Is the Wait for a Cheaper iPhone Ending Soon?

A cheaper iPhone that opens up attractive new growth opportunities in China and elsewhere around the world will be launched in 2013, according to Brian White at Topeka Capital Markets. The analyst wrote in a research note on Monday that Apple (NASDAQ:AAPL) was almost certain to unveil such a device around the mid-year mark.

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While rumors of a low-cost iPhone have been flying around for months now, the research firm discovered clues to the device from several unreleased iPhone prototypes last last year. “In late December, our research uncovered iPhones in different screen sizes for potential launch in May/June, allowing Apple to better bifurcate the market and pave the way for a lower-priced iPhone,” White wrote on Monday. “We are now confident that a lower-priced iPhone will be launched by Apple in 2013, possibly as early as June.”

The analyst added that the device may be named iPhone mini or iPhone Air given its lighter weight because of its plastic casing.

With an expected price range between $250 and $300, the device would open up a “new world” for Apple and allow it to make a larger market impact in China than ever before.

“We believe a $250 to $300 price point for a lower-priced iPhone would make sense and 58 percent below the $649 price point for an unlocked 16GB iPhone 5,” White wrote. “A $250-$300 price range would also be competitive with China-based Xiaomi that offers a high-end phone experience at a mid- range price of ~$320 in China.”

The phone could also do well in other countries with massive untapped potential, such as Brazil, Russia, and India. According to White, Apple was unable to address at least 60 percent of the smartphone market last year due to the high price point of the iPhone. With a high percentage of the annual smartphone unit growth of 688 million between 2012 and 2016 units likely to come from outside of the high-end market, Apple needed this phone.

And while the device was likely to have margins that are 10 to 15 percentage points lower that the current iPhone, they would still be above corporate average in volume. Apple would make hardware changes to support the lowered price. “The case would be an interesting area of cost savings with a lower priced material (e.g., plastic) versus the aluminum unibody casing on the iPhone 5, while adding colors to excite consumers,” White wrote.

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The analyst, who has a Buy rating and an $888 price target on Apple, also predicted the device would act as a catalyst for a new iPhone partnership with China Mobile (NYSE:CHL), the word’s largest wireless provider by number of subscribers.

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