Is a Low-cost iPhone a Bad Idea?

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Though rumors and speculation point to Apple (NASDAQ:AAPL) launching a low-cost iPhone sometime in the near future, it may never happen. But investors shouldn’t worry; that might just be the best outcome for the company.

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Apple has long been known for having high premiums on its devices, a characteristic that has lead to high profit margins, which, in turn, has surely enticed a large number of investors. However, those premiums only work if people were willing to pay them. As competition to Apple’s iPhone and the dominance of its operating system strengthened from Google’s (NASDAQ:GOOG) Android and the plethora of Android-powered devices last year, Apple ran into trouble.

Not all Android devices are priced low — some have comparable prices to Apple’s iPhones — but a good number of them have prices well below that of an iPhone, and they often feature similar tech specs. This reality makes a lot of Android devices appealing to people cautiously testing the water of smartphones without diving in head first. The low-cost devices powered by Android may have pulled a number of potential customers away from Apple.

Many have suggested that Apple will be working on an iPhone that can compete with Android by offering a lower-priced alternative that will be more accessible to people who aren’t ready for the monetary commitment the latest and greatest iPhone requires. But, it may never come to fruition…

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