At WWDC 2008 on June 9, after finalizing the details of the upcoming App Store, and summing up the original iPhone's achievements, the late Steve Jobs dove into the next challenges Apple had to face, the next mountain they had to climb. On the surface, they were obvious even before Jobs bulleted them on stage - 3G, Enterprise, third-party apps, more countries, and more affordable. The software changes came as part of iPhone OS 2.0. The hardware, iPhone 3G.
iPhone 3G: More Gs for less Cs
The iPhone 3G, codenamed N82 and model number iPhone1,2, had the same 3.5-inch screen at 320x480 and 163ppi as the original. The cellular radio, however, received a significant update to support 3G UMTS/HSPA networks. That allowed for a much faster - theoretical - 3.6 mbps data transfer. Jobs claimed it was faster - 36% - than other leading 3G phones of the time, including the Nokia N95 and Palm Treo 750, even while rendering a better version of the web.
The Dock connector remained, but Apple changed some of the pins so it no longer supported charging over FireWire, which rendered some accessories incompatible. It had the same Bluetooth 2.0 + EDR and 802.11 b/g Wi-Fi as well, but added an aGPS (assisted global positioning system) chip for more precise location services.
As the model number suggested, however, Apple didn't consider the iPhone 3G as full, next generation update. It was the first model, made proper. That was probably due to the chipset remaining the same, ARM-based Samsung 1176JZ(F)-S processor and PowerVR MBX Lite 3D graphics, with 128MB of RAM already showing its age and limitations. So were storage options, at 8 and 16GB for NAND Flash. Curiously, the battery dropped to 1150 mAh, though not at the expense of battery life.
There was still no CDMA and EVDO Rev A model, which meant still no possibility for Verizon or Sprint. Since Apple remained exclusive to AT&T, though, so it didn't much matter in the U.S.
Sensors and camera likewise stayed the same.
There was, however, a big change to the design. Apple changed the original, aluminium casing for new, polycarbonate ones with metal buttons. That let them improve RF transparency - allowing for better reception - but also offer the iPhone, for the first time, in multiple shades. The front plate remained uniform black, but for the 16GB model, the back was made available in both black and white. It didn't look quite as high end Apple as the original, and had some issues with hairline cracks around the cutouts, but it did manage to be both sturdy and reliable. It was rounded instead of flat on the back, allowing Apple to call it thinner at the edges. It also improved audio and "fixed" the headphone jack, making it flush and hence, more compatible with more headphones.
The biggest difference, 3G and GPS aside, was the price. Jobs said that, according to Apple's research, 56% of potential iPhone customers didn't buy because of the price. Yet the value of the iPhone - it's ability to drive adoption of premium services - had been proven to carriers. So Apple was able to convince them to subsidize the price. It dropped from a whopping $499/$599 on contract to a much friendlier $199/$299.
iPhone 3G: The iPhone many people had been waiting for
The iPhone 3G launched on July 11, 2008, and it launched internationally. By the end of the year, it reached 70 countries. Apple also launched iPhone OS 2.0, the App Store, and MobileMe (now iCloud) on the same day, something that overwhelmed so many servers for so long they've switched to staggered rollouts ever since. It took just one weekend to sell over one million.
By June of 2009, the original iPhone was gone but the iPhone 3G had sold somewhere around 20 million units. At that point, the it was dropped down to $99 on contract, and became Apple's first less-expensive iPhone.
But not it's last. Next would come the iPhone 3GS.