android phones in the beginning, and thus become invested in Android's content and ultimately see little difference between Android and Apple -- at least not enough to sacrifice their content investments, even when they can afford Apple's higher end products. If Apple isn't worried about this, then the investors are right to worry.
Comments
Quote:
Originally Posted by johnmcboston
We have previous versions of the iphone for $99. How cheap do you want? It's the phone plans that are killing us, not the cost of the phone. (Curious what the Tmobile plan will be with their unsubsidized iphone plans...)
Another American who doesn't understand the real price of the iPhone.
Quote:
Originally Posted by Michael Scrip
I think Apple has already proven that you can have a tiny percentage of market share... and still make crazy profits.
Why? Because Apple sells hardware. And for the time being... rather expensive hardware. That's where profits come from.
Android has 75% smartphone market share right now... but I have yet to see much good come from that.
There are so many Android phones out in the world. With all that market share... developers should be making more money from Android than iOS. And the Google music store should be selling more songs than iTunes. And Google should be making more money from ads on Android.
But they're not.
Again... I haven't seen the result of Android having all that market share. The platform isn't doing as well as you think it is... other than having that larger number on the market share chart. (which is really a false trophy)
Some say Android is "winning" the platform war.... but I have yet to see it.
You haven't seen it yet, you will when they are 90% and rising.
Those are all great points... but Apple's not exactly hurting because they are in 2nd place with 15% market share to Android's 75%.
It's not an "apples to apples" comparison anyway. Android is an OS... Apple sells hardware.
Oh really? Android already has 5 TIMES the market share of the iPhone. That's a huge disparity.
But like I said... Android's numbers look great on paper... but they aren't the clear winner by any means.
No doubt... and I meant no harm against people or Android as a platform.
But these are reports of Apple building a cheaper phone for developing markets... areas that are primarily served by $100 unlocked phones. Let's be honest... those aren't spectacular devices.
Quote:
Originally Posted by asdasd
Nonsense. In the absence of any 7 inch tablet competition there is no way that Apple would have introduced a 7 inch tablet. They reacted to competition there. Clearly. They don't have to match prices initially, but they will fall over time.
Its a platform war. Forget present day profits. Apple wants to win, or maintain, its market share.
I would bet that Apple doesn't have to drop its profits anywhere close to what the others do in order to sell more units.
Apple is winning by the way and you have to remember, if Tim Cook actually decides to chase a bit of market share then its my belief he could gut Samsung's sales in very little time. The caveat... it has to be done soon or Samsung will become too firmly entrenched.
[by the way... just as everyone is talking about the possibility of Apple introducing a cheap 5 inch phone, Sony brings out the Xperia Z... a 5 inch phone... true... but cheap... I sincerely doubt it.]
Quote:
Originally Posted by Tallest Skil
So leave the iPhone 4, free, with a Dock Connector, and replace the iPhone 4S, $99.
Uh, why keep the iP4 and replace the 4S with a new less expensive iPhone? That makes no sense.
If Apple releases a "less expensive" iPhone, it will replace the 4 and the 4S.
I guess you're suggesting the same scenario as the iPad Mini, keeping the iPad 2 around at a lower price?
But do we have hard data suggesting the iPhone 4 is the best selling iPhone? Not that I can recall reading.
Quote:
Has to be under $200 or it's a failure¡
People said the same thing when the iPad mini came out...
"if it's not under $199 for an iPad mini it's a FAIL".
Well, look what happened there.
Look what happened with the iPod Mini at first.
"who would by a iPod with significantly less storage and only $50 cheaper (than the standard iPod) that's much lighter and smaller?"
It became (after the Nano was released) the best selling iPod model to date.
I'm at the point where I hardly use my iPhone for anything more than quick glances and replies. I check email, reply to texts, I play games while waiting for a train or in transit, I listen to podcasts(no music), I check the weather, look at Maps for getting my bearings or look up movie times. That's about it. If i want to do something more complex, it's there, but I rarely use it. And I have my iPad for that. I don't really even use the phone all that much. Maybe 40min/mo. on average but I need a phone number for phone's sake. More like a feature-phone.
That's the real question. With Hardware advances being what they are, and Apple's strategies in quality and design...I don't see hardware being the differentiating factor between the iPhone and a rumored "less expensive" model. And if you make iOS less feature-rich, you're not saving any more money than just keeping the full iOS. So how would they make it "less expensive"? Carbon fiber or polycarbonate uni-body...maybe save a little, but not $200. Drop GPS, gyroscope, less expensive camera? That wouldn't go over well. Go back to the iP 3GS screen? At this point, i doubt it...perhaps a cut-down retina iPad screen.
