For months now we’ve heard rumors suggesting that Apple is secretly preparing a new entry-level version of the iPhone, christened by the press and industry pundits as the iPhone Nano. There are good reasons for Apple to launch such a device, not the least of which is that consumers have less money to spend due to the current state of the economy. Another good reason is that the iPhone is now available in over 70 countries worldwide, including many emerging markets. One such example is Egypt, where the average monthly salary is less than $200—the current price of an 8GB iPhone 3G. A lowerpriced version of the iPhone could help raise Apple’s market share in these countries.

The price difference could be a major sales point for the iPhone Nano. Mike Abramsky, an analyst with RBC Capital Markets, estimates that the cost of the device would be between under $100 with a signed contract. Gene Munster, a senior research analyst with Piper Jaffray, thinks that it would cost between $99 and $149, but that it might also be available on both prepaid and low-cost contract terms. According to Mr. Abramsky, the iPhone Nano “…addresses a global opportunity three to four times as large as iPhone 3G.”

As for the expected features, Mr. Munster believes that theiPhone Nano will have a slider keyboard to facilitate typing. Mr. Abramsky thinks that the iPhone Nano will lack the ability to connect to mobile wireless data networks, relying instead on Wi-Fi for Internet access. If true, the lack of cellular data capability would lower the monthly service bill because customers would not need to sign up for expensive data plans. Another thing that might lower the cost is using less expensive components. Intel is due to launch two new chipsets for mobile devices—the Intel Atom and the Intel Silverthorne—sometime in mid-2009. These chips are supposed to provide greater processing power at a lower price. If Apple decided to go with one of these chipsets—a high ranking Intel Germany executive is rumored to have said they will—it would allow them to drop the price of newer versions of the iPhone. However, Apple is currently using ARM chipsets in the iPhone 3G, and it has recently acquired a chipset designing firm PI semiconductors, so the above is speculative.

Mums the word!

For months now, Apple kept mum about the iPhone Nano and completely ignored these rumors. In fact, during Apple’s quarterly earnings conference call in January 2009 Apple’s COO Tim Cook stated that “We’re not going to play in the low-end voice phone business. That’s not who we are. It’s not why we’re here. We’ll let somebody else do that. Our objective is not to be the unit share leader in the cell phone industry. It’s to build the world’s best phones.” That doesn’t sound very encouraging!

However, in the same conference call he said: “The fear that …everyone has in this market, is that the economy may slow the adoption rate of smartphones, because smartphones generally command higher monthly fees and that may keep some customers from signing up for higher priced contracts.” One way to lower these monthly fees would be to produce an iPhone without broadband cellular data capability, as Mr. Abramsky predicted.

Are all these respectable analysts wrong? Is Apple going to produce the iPhone Nano? Will we all be on food stamps by the time it arrives? The jury is still out!

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