That wouldn't work for Apple because it does not fit their business model. That strategy works for Google because Google makes their money by selling ads on their online services. Apple makes their money by selling hardware. If they sell cheap hardware with little to no profit that doesn't do them any good at all. Apple does not have the online services business to back up that kind of model. The people who bought that cheap hardware won't be giving Apple any money down the road. Android users continue to pay for their phones by giving Google data which Google then uses to sell ads.
It has nothing to do with Apple wanting the iPhone to be a status symbol or only wanting to sell to the high end market. That's just how Apple has chosen to run their business and make money.
Apple can make money any way they can and have been smaller margins isn't going hurt them. They can still make money on hardware.