Lots of disappointment on iphone 5c pricing, here is my theory.

I think iphone 5c was never intended to match prices of android phones, it was created to allow Apple to expand its market share in Chinese market. From what is suggested in media, one of the reason Apple had a hard time getting China Mobile on board, was the high cost of subsidizing flag ship iphones. By creating a mid tier phone Apple may have been able to convince China Mobile to carry iphone.

Tim Cook has been very bullish about Chinese market, and this move may turn out very well.