Why Apple Could be Releasing an iPhone Nano this Fall

The idea of an iPhone nano has been debated since the device’s inception 4 years ago. Apple’s conquest of the mp3 player market with multiple iPod models has had many folks wondering if Apple was going to do the same thing with their smartphone line.

While most people scoff at the idea of Apple producing a cheap version of the popular iPhone, Horace Dediu of asymco seems to think otherwise. Apparently, Apple has plenty of reasons to manufacture an iPhone “nano.”

Nearly 5 billion reasons. Based on data published by the Deutsche Bank and the ITU, Dediu posted an article outlining several reasons why Apple is likely to release an iPhone nano soon. The largest factor seems to be the pre-paid market they are missing out on.

“Roughly 1.5 billion are post-paid and 3.7 billion are pre-paid. That means that nearly 70% of the world is not being addressed by the iPhone as it currently stands. Put another way, a shift in positioning might result in a 250% increase in addressable market.”

Apple is expected to eventually penetrate the remaining post-paid audiences, but what about pre-paid customers? Since pre-paid plans are generally non-contract, any serious attempt by Apple to invade that market would warrant a significantly less expensive iPhone model.

Let’s not forget the comments made by Apple’s COO earlier this year. In an interview with analyst Toni Sacconaghi, Tim Cook stated that Apple had “clever things” planned for the prepaid market. He also added that Apple didn’t want the iPhone to “just be for the rich.”

Then there is the maturity factor. Daring Fireball’s John Gruber said, “Examine the history of the iPod to see how this will play out.” Well the original iPod launched in 2001, and 4 years later Apple added the Shuffle and Nano models to its line of mp3 players.

Didn’t the iPhone launch in ’07? Apple’s been building iPhones for 4 years, and have a tremendous ecosystem in place with iOS. Add in iOS 5’s new no-need-for-a-computer design, and a cheaper iPhone for the pre-paid market starts to make sense.

We just covered a rumor yesterday that suggested that Apple would be releasing 2 iPhone models this fall, one of which is expected to be dramatically cheaper than previous models. I’m starting to think that this case could hold water.