They did something like this for the worst gen iPads. Two years and support was dropped. I believe they've also done it for Mac hardware too. So it wouldn't surprise me at all if they did it for an economy model of the iPhone.
The pace of change in phones/tablets has been tremendous since the iPhone and iPad were released. Current versions are more than 10x faster and ship with much more ram. There aren't infinite resources at any company (unless you want the army of programmers failed model from IBM of yore), focusing limited engineering resources on most important issues is crucial to making progress.
You got an iPad that worked well. They stopped enhancing it after 2 years. When did your car maker stopped enhancing your car?