I think the key is, that these phones are for "developing countries". So, we would not see it in Europe, North America, and other developed countries, but in places like South America, Asia and such that price point is an issue.
This makes sense. Selling a cheap iPhone (besides the 4s) in the US, or UK does not.
Aw man - can't Apple just license iOS to one of the cheap asian knockoff companies. They can make money on the iOS and appstore and not even have to manufacture a phone 😉