For the last few years, whenever Apple introduced a new iPhone, it kept the previous generation (or previous two generations) available for sale at lower price points. Rumors this year point at lower cost (or plastic) iPhones that would change this strategy. I see at least a couple of reasons why having an updated iPhone to cover a lower price point makes sense.
When designing any hardware, the team must work under a set of constraints. These contraints change based on different factors: available technology, target usage, etc. This is why the iPod shuffle is so different to the iPod touch. Which leads me to my point: the set of constraints Apple used four years ago were those to have the best possible iPhone, not to have a two-generations-older-and-cheaper one. Were Apple to produce an iPhone today to be sold at a lower price point, would it use the same constraints during the design phase? I don’t think so. If we see the Mac or iPod product line, we can see different devices created with different constraints in mind, even if some factors such as portability are similar (see for example the 13 inch MacBook Pro with Retina Display and the 13 inch MacBook Air).
The question we should be asking ourselves is: what are the features that would make the cut if an entry level iPhone were to be designed today? I don’t know the answer, but it sure looks like the purportedly leaked plastic iPhones are a closer answer than the old iPhone 4.
Rapidly evolving technologies
Assuming the upgrade cycle of users is about two years1, a person who gets an iPhone 4 today will have in a year a device that was introduced almost four years before. In that period a lot of things progressed: we enjoy better wireless speeds, bigger screens, faster processors, more memory, a lightning connector, etc.
A wireless chip that provided LTE with acceptable battery life was bit available by the iPhone 4S time, but was a reality by the 5. Same for faster WiFi, Bluetooth 4.0 or better battery technology.
By having an iPhone product line Apple could better manage the update cycle of not only the top of the line device, but all of them, by doing incremental revisions to the hardware that take advantage of better technology available each year. This will produce a way better bottom of the line device than offering a few years old device, tied to past technology.
Even if the new entry level iPhone end up not being any cheaper2 than the two generations old device it might replace, it might certainly have advantages for its buyers, and will probably see a more regular update cycle, keeping the iPhone with the best available technology at all its price points.