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The iPhone 5 Will Be Discontinued in September

The iPhone 5 will be discontinued next month. As CE: The Magazine reported back in July, the iPhone 5 as we currently know it will be replaced by a plastic iPhone, commonly referred to as the “iPhone 5C,” though that name has not been confirmed.

The rationale behind the cancellation of the iPhone 5 is twofold. First, the iPhone 5 and the plastic iPhone have the same internal components. The A6 processor, 1GB of RAM, and the 8MP camera are all found in the plastic iPhone. The only changes will be to the exterior. Apple would be hard-pressed to justify selling two versions of the same phone.

The primary reason for Apple’s shift from its usual approach of moving the previous years’ iPhone to a lower price point is its recent history with production constraints. Back in 2011, Apple experienced serious part constraints during and after the release of the iPhone 4S, due to the iPhone 4 using some of the same internals, and the same external parts. Apple executives believe they could have sold more units of the iPhone 4S, but were hindered by having to manufacture two iPhones that used nearly 60 percent of the same parts.

By discontinuing the iPhone 5, Apple removes most of their concerns over part constraints, and should meet all production quotas for the upcoming iPhone 5S. The plastic iPhone will take the place the iPhone 5 would have inherited after the release of the iPhone 5S, coming in at $99 with a two-year contract. Expect the plastic iPhone to land somewhere between $400-$500 unsubsidized. Apple’s margins should increase for on contract sales of the plastic iPhone, when compared to what they would have been if Apple shifted the iPhone 5 to the same price point.

The iPhone 4S, which will stay in production this year, will become free with a two-year contract, and should receive a significant drop on its unsubsidized price point, possibly to $300 off contract. This would make Apple a significant player in emerging markets, and strengthen its position in Asia.

Apple will announce the plastic iPhone and the iPhone 5S on September 10.