Report: Apple to start producing new iPhone during Q2

Apple (NASDAQ:AAPL) expects to start producing the next version of the iPhone during this quarter, potentially setting up a summer launch of the gadget, according to a Wall Street Journal report. The report, which cited unnamed sources familiar with the device's production, said the new iPhone will be similar in size and shape to the iPhone 5.

Apple declined to comment, according to the Journal.

The timing of the launch is notable; Apple launched the iPhone 5 in the fall of last year, and a summer launch of the next iPhone could indicate Apple is not prepared to wait a full year between its iPhone launches, as it has done previously. The accelerated timing could be an effort by the company to juice its revenues; Wall Street generally expects Apple to report a slowdown in sales during the first three months of this year.

The WSJ report also noted that Apple is still working on a cheaper version of the iPhone that could be launched as soon as the second half of this year, and which may use a different casing and different-colored shells. Apple is also expected to ship the next version of its iOS software around midyear, the report said.

Many analysts have said Apple needs to build a cheaper iPhone and is essentially leaving too much money on the table by not doing so. "We believe a product that addresses the more than 70 percent of global wireless subscribers that are unsubsidized pre-paid is necessary in order for Apple to grow its EPS next year," BTIG analyst Walter Piecyk wrote last month. "This is not rocket science and our belief is based on basic logic, not questionable 'channel checks' or trips to Asia."

"A low-priced phone is also necessary to drive the market share that more fully opens up the opportunities that exist in payments and local commerce," Piecyk wrote. "If the management team has been more open to talk about payments in investor meetings they should also be looking to expand market share of their products."

Samsung Electronics catapulted itself into the world's largest handset maker and smartphone maker largely on the strength of its flagship Galaxy S Android line (and will introduce its new Galaxy S4 by the end of the month). However, Samsung also sells smartphones at a wide range of price points.   

Apple CEO Tim Cook said at an investor conference in February that he thinks the global smartphone market will continue to grow significantly over the next few years and that Apple's iPhone business will benefit from that. However, Cook did not directly address whether Apple will introduce a cheaper iPhone for emerging markets, but he said the company will continue to make great products. He said "the only thing we'll never do is make a crappy product."

Apple generally has focused on selling products that carry a high margin rather than selling cheaper products in a play for more market share.

Meanwhile, insiders say Apple is scrambling to finalize the next version of its iOS mobile operating system in time for its annual Worldwide Developers Conference, scheduled for mid-June. "What I've heard: iOS 7 is running behind, and engineers have been pulled from [Mac] OS X 10.9 to work on it," Silicon Valley insider John Gruber wrote on his Daring Fireball blog. Gruber notes Apple has previously shifted engineering resources in order to meet deadlines: In 2007, the company delayed the release of Mac OS X 10.5 Leopard by four months in order to ship the first iPhone on time.

For more:
- see this WSJ article (sub. req.)
- see this BTIG blog post (reg. req.)
- see this FierceMobileContent article

Related Articles:
Apple launches site to tout iPhone as Samsung unleashes Galaxy S4
Apple's Cook: Smartphone market is 'a wide-open field'
Report: Smartphones still have room to grow in Brazil, India and Russia
Analysts: Apple grabs top U.S. handset spot in Q4
Rumor Mill: Apple to make cheaper iPhone that will look like a plastic iPhone 5
Analysts: Samsung maintains handset lead in Q4, but slowdown may be coming
Apple sells 47.8M iPhones, 22.9M iPads, misses analyst estimates

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