Apple has amassed a remarkable share of the worldwide mobile market by essentially selling just one type of phone.
Yet Apple trails Samsung and No. 2 Nokia ( in market share. Both of those companies offer a wide range of devices, ranging from ultra high-end iPhone competitors to very low-end devices designed for customers in emerging markets. )
Apple still sells the two-year old iPhone 4 and year-old iPhone 4S for a discount. But they remain high-end smartphones that have not gained traction in some of the fastest-growing markets. The iPhone doesn't even crack the list of top five phones in China, for example, according to research firm Canalys.
Meanwhile, the iPhone is reaching a point of saturation in developed markets, as sales have slowed. That's why many Apple watchers believe the company will soon produce a low-cost iPhone to keep sales growing.
Some argue that would go against Apple's premium brand image, but Apple did launch a similar strategy for the iPod, developing the iPod Mini, Nano and Shuffle to appeal to a wider audience.
Laura DiDio, principal analyst at ITIC, said a cheaper iPhone is likely within the next six to eight months. "The competition in the smartphone market is simply too intense," she said.
Apple has a profit margin problem, as competition ramps up and customers switch to cheaper devices. The only way out is to innovate.