Cheap iPhone Rumor Returns

Like clockwork, rumors of a cheaper iPhone are back.

Citing a report in China Times, Boy Genius Report claims that Apple is working on a low-cost iPhone to compete with the cheapest Android smartphones. Apple will reportedly launch the low-end iPhone later this year, around the same time as the sixth-generation iPhone.

(BGR also uses the term “iPhone Nano”–a reference to earlier rumors of a smaller phone–but I don’t see any mention of that in the source material.)

In the United States, the iPhone 3GS is free with a two-year contract through AT&T, but an unlocked iPhone 3GS costs $375. in other countries, where carrier subsidies aren’t as prevalent, Apple may want to go cheaper.

Still, I have my doubts that Apple would launch a new, less expensive iPhone instead of simply lowering the price on existing models. There’s not much room to trim the specs on the iPhone 3GS except for storage space, and I can’t see Apple going lower than 8 GB anyway. Lowering screen resolution is out of the question because it would ruin the way apps run, and cutting back the processor would jeopardize the phone’s ability to run iOS 5 smoothly.

Come this fall, I wouldn’t be surprised to see the no-contract iPhone 3GS price hit $250 or less. At that point, the phone will be more than three years old, and a bad buy for most users. but for people who travel overseas a lot and want a low-cost smartphone with the ability to swap SIM cards, a cheap, unlocked iPhone could be quite the deal. You wouldn’t even have to trade a kidney to get one.