Apple's Cheap iPhone Reportedly Confirmed by Parts Supplier

All signs indicate that Apple AAPL is finally developing a lower-cost iPhone that will reduce the contract-free price by as much as 50 percent. According to ETrade Supply, Apple has confirmed that a lower-priced iPhone is being developed. "When something is happening in the cell phone business, we here at ETrade Supply are often the first to know," ETrade Supply wrote in a news post. "You may remember 11 months ago, we showed you the first real images of the iPhone 5, or three months ago the first parts from the Blackberry BBRY Z10. Well, we just heard 'on the wind' confirmation that Apple will in fact be releasing lower-end models." How could ETrade Supply be privy to information that no one else has? According to the company's website, ETrade Supply is a "global, vertically integrated, post sales consumer electronics solutions provider." The company "maintains facilities dedicated to OEM new, OEM reclaimed, and contract production of consumer electronics repair parts." This is not the first time that a low-cost iPhone was said to have been confirmed by Apple. In January, tech bloggers had a field day after a Reuters pulled a story (in which Phil Schiller, Apple's Senior VP of Worldwide Marketing, claimed that Apple would not develop a cheap iPhone) from its website. This made it appear that Apple was developing a lower-cost iPhone. While the Mac maker was also believed to be building an iPhone Mini, the company is now reportedly focused on reducing costs for the existing iPhone format. This means that the screen size, resolution and processor speed may be very similar to what consumers already receive when buying the current-generation iPhone. Other features -- such as the body, the way parts are laid out internally, the weight and thickness of the device, etc. -- will be tweaked to make up the difference. With a rumored price point of $350 to $400, the cheap iPhone could still be very expensive. However, it would be notably cheaper than the iPhone 5, which carries a starting price of $649. According to IHS iSuppli, Apple can produce that model for $207 -- just $19 more than the iPhone 4S. This cost is relatively low considering the high price point. It is even lower when investors read all the reports about how difficult the iPhone 5 was to manufacture. While that may be true, the increased difficulty only added $19 to the expense. If Apple intends to sell a new iPhone (of any type) for $400 or less, the company may aim to cut production costs by roughly $80 to $100. That could be difficult even if cheaper parts are being used. Louis Bedigian is the Senior Tech Analyst and Features Writer of Benzinga. You can reach him at 248-636-1322 or louis(at)benzingapro(dot)com. Follow him @LouisBedigianBZ