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Rumors of a Cheaper iPhone Resurface After Chinese Suppliers Hire More Workers

Bernice Napach
Daily Ticker
Rumors of a Cheaper iPhone Resurface After Chinese Suppliers Hire More Workers

Rumors are resurfacing that Apple (AAPL) will finally introduce a cheaper iPhone, likely sometime this fall.

Fueling the latest speculation: a Reuters report that Taiwanese electronics maker and Apple supplier Pegatron plans to boost its Chinese workforce by as much as 40% in the second half of the year. Pegatron CFO Charles Lin said 60% of company revenues would come in the second half of 2013, but he didn’t elaborate.

A cheaper iPhone is “very necessary,” says The Daily Ticker’s Henry Blodget. “If [Apple] wants to compete in China, India, Brazil -- places where $600 for a phone is just inconceivable especially without subsidies -- They’ve got to have a cheaper phone.”

Related: Apple Gearing Up to Launch New iPhone (Yawn)

U.S. customers typically pay $199 for the latest iPhone because cellphone carriers like Verizon Wireless (VZ) or AT&T (T) subsidize the purchase by roughly $400. Most foreign markets don’t have such subsidies.

But those markets will soon have a much cheaper smartphone. Nokia (NOK), a big player in the global smartphone market though not so much in the U.S., has just announced plans to sell a $99 smart phone in 90 countries starting in June. That will increase competition in the global smartphone market where Apple is already losing market share to Samsung's Galaxy phones.

Apple captured 57% of the global smartphone market in the first quarter of this year, down from 74% a year earlier. Samsung grabbed a 43% share, up from 23% from a year ago, according to the data from investment bank Canaacord Genuity.

Apple’s marketshare could fall even further if U.S. mobile carriers reduce or eliminate phone subsidies—another rumor that continues to surface especially after T-Mobile announced in March a contract-free plan for customers who buy full-priced phones.

Related: T-Mobile Drops Long-Term Contracts and Phone Subsidies: More than Just a Gimmick?

Blodget says Apple will never compete just on price but it will “come out with a cheaper phone.”

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