A cheaper iPhone has been discussed almost since the original launch in 2007, but we believe costs have fallen and the market developed to the point that it now makes sense for Apple to offer a $200-$300 (unsubsidised) model. We see a positive but fairly small financial impact on Apple. The key benefit would be defensive: by extending the ecosystem and preserving iOS as developers’ first choice, Apple would secure the whole portfolio. We believe a well-executed and distributed $200-$300 iPhone would sell double-digit millions of units – a significant challenge to Android OEMs and Google. However, the US market’s pricing structure might limit the impact there.