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Apple keeps 8GB iPhone 4S around as free-on-contract option

In introducing its new iPhones on Tuesday, Apple both adhered to tradition and shook things up, dropping the iPhone 5 but keeping the iPhone 4S alive as the low-end model.

Apple's iPhone media event on Tuesday brought little in the way of surprises regarding Apple's bestselling devices. As expected, Apple rolled out a lower-cost iPhone 5c and a high-end iPhone 5s with a built-in biometric security feature. As had also been predicted, Apple kept the two-year old iPhone 4S around as the low-end, on-contract option.

Well-connected KGI Securities analyst Ming-Chi Kuo predicted that the iPhone 4S would stay in production even as the iPhone 5 made way for the iPhone 5c. Apple's polycarbonate backed iPhone 5c packs the same internals as the iPhone 5, but with its slower processor and smaller display, the 4S may be even cheaper still for Apple to manufacture.

Retaining the 4S is in keeping with standard Apple procedure since the introduction of the iPhone 4 in 2010. That year saw Apple keeping the 4's predecessor — the iPhone 3GS — in rotation as a cheaper option. The next year, with the release of the iPhone 4S, the iPhone 4 moved into the 3GS' former slot, while the 3GS moved on to an even lower on-contract price point. Now, the iPhone 4S will occupy that bargain-level entry point, available in an 8GB model for free with a two-year contract.

In offering only one memory configuration for the entry-level iPhone, Apple likely also reduces manufacturing and inventory costs. Apple's margins on the device may be aided even further by changes to its manufacturing strategy. The iPhone maker is expected to go with Pegatron for more than half of its legacy iPhone 4S orders. Apple will still rely on longtime partner Foxconn for much of its iPhone needs, but the move to a competitor for the cheaper iPhone option will likely help improve margins on the already low-priced device.

Even as the device showed began to show its age, the 4S was still the second-most popular smartphone in the world, according to figures from Strategy Analytics, beating out even Samsung's Galaxy S3, which had been released after the 4S. The 4S trailed only its successor, the iPhone 5, in terms of worldwide popularity.