I could possibly see something like this. Maybe. Perhaps.
The advantage would be that it gets people into the iOS ecosystem, some of whom will later become potential customers for the higher end iPhone, iPads, and whatever else they come up with. If everyone who can't afford an iPhone buys a cheap Android phone, when they can afford a high end phone they are more likely to choose Android even though they can afford an iPhone.
The disadvantage is that they don't want to tarnish their image of selling high end products, so I can't see them going too cheap. They wouldn't make a cheap plastic phone, I just don't see that. They could use the same body, perhaps altered to be a bit cheaper to make, and slightly thicker to save money by dropping the expensive and hard to manufacture in-cell matrix. Use a cheaper less accurate touchscreen matrix like most Android phones use, use their last generation (i.e. A6 if they sell it around the time the A7 is available) CPU. No LTE - perhaps no Edge, since I think that's mainly used in the US now and dropping it would make it less likely to be greymarketed into the US. Clock the CPU down a bit to allow using cheaper less power efficient components elsewhere in the phone without compromising battery life. Maybe even give it a LARGER battery, since in the less developed world perhaps nightly charging can't be relied upon if your power isn't reliable.
If they can get the cost down below $150 and sell it for $300 they'd be where they need to be. After all R&D and other costs that's in line with their overall corporate margin, though much less than their current iPhone margin. If they look at it as an investment in future growth that's a reasonable sacrifice to make, even if they do see some limited cannibalization of sales that would have gone to people who could afford the higher end model but decided the lower end one was "good enough".
The big problem is that they'd have to differentiate the "real" iPhone from this one. Not sure how, unless they decide to make the iPhone 6 larger since it seems as though the market has spoken and people want bigger phones (or maybe I only read about 5" Android phones and there are still plenty of 4" and under phones sold?) Only problem is, if too many people like the old size they'd buy the "low end" phone or keep their iPhone 5 as long as they could. Otherwise, they'd need some sort of killer feature introduced on the new one that people would be willing to pay for the high end model to get.