All I know is I would actually welcome a "less expensive" iPhone since I would clearly be the target demo for it. Someone who just needs a phone for phone's sake, and few extra features that keeps it competitive with other lower priced feature phones. Almost like the Gen 1 iPhone but with today's tech.
Quote:
Originally Posted by asdasd
It isn't. Lets forensically analyze this:
Disadvantages of cheap iPhone:
1) It reduces margins.
Advantages of cheaper iPhones
1) It probably won't reduce over all profit as volume will compensate for margins.
2) It increases the market share of what is in fact a platform - iOS.
3) Multiple product upgrades a year allows Apple to compete with new Android models more rapidly.
4) It reduces the impact of bad quarters - those two quarters prior to the Big Launch of a new iPhone.
5) It reduces the risk of a bad, or mediocre, upgrade to the high end phone causing a collapse in revenue. ( think manufacturing snafus etc.)
6) It increases the number of people with 2 or more devices - which makes them much stickier see Seeking Alpha here. ( http://seekingalpha.com/article/1099961-apple-margin-pricing-and-product-strategy) [1]
7) It locks people into the system early and gets them for life ( at the cost of reduced margins now) - increasing Apples monetization of apps, videos and music over time, which is a growing component of Apple's business model ( see here: http://seekingalpha.com/article/1102111-app-monetization-drives-revenue-growth-for-apple).[2]
Since the disadvantage is in fact eliminated by the first advantage, there are really no dis-advantages.
[1] An important aspect of this user experience, at least for AAPL's economics, is that it extends over multiple products. The chart below, from a Goldman Sachs survey in May 2012, show the lift to loyalty if customers own multiple devices. Of the customers owning a single device, 62% say they are highly likely to purchase another AAPL device; this figure increases to 75% for customers who already own 2 or more devices.
[2] This huge number suggests that Apple is making considerable amount of money ($3 billion) by hosting these 775,000+ growing applications at its app store. This clearly shows a trend towards applications becoming the mainstay of Apple's flexing power. Though many of these apps are free, they feature advertisements, which generate revenue for both Apple and its developers. ( Thats just apps though, they also make money from videos, music, TV and Movies)
Great points, and many are likely the same that led Apple to diversify the iPod lineup nearly 10 years ago.
I don't think it's an "if" point anymore but a when and how, will they do it for the iPhone.
Quote:
Originally Posted by antkm1
People said the same thing when the iPad mini came out...
"if it's not under $199 for an iPad mini it's a FAIL".
Well, look what happened there.
Look what happened with the iPod Mini at first.
"who would by a iPod with significantly less storage and only $50 cheaper (than the standard iPod) that's much lighter and smaller?"
It became (after the Nano was released) the best selling iPod model to date.
Great points. That's why I don't think we're going to see plastic or low grade materials in the smaller iPhone. Apple will keep it premium and people will be willing to pay the premium price.
Quote:
Originally Posted by antkm1
Uh, why keep the iP4 and replace the 4S with a new less expensive iPhone? That makes no sense.
If Apple releases a "less expensive" iPhone, it will replace the 4 and the 4S.
I guess you're suggesting the same scenario as the iPad Mini, keeping the iPad 2 around at a lower price?
But do we have hard data suggesting the iPhone 4 is the best selling iPhone? Not that I can recall reading.
People said the same thing when the iPad mini came out...
"if it's not under $199 for an iPad mini it's a FAIL".
Well, look what happened there.
Look what happened with the iPod Mini at first.
"who would by a iPod with significantly less storage and only $50 cheaper (than the standard iPod) that's much lighter and smaller?"
It became (after the Nano was released) the best selling iPod model to date.
I'm at the point where I hardly use my iPhone for anything more than quick glances and replies. I check email, reply to texts, I play games while waiting for a train or in transit, I listen to podcasts(no music), I check the weather, look at Maps for getting my bearings or look up movie times. That's about it. If i want to do something more complex, it's there, but I rarely use it. And I have my iPad for that. I don't really even use the phone all that much. Maybe 40min/mo. on average but I need a phone number for phone's sake. More like a feature-phone.
That's the real question. With Hardware advances being what they are, and Apple's strategies in quality and design...I don't see hardware being the differentiating factor between the iPhone and a rumored "less expensive" model. And if you make iOS less feature-rich, you're not saving any more money than just keeping the full iOS. So how would they make it "less expensive"? Carbon fiber or polycarbonate uni-body...maybe save a little, but not $200. Drop GPS, gyroscope, less expensive camera? That wouldn't go over well. Go back to the iP 3GS screen? At this point, i doubt it...perhaps a cut-down retina iPad screen.
