From Fortune:

Tran says that [Android] phones made from the BCM2157 chipset will retail for under $100 and may dip as low as $75. Those devices should debut in just 3-6 months (and we might hear about them next month at CES).

That means that popular pre-paid Android devices that currently can be found as low as $180 will drop by half in the next half year.

Apple’s low-end strategy so far has been to offer the last year’s model for $99 with a two year contract.  That contract is at least worth $350 (AT&T’s ETF) which puts old retail iPhones at $450. Buying an iPhone 4 off contract costs $650.

What’s more important is that with Apple’s AT&T agreement, you have exactly one data plan option in the US (soon to grow).  Even with Verizon and maybe even Sprint and T-Mobile, there isn’t going to be a $25/month data plan for the iPhone anytime soon.  For the budget conscious, Android is the only smartphone game in town.

So how does Apple respond?

Does Apple build an iPhone based on one of these cheap chipsets?  “The iPhone mini” rumor has been around for years.  But I don’t see Apple joining up with this low margin game any time soon.

MG Siegler at TechCrunch says:

And so the only way for the iPhone to “beat” Android would be for Apple to either open iOS up in the same way that Android is, or to create a huge variety of iPhones spread across the spectrum in terms of features and price. Neither of those things is going to happen.

So it goes. Clearly Apple can’t play this game, nor do they have any interest in serving the budget-minded sector.  Can you imagine an iPhone manufactured for even $200?  Seems impossible to me, at least in the next few years.

It’s painful to repeat, but yes this does bear some resemblance to the Mac/PC wars, except I’d note that the huge difference between the current Mac vs. PC landscape vs. the one that Steve Jobs inherited in 1997.

In 1997, Apple was a few months from bankruptcy.  There was a question of the relevancy of the Mac.  Luckily, Jony Ive’s iMac, Steve Jobs’ salesmanship and leadership and the platform agnostic Internet came to the rescue.

Now there is a lively Mac development community, sales numbers have outpaced the greater PC market for years and no one is questioning whether the Mac is still a viable platform.  Apple practically prints money with its Mac line.

I think if we are just talking about numbers, Android phones will outnumber iPhone.  In fact, it is pretty apparent they already do. There might one day even be more apps available for Android than iOS.  But the iPhone is still the better experience and has a big, passionate following.  Apple is also evolving the iOS to new forms including the AppleTV and iPad.

I expect to see a wearable computer from Apple in the next two years which might change the game again.

But in the meantime, how does Apple respond?

They don’t.

Android will indeed explode and that’s ok, Apple will be fine.

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