Analysts bet on a budget iPhone

A smaller Apple iPhone aimed at budget shoppers could be just around the corner, according to new research from industry experts.

Analysts from Strategy Analytics, Topeka Markets, Jefferies & Co and Telsyte speculate that a midrange Apple iPhone -- speculatively titled the 'iPhone Mini' -- is likely to be announced by the Cupertino tech giant in a bid to compete with cheaper Android offerings.

The estimated timeframe for the new device range from mid-2013 to 2016.

Strategy Analytics was the most conservative:

"The iPhone 5 is growing fast and profitably right now, so there is little incentive for Apple to launch an 'iPhone Mini' this year," said Neil Mawston, executive director at Strategy Analytics, in an email interview with Reuters.

"We think Apple will have to launch an 'iPhone Mini' at some point over the next three years."

Topeka Markets analyst Brian White believes a smaller, low-cost iPhone could land as early as June 2013. He also predicts the device will come in a variety of different colours.    

"The next iPhone [will offer] different screen sizes that we believe will allow Apple to better bifurcate the market and expand its reach," White wrote in a research report published last week.

"This eventually opens up the possibility for a lower-priced iPhone (i.e., iPhone mini) with a smaller screen size." 

These claims were echoed by an earlier research report from Jefferies' analyst Peter Misek, which states that a low-cost iPhone is awaiting production approval from Apple. 

"Our checks indicate that the next iPhone will have more choices for customers," Misek said in his report.

"This entails an expansion in both the color patterns and screen sizes with the next iPhone that we currently believe will be launched in May/June with certain supply production starting in March/April."

Telsyte research director Foad Fadaghi is betting on a cheaper iPhone device to be announced in the first half of the year.

"For Apple to be effective in this segment it needs to come to market soon with a Mini or other similar type product," Fadaghi told iTnews. 

"It probably can't wait around too long because the Android players in that space are moving very quickly and are taking up a lot of market share. The opportunity is really right now – I'd assume within the next six months we will probably see some sort of lower-cost iPhone model available. 

"It comes down to Apple being adaptive to market conditions and addressing the opportunity outside the premium market," Fadaghi said.

"In the past, Apple has tried to address that market with older models at lower prices. But this strategy probably has to be adjusted."

Any shortfalls in hardware margins could be compensated from gains in sales of digital content, he said.

"Apple makes a lot of money from selling digital content; the more users it has, the better opportunity it has to make revenue from apps and also retain developers and the other ecosystem players it's built up over the years."     

Fadaghi said he expected the device to be in the "$200-$300 price category" in the US, and "maybe $100 more" in Australia.

"This pricing is typical of what you'd expect from a budget-conscious smartphone."

"I don’t think Apple is at risk of losing market share by bringing out a downmarket product. It's proven it can do that successfully in other markets, such as tablets with the iPad Mini and MP3 players with the iPod Nano. So is had experience addressing different market segments with different products without cannibalising sales of its premium products.

"It's unlikely that a low-cost iPhone would have 4G for example, or an expensive larger screen or high capacity storage. If some of those costs can be taken out, you can begin to approach the pre-paid market as well as the direct product market which it can sell through its own stores."