Apple To Counter Android With Cheap iPhone Nano

Apple is secretly developing a smaller and cheaper version of its popular iPhone, as a way to head off the increasing threat posed by Android-based handsets.

This is according to Bloomberg, which cited people who had been briefed on the plans.

According to the report, one person who has seen a prototype and asked not to be identified, said that Apple is developing a cheaper and smaller device than the most recent iPhone, which it will sell for approximately £200 (£125), without obliging users to sign a two-year service contract.

No Home Button

At the moment, the iPhone 4 costs $200 to $300 when subsidised by a contract in the United States. In the UK, subsidised prices for the 32GB handset start from £60 pounds upwards, with a typical monthly contract of around £35 per month.

Interestingly, Bloomberg said that the prototype was about one-third smaller than the iPhone 4, and it had no “home” button.

This is not the first time that rumours have spread about Apple dropping the home button on its future devices. Last month for example, the blog Boy Genius Report suggested that Apple was dropping the home button for the next generation iPad 2. Users will instead apparently use multi-touch gestures to navigate to the home screen.

The Bloomberg report also indicates that Apple is working on a dual-mode phone, that will be capable of working with the world’s two main wireless standards, namely GSM and CDMA, although it is not clear yet if this capability will be available in the cheaper iPhone ‘nano’.

Universal SIM

The report also said that Apple is working on a universal SIM that will allow iPhone users to utilise any GSM network without having to switch the SIM cards that associate a phone with a particular network.

This is interesting, as in late October reports emerged that Apple was working with SIM card maker Gemalto to create a special proprietary SIM card for the iPhone 5.

Some thought this would mean Apple could then offer future versions of its mobile phones with an Apple contract, and cut out the mobile operators, providing its own SIM and activation, and giving more revenue to Apple.

But in November Apple ditched its proprietary SIM plan to bypass operators, apparently after operators warned Apple that they would refuse to continue subsidising the cost of its pricey phones.

Whatever the truth about these rumours, it is clear that Apple has the potential to offer up a cheaper alternative to its premium iPhone 4 handset, simply by reusing the processors, displays and other components currently utilised in its current handsets, instead of opting for the more advanced (and hence pricier) parts that will be in the iPhone 5.

Broader Appeal

At the moment, Apple’s iPhone is a premium device that tends to be focused on the high end customer market, but theoretically a cheaper ‘nano’ device would appeal to a wider customer base.

This is important as Apple is also facing increased competition. For example Canalys found recently that Android’s share of the global smartphone market more than tripled to 32.9 percent in the fourth quarter, eclipsing Apple’s 16 percent and overtaking Symbian. But Gartner found that, despite this, overall Symbian retained the leading spot (for the moment) ahead of Android.

And Apple is of course also facing a potential renewed threat from Microsoft, after the announcement that Nokia and Microsoft are to join forces in smartphone development, and Nokia will adopt Windows Phone 7 as its primary smartphone operating system.