Mini iPhone is critical

It's called an iPod Touch, which costs $229 unsubsidized.

Is there actually some magic market Apple is missing between the $99 iPhone 3GS and the bottom of the line Android handsets? Maybe, but they don't seem particularly enthused about targeting the free-with-contract market.

Maybe this is a different story outside of the U.S. where phones are often purchased unsubsidized. While Apple is making money hand over fist, however, they might not see the need to scramble for that low end of the market.