JP Morgan analysts claim that Apple is planning on launching a cheaper version of the iPhone in the 4th quarter of this year that "could be based on the ultra-slim iPod Nano music player".
The analyst (Kevin Chang) cited unspecified "people in the supply channel" as well as a recent U.S. Patent application as his sources for the information.
"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."
The "iPhone nano" patent application was widely cited last week as evidence of a possible iPhone Nano:
It describes a simple touchpad that can display different symbols for different modes of the device and the ways to operate such a device. These different symbols are illuminated as different modes of the device are selected and are used to operate iPhone Nano in that mode.
The patent application, however, was filed in November 2006, and may simply represent different iterations of early iPhone plans than actual future devices.
Update: A followup report by the JP Morgan contradicts their first report:
The new report says that the majority of Chang's assumptions appear to have come from a review of the patent that was published last week, adding that a near-term launch of an iPhone-nano product would be "unusual and highly risky".
