But that's mainly a niche market - a market of people who wouldn't care even if the iPhone is $2,000.

Apple may very well continue to sell iPhones only to that market, but they will definitely lose market share. And I think Apple, at the very least, wants some compromise between high-end/quality and market share, and aren't purely focused on high-end, no matter what they say in public.

They know that if their market is 5 percent of smartphones (which is starting to look that way in a few years, if they change nothing about their strategy) they will start losing the developers. iOS won't be the platform to get apps first, or the most (already isn't here). And I think Apple will try to avoid that as much as possible (as futile as I think that will be).