Why Cheaper Apple iPhone Will be a Threat to Android, Windows Phones

Apple Inc. fans have been waiting and expecting the company to showcase the most anticipated smartphone iPhone 5 Tuesday. The Apple's Let's Talk iPhone event is just hours away.

Most of the features of iPhone 5 are attributed to the realm of rumors but some are more likely to be in the phone than others. It is for sure that the smartphone will have the latest iOS 5 operating system, the A5 processor found in the iPad 2, an 8-megapixel camera and a slimmer and thinner design.

Apple has been dominating the high-end smartphone market which Google Inc.'s Android and Microsoft's Windows Phone 7 haven't been able to defeat.

Android completely dominates the low-end smartphone segment with budget devices. Microsoft is also expected to launch multiple new smartphones with its partnerships with Nokia Corp., HTC and Samsung in the low-end smartphone segment soon.

Speculations suggest that Apple might launch not one but two new iPhones -- iPhone 4S and iPhone 5 -- at the event. The iPhone 4S model is expected to have some improvements and could be a refreshed version of the iPhone 4.

Added to that, the iPhone 4S is expected to be priced at a much cheaper price than the typical new device pricing. If iPhone 4S comes with a cheaper price tag, it could end up snatching market share from the Android and Windows Phones.

In late June, Deutsche Bank analyst Chris Whitmore said the iPhone 4S features minor upgrades, and is expected to sell for $350 without a contract. He said the iPhone 5 will reportedly offer a new body style, an upgraded 8-megapixel camera and a higher price tag.

The iPhone 5 is expected to be a completely new device with much better specifications than the iPhone 4.

However, if Apple does launch two new iPhones at the event, it can continue to cater to its existing customers with the iPhone 5 and also gain additional cost-conscious customers who want a cheaper iPhone with the iPhone 4S, stock analysis firm Trefis wrote in a note to clients.

Apple offers a more mature platform with many more apps and games than the Android or Windows Phone. So with a cheaper iPhone, Apple could compensate gross iPhone hardware margins with the growth in total units sold.

Trefis expects that if Apple were to launch a new, inexpensive iPhone variant, many customers who currently buy Android and Windows Phone smartphones just because they are cheaper would switch to the iPhone.

It could also help Apple break into the emerging markets like India and China where the iPhone is priced much higher than comparable Android or Windows Phone devices, and gain a significant amount of market share at the expense of Android and Windows Phone.

According to Jefferies analyst, Peter Misek, Apple will make 35 to 40 million iPhones in the calendar fourth quarter, while shipments are expected to be 26 million. He also said Apple would make far in excess of 100 million iPhones compared with his estimate of 115 million.