Report: Apple to unwrap less expensive nano-iPhone this year

Still basking in the glow of its overly hyped iPhone launch, Apple plans to launch a cheaper version of much-sought after devices in the fourth quarter.

A report from a JP Morgan Chase analyst today says the device could be based on the ultra-slim iPod Nano music player. JP Morgan Chase analyst Kevin Chang said the new model could sell for less than $300 and he based his speculation on patents filed by Apple and unidentified component suppliers, the reports said. The iPhone sells for $500 and $600, depending on storage requirements.

Apple filed a patent application document dated July 5 that refers to a multifunctional handheld device with a circular touch pad control, similar to the Nano's scroll wheel said Chase. Apple did not respond to the report.

The lower price could let Apple sell 30 million to 40 million of the devices in 2008, Chase said.

Even at its current cost the iPhone could grab as much as 10% of the U.S. smartphone market by the end of the year, according to the analysts at Strategy Analytics. Strategy Analytics Associate Director Neil Mawston said: "We forecast 20 million smartphones to be sold in the U.S. during 2007. We expect Apple and its iPhone portfolio to account for two million of that total, giving it a 10% share by the end of the year."

Apple has targeted sales of 10 million units in 2008, which would give it a 1% share of the global market.

"We believe that iPod Nano will be converted into a phone because it's probably the only way for Apple to launch a lower end phone without severely cannibalizing iPod Nano," he said, noting that the new phone could have "rather limited functionality."

Since it had great success with its stripped-down Nano version of the iPod, it’s not a great surprise Apple would do it with the iPhone, experts say. Such a move would put great pressure on competitors such as Nokia, Motorola and Sony. It could also open up new competition for its services, which are currently under exclusive contract to AT&T.