Steve would have likely insisted that they find a way to build the iPhone out of its current materials but less expensively, and I'm sure the engineers would have lived up to the challenge.
He was a perfectionist, and while I didn't agree with all his decisions, his absolute refusal to compromise and insist that everything be exactly right is what led to Apple becoming what it is. I already see things going downhill and it's not going to be pretty moving forward.
I agree that Jobs has been responsible for a lot of good things, but he was accepting of imperfect products. If you thought otherwise, then you are an example of Steve's most valuable talent. His cult-like brainwashing of consumers has largely kept the demands of shareholders at bay. Going to follow that attack up with quick example other than Antennagate:
Remember when Macbook Airs lost their backlit keyboard?
Back when Dell first came out, they were churning out beautiful products. When you opened up a Dell machine, you saw high-end. Let's talk keyboard again. Dell sold a $100 keyboard that was quiet, with keys firmly held in place. The letters were nicely printed on each key, beneath a smooth surface. It was getting old, so I looked forward to my next Dell, with a new keyboard. The new Dell arrived, and the keyboard was priced $50. The keys were shaky and slightly noisier. You could feel the printed letters on each key. It seemed so cheap that I frantically called Dell, asking if I could buy the previous model. They no longer sold it, thinking users were okay with a cheaper product, since they now just bought Dell based on its high-quality reputation. I think this strategy worked, but their reputation for quality is long gone. Michael Dell buying back Dell makes complete sense, because the company needs a major overhaul that shareholders are unlikely to be accepting of. I see Apple, without the brainwashing icon that is Steve Jobs, falling slowly but surely down the same path.