Times Online claims the reason for the UK and German iPhone discounts are to clear room for the 3G iPhone. European mobile operators reportedly overestimated demand for the current iPhone and are said to be working to clear excess inventory ahead of the 3G iPhone release.
This claim appears to be somewhat speculative, but Times Online also claims to have heard that Apple has placed orders for the 3G iPhone:
Times Online understands that Apple has placed an order with its Asian suppliers to produce 200,000 of the new 3G iPhones by the end of May, rising to 2 million - 500,000 per week - in June.
Times Online goes on to say that the new version of the iPhone will have a "radically different" appearance.
Among the possibilities are flip version, which would enable the screen to be larger, and a sliding model with a regular qwerty keyboard - as opposed to a touchscreen one.
The reliability of Times Online's sources are unknown, but such a departure from the existing iPhone's design seems very unlikely. Jobs specifically criticized the inclusion of an built-in keyboards amongst existing smartphones when the iPhone was first introduced. Apple is also in the midst of launching a Software Development Kit (SDK) intended for their multi-touch OS X. Radically changing the form factor would splinter the audience for iPhone applications.
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