Is the iPhone about to get some competition - from itself?

Steve Ranger's Notebook: Why a cheaper iPhone 4 to partner the iPhone 5 makes sense...

Unveiling a cheaper version of the iPhone 4 alongside the iPhone 5 might make sense - especially when you look at the history of another big Apple product, says editor Steve Ranger.

That Apple may soon be launching a cheaper version of its iPhone 4 - as well as a brand-new iPhone 5 - might just make sense, especially considering the history of its other wildly successful product, the iPod.

Reuters has reported that Apple is preparing to release a cheaper iPhone 4 within weeks, with the company willing to sacrifice profit margin to grab lower-end customers from rivals in China and other emerging markets. The news agency said the 8GB iPhone 4 - a lower capacity than the existing 16GB and 32GB models - will be unveiled around the same time as the iPhone 5, possibly as soon as next month.

Of course, in the fog of rumour and conjecture that swirls around Apple - especially at this time of year when product launches are probably on the way - it's often hard to spot the real news among the speculation. But the timing for a new iPhone model seems about right, especially if you delve into the history books and take a look at Apple's strategy when it comes to releasing new iPod iterations.

The first iPod Classic launched in October 2001, the second in July 2002 and the third in April 2003.

And it was eight months after the third-generation iPod Classic appeared in April 2003 that the first iPod Mini arrived, in January 2004 - the first alternative model to the Classic. That launch was then followed by the iPod Shuffle in January 2005 and the iPod Touch in September 2007.

It's a straightforward model. Prove the concept with a premium product, then fill the gaps with variants. It could well be Apple intends to do the same with the iPhone.

It's now more than four years since the first iPhone was launched in June 2007, and there hasn't been an alternative version of the handset - although of course Apple has kept the 3GS in production instead of discontinuing it soon after the iPhone 4 came out.

Offering a cheaper version of the iPhone 4 would make sense, especially if it were launched at the same time as a clearly differentiated iPhone 5 - take our photo tour of the most wanted iPhone 5 features.

Of course, there is an element of risk here. By taking a step into the mid-market, Apple risks smaller margins and tough competition from the huge array of Android phones. And it would be competing with itself. In a tough economic climate, smartphone fans could choose the cheaper model over the premium device.

And a mid-market model could also affect perception of the iPhone brand too. Undoubtedly some of its cachet is to do with the premium pricing as well as the quality of the device.

Still, it makes sense for Apple to reach into new markets, especially growing ones. But it would be a strange change in strategy if Apple were to target such a phone only at emerging markets.

First, it's hard to see how it could create a quality iPhone product cheaply enough to be price-competitive in emerging markets and, secondly, it's hard to see how it could prevent this budget handset appearing in developed markets too. As such, any new iPhone 4 handset is unlikely to be targeted at a particular geography.

All of which raises another question: if Apple really is working on a cheaper iPhone 4, will it apply the same strategy to the iPad at some point down the line?

By Steve Ranger

Steve Ranger is the UK editor-in-chief of ZDNet and TechRepublic. An award-winning journalist, Steve writes about the intersection of technology, business and culture, and regularly appears on TV and radio discussing tech issues. Previously he was th...