There are a couple ways you can approach this particular issue.
1. You can capitulate to the demands that your child has, and get him an iPhone of some appropriate variety. You can attach some strings to this, maybe he needs to work or do something else and this can be his reward, or you could just give it to him. Sometimes it's best to pick your battles, and you could have a conversation with him about that.
2. You can continue as you have been doing to try and teach your son that the kids are wrong, and that he can be resilient against this kind of bullying. (I don't think I recommend this strategy)
3. You can tell some other authority figures about what's going on. The outcome of this will largely depend on who they are, and how likely they are to recognise/care about the bullying.
EDIT:
The most important thing is to talk to your son about this, and listen to what he has to say. You might think you're an expert on phones, and you probably are. That doesn't matter. Let your son explain how he feels, and work through a plan to make the situation better. Bullies prey on insecurity. Help your son understand what's happening and let him know that you are a person who can help.