Apple may launch cheaper iPhone model this year

By John
Liu

Bloomberg
News

Apple may
introduce a model of its iPhone this year that is 50 percent cheaper than the
handsets that went on sale in the

U.S. last month, JPMorgan Chase
& Co. analyst Kevin Chang said.

The new
model, based on Apple’s thin iPod Nano, may cost less than $300, Chang said
today by telephone from Taipei, citing a patent Apple filed in the U.S. and
components suppliers he declined to identify. Apple began sales of two iPhone
models priced at $499 and $599 on June 29.

A
lower-priced iPhone may win customers away from rivals Nokia and Motorola, with
Chang estimating Apple may ship as many as 40 million units of the new handset
in the fiscal year ending September 2008. Apple will probably sell the new
phone with several wireless carriers, unlike the five-year exclusive agreement
it has with AT&T for the current iPhone, Chang said.

“We’ll
see this new iPhone having a noticeable impact on the handset market,”
Chang said. The new model may be introduced as early as the fourth quarter, he
said.

Jill Tan,
a Hong Kong-based spokeswoman for Apple, declined to comment on the report.

JPMorgan
analyst Bill Shope in

New York,
who covers Apple, cautioned investors about Chang’s predictions.

“The
potential for a low-end, subsidized phone from Apple seems unlikely in the near
term,” Shope wrote in a separate report today. “Perhaps Apple will
choose to eventually replace its iPod family with phones over time, but it
could be premature to assume this will happen in volume any time soon.”

Apple may
release the next version of the iPhone in the first half of next year, Shope
said. It will still be “high- priced” and support so-called
third-generation networks for connecting to the Internet at faster speeds.

The new
iPhone model won’t have a touch screen like the current handset and will likely
be controlled by a scroll wheel similar to those used on Apple’s iPod music and
video players, Chang wrote in the report published Monday. It will also have
fewer functions, such as limited Internet browsing, he wrote.

Simpler
features would allow Apple to sell the handset with multiple carriers, as
operators won’t need to customize their wireless networks for the phone’s
services, Chang said. Subsidies provided by carriers may further lower the
price of the new model to as little as $99, he said.

Apple ran
out of iPhones at more than half its 164 stores less than a week after
introducing the handset, and AT&T said it sold out at its 1,800 outlets
within 24 hours. Apple said it is delivering iPhones to its stores and AT&T
shops every day.

Information
from Bloomberg News reporter Connie Guglielmo is included in this report.