You seem awfully hung up on the initial characterization of Intel's announcement. They are not discontinuing existing SKUs. They are not discontinuing the Atom microarchitecture. They are not discontinuing the Celeron and Pentium lines that are already used in sub-$200 devices. They are not even discontinuing the Atom brand as it turns out; they just demoed the new line at the Developer conference this week: http://www.anandtech.com/show/10576/more-details-on-broxton-quad-core-ecc-up-to-18-eus-of-gen9
And while Microsoft may or may not decide there is enough market for a cheaper Apollo Lake based Surface, HP has already leaked details about an Apollo Lake based Pavilion x360.