Past as prologue?
On the surface, an iPhone mini looks like a no-brainer. The iPod mini, Mac mini, and iPad mini were all cheaper – and successful – versions of iconic Apple products.
From a business perspective, each of these minis lowered the entry fee for its product line. But from a consumer perspective, they each added something else:
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The iPod mini (and, later, the iPod nano) added greater portability. Gym rats, commuters, and children loved its smaller form factor, and it went on to outsell the classic iPod.
The Mac mini adds flexibility, as the only consumer Mac that isn't an all-in-one. It smooths the transition for Windows converts who already own a monitor, mouse, and keyboard.
The iPad mini adds portability and comfort. It's much lighter and easier to hold than the 9.7-inch iPad, which it is likely outselling (possibly by a large margin).
Unless Apple radically changes its values, an iPhone mini would need to add something other than a cheap price tag. But what?
Making it lighter and thinner could add value. But that's already one of the iPhone 5’s killer features. Wouldn't it need something different?
A smaller screen? iPhone customers have already spent five years using 3.5-inch displays, and anything smaller would cramp and cripple iOS.
It could add the flexibility of buying off-contract for pre-paid service. But isn't that the same as saying it's cheap?
We can also look to Apple's branding for clues. Seven months before Apple announced the iPad mini, the company dropped numbering from the iPad line. What everyone expected to be the "iPad 3" was just "iPad." This paved a road of simplicity: iPad and iPad mini.
The iPhone, though, still has a numeric suffix. If Apple was already moving forward with an iPhone mini, wouldn't the iPhone 5 simply be called "iPhone?"
Last year's model
Let's not forget that Apple already has a budget iPhone strategy: selling the previous two years' models in decreasing US$100 increments.
If Apple wants a bigger presence in the budget/prepaid market, it could reach back one more generation. Sell the model from three years prior for, say, $150-300 off-contract.
Wouldn't that be simpler than – and perhaps just as effective as – producing an iPhone mini?
Will Apple eventually make an iPhone mini? Unless you're a high-ranking Apple employee, you're left to guess.
One thing we won't see, though, is an iPhone whose sole purpose is to be smaller and cheaper. Apple could still make a new iPhone that costs less. But something about it would also have to be better. Right now, it's hard to imagine what that something would be.