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Is Apple (NASDAQ:AAPL) going to attack the low end of the smartphone market with a big price cut in the 8 GB version of the iPhone?

RBC Capital analyst Mike Abramsky thinks they might. In a research note Wednesday morning, he notes that the company is widely expected to unveil updated iPhones at the Worldwide Developers Conference on June 8. Expectations are they will keep price points at $199 and $299, with 16 GB and 32 GB models. Abramsky thinks even an evolutionary upgrade will drive a healthy upgrade cycle; he estimates 20% of the 21 million iPhone installed base will upgrade within the first year.

But he also says that the company could leverage its component and manufacturing efficiencies by offering an 8 GB version of the phone at $99, down from $199 currently. He thinks the result could provide a major lift to unit demand, with 5 million additional iPhones in FY 2009, and 22 million in FY 2010.

Meanwhile, he writes that global checks show steady iPhone sales ahead of the pending product refresh, with nominal inventory contraction assisted by carrier promotions. He ups his June quarter iPhone unit forecast to 3.5 million from 2.5 million.

Abramsky also thinks Apple next year could launch a Nano iPhone - possibly an “iPod phone,” sold in the pre-paid market - providing a further catalyst for share gains, momentum and valuation.

He maintains his Outperform rating and $165 price target.

In pre-market trading Wednesday, Apple is up 57 cents, or 0.4%, to $131.35.

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Source: Apple: Will Apple Cut the 8GB iPhone to $99?