He does say iOS rather than iPhone, so he could be talking about expansion into markets that currently have an iPod Touch and a dumbphone, or no phone at all due to youth or poverty.
The iPod touch is currently not two-thirds of the overall iOS market, it’s 38 percent (10 million units in Q1 2011 vs. 16 million iPhones). Non-iPhone devices (iPod touch and iPad) were a bit more than 50 percent of the overall iOS market.
In the best case scenario for Android, cheap phones can completely obsolete the iPod touch (I think that’s very unlikely), but even then they would only take 38 percent of the iOS market.
