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It was bound to happen. I personally found it difficult to believe a year ago that Apple could catch up so quickly. But Apple iPhone has surpassed Motorola Razr in the U.S. consumer market. Motorola Razr is a very good phone. It’s obviously not in the iPhone’s league, but the low price and its standard features allow it to compete with the iPhone on a price basis.

Apple may have beaten Motorola finally. But that doesn’t mean Apple folks are dancing in the streets right now. The economy has hit everyone hard in the U.S., and unless things change, Apple could lose its profits in the upcoming quarters. The good news is there is a new direction for the government in the U.S. The bad new is analysts claim the worse is yet to come.

CNN Money has an article about this very issue. Google’s android-based phone is 10% cheaper to build than the iPhone. What does that mean? Phones that are cheaper to manufacture give their makers the opportunity to be price competitive. Think about it. If iPhone cots $199, and a phone that has all the basic features a smartphone needs to have is going for $49, which one would you buy?

I know, I would still go with the iPhone. No one i arguing that any phone is better than the iPhone. The problem is that most analysts believe that this year is going to be the worst for retailers and gadget makers as people are keeping a tight hand on their pockets.

Apple did adjust their forecasts for the future quarters, and that shows that Apple, too, is somewhat vulnerable, so I expect Apple to cut their costs in the next quarter or so to make iPhone more profitable for them and more affordable for folks.

Games have dominated the premium iPhone apps category, and the newest champ is no different. But this time, it is a hunting game (iHunt) that is on the top. Now iHunt is a fun game and very addictive, but I just wonder if the programmers got the idea for this app from former VP candidate, Sarah Palin. She was a huge hunting game, and maybe these guys decided to use the free publicity to push this application? Nevertheless, games continue to dominate the iPhone apps category.

I have been surprised about the big deal that folks are making out of Apple scaling down iPhone productions for the next quarter. Apple is simply readjusting its production to account for the whole supply-demand equation. You don’t want to have a lot of iPhones on hand when folks don’t have money to buy them.

Now producing less iPhones doesn’t mean that it will become rare like Nintendo Wii. You can still buy iPhones anytime you want. The truth is, Apple is also affected by the economy, so it’s tough to expect them to go out full force when there is so much volatility around.

Is Apple thinking of building their own chips? It has been talked about a lot in the industry, but hiring Mark Papermaster, former vice president of microprocessor technology at IBM Corp. could be an indication for that.

Apple has grand plans for the iPhone, and the whole idea of Apple making its own chips been tossed around alot and can’t be ignored easily. Will they do that with iPhone 3.0? That’s something we will have to wait and see.