Confused by Apple's decision on the iPhone 5c

Technology is full of surprises, and even today's relatively straightforward announcement had it's own surprise: the cost of the iPhone 5c. I guess it's my fault for getting in the hype bandwagon, but I was really expecting a cheap iPhone. Replacing the 4s with a 5c and leaving the iPhone 5 in tact would have made a lot more sense than doing it as is in my opinion, because they would have to manufacture less types of screens, use a similar body, similar processors, finally move everybody to the lightning connector, etc, and it could combat the threat of the cheaper yet still very nice android phones.

If the 5c came out at 350 USD/ 2,000 Yuan/ 25,000 rupees, it could compete with the Xiaomi Mi3 in China which goes for 2000 Yuan and has much better specs, Samsung Galaxy Grand in india, and here in the states they could compete with the Nexus 5 even though the 5c is cheaper to make and has lower specs than these devices. If they really wanted to do well in China, The largest Smartphone market, other emerging markets, or even cheaper phones in the western world, they should have made it cheaper. Of course, they aren't going to be able to compete with all the cheap phones they have there, but at the same price as the Mi3, or Nexus 5, they could convince many users to switch over.

Why did Apple do this? Frankly, I have no idea. I thought they were going to make a cheaper iPhone to unify accessories to the lightning standard, get into the emerging markets, and more iPhones through it's own stores, they would have done so. But they did what they did, and left me and many others confused.