It looks like Apple's long-rumored low cost iPhone might finally be getting ready to enter production. Pegatron Corp., one of Cupertino's principle manufacturing contractors for the iPhone and iPad has said it intends to increase its workforce in China by as much as 40 percent.
Charles Lin, Pegatron's chief financial officer said the company planned to add the new employees in the second half of 2013. Pegatron says it anticipates generating 60 percent of its annual revenue in the second half - incidentally right around the time the low cost iPhone is expected to be launched.
Lin declined to tell Reuters whether the cheap iPhone was among the products Pegatron would be working on in the third quarter, but the news agency says that several suppliers have confirmed that Apple is designing a low cost iPhone targeted to lower-income markets.
"Making the cheaper iPhone will further help Pegatron's operating margin because its plastic casing is easier to make than iPhone 5's metal casing; this should ensure a good yield rate," Fubon Securities analyst Arthur Liao told Reuters.
We reported on low cost iPhone rumors previously - namely, that the alleged cheap iPhone might not be so cheap. The "cheap iPad" has a starting price of $329. Tack on a cellular radio, and the starting price for the low cost iPhone is likely to be around $350.
Apple CFO Peter Oppenheimer alluded to the company's pricing strategy in a recent earnings call:
"We are managing the business for the long term and are willing to trade off short-term profits where we see long term potential. The iPod is a great example of this. When we launched it in 2001, its margins were significantly below the margins of Apple as that time. Four years later, the iPod and iTunes music store comprised half of Apple's revenues and inspired us to build the iPhone.
Now the iPad mini is another great example. We have priced it aggressively and its margins are significantly below the corporate average. However, we believe deeply in the long-term potential of the tablet market and think that we've made a great strategic decision."
