Apple rejects 'cheap' iPhone

Phil Schiller’s comments to the Shanghai Evening News follow soon after reports from The Wall Street Journal and Bloomberg - both regular conduits for genuine leaks about forthcoming Apple products - that said a cheaper iPhone was in the works.

“Every product that Apple creates, we consider using only the best technology available,” he said.

“This includes the production pipeline, the Retina display, the unibody design, to provide the best product to the market.”

Analysts have said Apple should offer a smartphone at a lower price to increase its share of the booming Chinese market, which has been falling under pressure from a slew of cheap, low-margin Android devices from domestic manufacturers. IDC said in December the American firm had slipped to sixth biggest smartphone maker in China, with less than 10 per cent of the market.

Mr Schiller, who is Apple’s second most powerful executive, after chief executive Tim Cook, acknowledged the trends in China.

“At first, non-smartphones were popular in the Chinese market, now cheap smartphones are more popular and non-smartphones are out,” he said.

But he rejected calls for Apple to make a “cheap” iPhone, saying that “despite the popularity of cheap smartphones, this will never be the future of Apple’s products.”

“In fact, although Apple’s market share of smartphones is just about 20 per cent, we own the 75 per cent of the profit.”

China is nevertheless seen as a weak spot for Apple by investors. When it introduced the iPhone 5 there in December, it was forced to issue an unusual announcement of strong sales to counter negative reports that Apple Stores had failed to attract customary crowds.

While appearing to make a smaller, cheaper iPhone less likely, Apple watchers have insisted Mr Schiller’s comments do not amount to a denial of The Wall Street Journal’s and Bloomberg’s reports that one is in development. Instead, his message was consistent with Apple’s strategy of never making price the main selling point of its products, many claimed.

“A cheaper iPhone may indeed be cheaper than what we're used to, but it's unlikely to end up being what Apple considers to be ‘cheap’,” wrote Jacqui Cheng of Ars Technica.

“Another way of looking at it is this: the iPod nano is cheaper than the iPod, but it's not a ‘cheap’ product.”

It has been reported that Mr Schiller and Mr Cook are visiting China in the hope of making a distribution deal with China Mobile, by far the country’s largest operator, with 700 million subscribers.

Mr Cook told the official news agency Xinhua he expected to see growth for Apple in China.

"China is currently our second largest market. I believe it will become our first. I believe strongly that it will," he said.