Ever since Apple introduced the original iPhone in 2007, it has adhered to a standard formula: Introduce one updated model the following year, discount the previous model and kill off models that are more than two year old. This year, Apple decided to shake things up by introducing two new iPhone models, discontinuing the iPhone 5, but keeping the 4S as free with a contract.
"In the past, when we've announced a new iPhone, we've lowered the price of the current iPhone making it even more accessible to more people. But this year, we're not going to do that," Tim Cook, Apple's CEO, said during the company's big iPhone event on Tuesday. "The business has become so large that this year we are going to replace the iPhone 5. And we are going to replace it with not one, but two new designs."
See also: How the Smartphone Market Has Changed Since the iPhone 5
There had been plenty of rumors leading up to the event that Apple would introduce a lower-cost model called the 5C in addition to updating the iPhone 5. The decision to kill off the iPhone 5 was a bit of a surprise, though it's reminiscent of how Apple handled its iPad product line late last year.
Still, it raises the obvious question: what does Apple gain from introducing the 5C that it wouldn't get from simply keeping the iPhone 5 and introducing the 5S. The short answer is that Apple now has a variety of colorful new phones that are more affordable at launch than any iPhone it has ever introduced , with the hope being that it will be able to attract a wider range of consumers.
"The broader the price range you can present to the market, the more people you are going to get," Van L. Baker, VP and research director with Gartner, told Mashable. Cook seemed to allude to this during the keynote, noting that multiple new iPhone models "allows us to serve even more customers."
While Apple continues to perform well in the high end of markets in the U.S. and elsewhere, the iPhone's share of the global smartphone market has declined year-over-year, according to IDC, as competitors have introduced more affordable alternatives for the low- and mid-tier market. For China in particular — a country that Apple expects to be its largest market one day — some analysts estimate Apple's share of the market has been halved as consumers there gravitate toward cheaper products.
A lower-cost iPhone would, in theory, help Apple attract more customers in China and other emerging markets, but analysts now question whether the price Apple set for it is low enough to really make a difference. According to Apple's website, the iPhone 5C starts at $99 with a contract and $549 without, compared to $199 for the 5S on contract and $649 without. Analysts and investors had been hoping the 5C would price in the $400-$500 range to be more competitive.

In China, the iPhone 5C starts at the equivalent of $733, or about $100 cheaper than the previous iPhone 5. That may attract some consumers who were on the fence, but Baker suggests the device won't be "market expanding" unless Apple can get it on China Mobile, the country's largest carrier, and knock the price down a bit. (It's also worth noting, as some have pointed out, that Apple is still advertising the iPhone 4 in China, which could prove to be a cheaper option for consumers in the country.)
"We would have liked to have seen something lower, but it will help," Baker says about the price of the iPhone 5C. "It will gain some additional market share, it's just a question of is it enough?"
Apple CEO Tim Cook opens the event.
Craig Federighi, senior vice president of software engineering, demonstrates iOS 7, Apple's forthcoming mobile operating system. Federighi announced it will be available for free Sept. 18.
The new device comes in five colors.
Philip W. Schiller, senior vice president of worldwide marketing at Apple, reveals the pricing for the iPhone 5C.
The new device comes in three colors.
Philip W. Schiller, senior vice president of worldwide marketing at Apple, reveals the iPhone 5S.
Schiller speaks about the iPhone 5S.
The iPhone 5S can scan your fingerprint.
The musician played his new song "Tripwire."
People arrive for the product announcement.
Members of the press await Apple's product announcement outside the company's Cupertino, Calif., headquarters
Image: Mashable