Rumors about Apple building a 4GB iPhone ain't that fresh. However, according to an UBS analyst Maynard Um, supply chain checks suggest that Apple is building an iPhone with 4GB of memory. So, these rumors can pretty well turn into reality. But wait, does it make sense to introduce a 4GB model?
The only reason why a company can offer a slightly cut down product is to sell it at a lower price. In terms of costs, there shall not be a big difference between pouring in 4GB of memory instead of 8GB. After all, memory is not that expensive today. Let's speculate, what a possible price difference can be between the currently available 8GB and the rumored 4GB models. Can it be $10 or maybe $50? Slight difference makes no sense. Considerable difference is even bigger nonsense because this decision would cannibalize the current offering. I am confident Apple won't do that. So, we can logically conclude that the average price of both the 8GB and 16GB models will go down. iPod Touch shall get cheaper as well.
In the end, it makes sense to introduce the third (4GB) model and at the same time cut prices on the current models. After all, in terms of contract revenues, it does not matter whether a 4GB, 8GB or a 16GB model is sold.