Apple unveils two new versions of the iPhone

After years of pitching its iPhone as a sleek luxury item, Apple is now aiming at more cost-conscious shoppers.

The company unveiled two new iPhones Tuesday, including a cheaper model made of plastic. But what’s cheap for Apple, it turns out, may not exactly be a bargain.

Apple’s new, lower-priced iPhone 5c costs $99 for a 16GB model and $199 for a 32GB version with a two-year contract. Rather than the usual metal body, the phone is encased in plastic that comes in a choice of five colors, including lime green, pink and yellow.

The lower-priced phone is intended for first-time smartphone buyers and developing countries. People without credit -- particularly in countries such as China -- must generally pay a phone's full price upfront rather than spreading the cost over a two-year contract.

"This allows us to serve even more customers," Tim Cook, Apple’s chief executive, said at a press conference at the company’s Cupertino, Calif., headquarters.

The problem is the phone starts at $549 without a contact. Many rivals' sell phones for far less.

The significance of Apple’s plastic phone is further muted by the fact that the company and its carrier partners have, for years, sold older iPhones at a discount from new models. Indeed, Apple said Tuesday the practice will continue and that people will be able to get an iPhone 4s with 8 gigabytes of memory for free with a two-year contract. 

Cost-conscious shoppers intent on owning an iPhone may therefore be better off with an older model. They handle most of the basics and only a few bells and whistles are lacking. Consumers will have to decide whether more memory, faster chips and a better camera are worth the hefty price.

Selling a plastic phone is risky for Apple, which has long marketed the iPhone as the Tiffany’s of mobile devices. Straddling the low and high end of the market may damage the company’s image. But Ross Rubin, principal analyst at Reticle Research, pointed out rivals such as Samsung already sell phones that are at least partly made of plastic and they seem to be doing just fine.

"There’s sure a lot of plastic phones sold in the U.S.," Rubin said. "Materials choice has not necessarily been a key determinant of smartphone success."

Aside from the different body, the 5c largely performs like an iPhone 5, which was introduced last year. Small changes to the plastic model include steel reinforcements inside the phone to provide extra stiffness and a longer-lasting battery.

In addition to introducing a plastic phone, Apple on Tuesday upgraded its standard iPhone with faster chips, an improved camera and, most significantly, a fingerprint reader. Instead of typing in a passcode, people can simply click on the home button -- where the scanner is embedded -- to unlock the phone that recognizes the owner’s fingerprint. Apple said entering passcodes is so annoying that half of its iPhone customers turn off the feature. Doing so, of course, leaves phones without any security if they are stolen.

Owners of the new iPhone 5s can also use their fingerprints to authenticate purchases of apps, music and movies through Apple’s App Store and on iTunes, removing the inconvenience of having to constantly enter passcodes. The ability to use fingerprints for authentication does not extend everywhere, however. People who make purchases through apps other than Apple’s will still have to go through their usual password ritual.

The scanning technology is family friendly. Multiple people can use their fingerprints to access a single phone as long as they are properly registered.

In the past, a handful of electronics makers have tried to embed fingerprint scanners in their products as alternative to passcodes. But consumers found that the technology often failed to recognize them. Apple is betting that its scanner is more reliable than those used by others. Some of the company’s cutting edge technology, however, has failed to live up to the marketing hype. For example, Siri, the voice activated personal assistant, frustrated phone owners by failing to understand what they said.

The 5s will be available in the United States and Canada, along with several other countries, starting Sept. 20. With a two-year contract, a 16GB model costs $199; a 32GB is $299 while a 64GB is $399.