All I know is I would actually welcome a "less expensive" iPhone since I would clearly be the target demo for it. Someone who just needs a phone for phone's sake, and few extra features that keeps it competitive with other lower priced feature phones. Almost like the Gen 1 iPhone but with today's tech.
It would defiantly be a hard sale if they would hinder the OS, there really isn't much to take away feature wise anyway. I'm with you, I use my tablet a lot more then my phone, I would love to see the Mini get a GSM. The 3G model technically can be a phone it would just take some hacking. Asus has such a model the EeePad Memo, interesting idea, good luck finding one though. It has a second piece for phone calls and listening to music.
Next up: A cheaper Retina MacBook with a 17" display!
The most likely scenario IF Apple decides to go after the emerging markets with a lost cost phone is to use the 3GS. They wouldn't need to do much to it to make it a $200 unsubsidized phone AND get great margins doing it. The phone probably costs around $100-$125 to produce now. No need for extra design time, testing, sourcing parts, manufacturing tooling, ramping etc…all of which costs money. Just make a few tweaks and it's good to go.
It's a response to market saturation
The smartphone market is quickly moving toward market saturation (particularly in the U.S. and parts of Europe). Many people who want a smartphone (and can afford the phone and monthly cost of the plan contract) already have one. It's not quite there yet, but it is coming quickly.
As the smartphone market reaches saturation, sales will not be able to keep pace with where they are at today. Apple can always continue to sell the latest iPhone model to current smartphone customers and try to convince users of other smartphone devices to switch, but the kind of sales expansion that has taken place to date will begin to dwindle.
Apple is likely looking for ways to keep the sales momentum going with a new product category -- expanding to people who would not buy the full iPhone (or could not afford the typical phone+contract plan monthly cost). This includes those in developing countries who typically purchase a phone at full cost (i.e., not subsidized by phone carrier). And hopefully those people once hooked will continue to buy other Apple products.
However, while they will address a different part of the phone market, my guess is they will still do it in a way that is completely Apple -- that will uphold their overall brand and will avoid cannibalizing their other products as much as possible.
Apple has to have a forward-looking approach for products or they will not be able to sustain the growth they have been experiencing in recent years. Shareholders expect it -- and the health of their future business depends on it. They know market saturation is coming and need to be a step ahead of it by expanding into other categories.
Apple has made most of its money on the strength of its brand,i know people who have never used a iphone and assoicate it with quality, iv never drove a audi but i know its a quality car, once apple gets into the cheap phones games they are going to be in the same boat as samsung
If gaining market share is really that important, a better idea would be to knock off profit margin from the 4 and the 4S.
But the fact that the rumour says that Apple will create a cheaper phone with a larger display doesn't stack up quite well. It would mean making it out of Android-phone materials, which sounds unbelievable in the case of Apple.
Anyway if that's the subsidized price that means the phone would still cost $550-600 assuming Apple retains their $450 subsidy.
But if its subsidized voice only, meaning it doesn't require a data plan, the actual price would be somewhere between $350-$400 (assuming a $250 subsidy) which I think would be more believable.
Not sure about this rumor -- but I'd do it just to grow market share. Sure the premium profits are nice -- but you've got to keep mindshare and we all know that the iTouch was a gateway device for other iDevices.
So by using the prior years state of the art (whatever surplus is on hand) and a plastic case, Apple can definitely have a cheaper larger phone. I don't think this would ruin the brand as long as it was sturdy.
iTunes currently accounts for twice the profits of the entire iPod division, and will only continue to grow. If Apple sells less hardware (no matter the profit), they will sell less content, and that's the ultimate prize.
Apple goes out of its way to make sure customers can do whatever they need as easily as possible so that they retain their customers and tie them into their content service. They may not accept lower profit margins in general, but arguably they are subsidizing their software and services. If they charged a fair price for both hardware and software it would probably work out about the same as it does now.
But if Apple cannot attract new customers to the platform, then they can't lock them into their content and thus profits will eventually fall. I maintain that Android is catching up to Apple so quickly, especially if their UI patents keep getting thrown out, that Apple will eventually lose market share from less affluent users who chose cheaper Android phones in the beginning, and thus become invested in Android's content and ultimately see little difference between Android and Apple -- at least not enough to sacrifice their content investments, even when they can afford Apple's higher end products. If Apple isn't worried about this, then the investors are right to worry.