It seems to me that instead of incurring the expense of manufacturing a whole separate model, Apple could more cost effectively sell refurbs or legacy phones.
Refurbished phones cost more to build than brand new ones (Apple builds a new phone at full cost, something happens, Apple refurbishes the phone at extra cost). And what makes you think that legacy phones are cheaper to build? Building a first generation iPhone wouldn't be any cheaper than it was in 2007. You'd need a complete redesign to actually reduce the cost.
Personally, I think most people simply aren't as technologically inclined as you or I and wouldn't know the difference between all the iPhone models. Most people shop on price alone and don't care how much more feature-rich an iPhone 5 is compared to a 4 or 4S.
If you visit
www.o2.co.uk and check the price for an iPhone 4 or 4S, you get the shock of your life. Either the people setting their prices have not the slightest clue at maths, or they are intentionally trying to rip off people who want to save money by not buying the latest phone, or they intentionally want to keep you away from the iPhone 4 and 4S. If you _carefully_ compare their prices (which is hard because they make them as difficult to compare as possible), you'll find that at this company, the iPhone 5 is actually the cheapest iPhone.
(They also offer the iPhone 5 at different initial prices and different monthly prices - if you pay £50 more for the phone, you save £5 per month for 24 months. Which adds up to £120, so by trying to save £50 you pay £70 more. )
BUT most people I know don't complain about the cost of the iPhone, they just don't want to pay for the data plan for the phone. Which is probably the same for most smart phones but they don't want to add it to the phone if they don't already have it.
At O2, if you carefully check the prices, iPhone 5 ends up costing about £22 per month for the phone and £13 per month for the service (unlimited calls, unlimited text, 1 GB data) over two years, so it is very much the cost of the phone. Of course the company hides that by putting most of the cost of the phone into their contracts. And they probably hope that you don't switch to a cheaper contract after two years when the phone is paid. They make it actually very, very hard to find cheaper contracts.
on a subsidized contract. the cost of the phone still reminds roughly $450 or whatever it is.
Some people will never get that. An iPhone costs exactly what Apple charges on their store. In the USA, $649, $749 or $849 plus tax, depending on memory. That's what you pay. The seller may be hiding this buy putting the cost or most of the cost into the monthly payment, but the full price is what you pay.
So if a 16GB iPhone 5 is offered for $x for the phone and $y per month on a 24 month contract, here is how you calculate it correctly:
1. You pay $649 for the phone.
2. You are given a loan (not a subsidy) of $649 - $x, which you pay off over 24 months at ($649 - $x) / 24 per month.
3. The service therefore costs $y - ($649 - $x) / 24 per month.
4. The phone costs you $649 / 24 = $27 per month.
