“Apple has never shied away from cannibalizing its own business, typically with good results. With a new, lower-priced iPhone, it can build on that track record,” Rolfe Winkler reports for The Wall Street Journal.

“The company is working on such a device, according to The Wall Street Journal,” Winkler reports. “The reason: While its flagship iPhone remains a top seller among high-value mobile subscribers world-wide, the company has mostly left the lower end of the market to cheaper devices from Samsung and a handful of others running Google’s Android mobile operating system. In the year through September, Apple’s share of world-wide smartphone-unit sales was 20%, versus 63% for Android, estimates Strategy Analytics.”

Winkler reports, “Even as such a move risks cutting into Apple’s stellar gross margins from iPhone sales, the opportunity to attract more users to its platform may be more important in the long run. As incomes rise in China, for instance, many of those buying a cheaper iPhone today might graduate to more expensive iPhones later. Meanwhile, once on the Apple platform, they may also be more inclined to buy an iPad or a Mac.”

Read more in the full article here.

MacDailyNews Take: Why cannibalize if you don’t need to? Eat the iPhone wannabes’ lunches instead. As we wrote earlier today:

The trick – and it’s not too difficult – will be for Apple to make a pre-paid iPhone model that will delight customers in emerging markets, but not entice many current iPhone users.

Apple can do this by delineating the models based on screen sizes and, to a lesser extent, resolution (Retina displays) and/or features (for example: Siri).

Imagine a modern day 3.5-inch iPhone 3GS (with a faster processor, better battery, thinner screen, thinner and lighter body) as the pre-paid iPhone and an iPhone family for carrier-subsidized markets that features screens from 4-inches and larger with Retina displays, state-of-the-art cases (Liquidmetal?), Siri, etc. There would be little cannibalization to worry about with such a clear-cut delineation between flagship iPhones (“iPhone Pro”) and pre-paid models (“iPhone Mini” – don’t call it “iPhone Air,” that would give it too much cachet).

Related articles:
Cheaper iPhone could boost Apple’s market share but ding margins – January 9, 2013
Gene Munster: 60-70% chance Apple debuts $199 iPhone for emerging markets – January 9, 2013
Bloomberg: Apple developing cheaper, smaller iPhone for 2013 holiday release – January 9, 2013
WSJ: Apple prepping less-expensive iPhone – January 8, 2013
Apple to launch low-cost iPhone with 5-inch display for emerging markets in 2H13, sources say – January 8, 2013
Barclays: Cheaper iPhone for emerging markets ‘key’ for Apple – December 4, 2012