Apple Would Be "Insane" To Build A Cheap iPhone

So says Charlie Wolf at least, and he goes into detail to show why. Thing is, he's right as far as he goes: For Apple to try to build iPhones the way it currently does and sell them on low-or-no contracts would be preposterous.

This, however, is the same kind of thinking that led people back in 2004 to say Apple couldn't make and sell a low-cost flash-memory-based iPod (shortly before the iPod Shuffle appeared). It's also why Apple said it didn't know how to make a $500 computer that wasn't "a piece of junk", but could build the iPad.

Apple has a way of rethinking what's needed at a particular price point and building the right product to meet those needs. 

Wolf's thesis was presented on Wednesday in a note to investors, a copy of which was provided to AppleInsider. In it, the analyst went as far as to say that building a cheap iPhone to capture the low end of the smartphone market would be an "insane idea" for Apple, destroying the company's gross profits seen in its current strategy.

For example, to hit the so-called "sweet spot" of smartphone pricing in emerging markets, Apple would have to price a hypothetical cheap iPhone at around $350 without a carrier contract subsidy. If Apple were to target a hypothetical 40 percent gross margin with such a product, Wolf's estimates suggest the cheap iPhone would need a bill of materials at around $90 — or less than half the bill-of-materials cost of high-end iPhones.