Is Apple working on a cheaper, smaller iPhone?

Apple's iPhone 4

The new handset would be a concerted effort by the company to counter the growing threat of Android smartphones by entering the more affordable end of the market.

The handset would use the processor, display and other components used in the current handset, rather than the latest specification components set to be used in the new iPhone, in order to keep the cost down.

The premium price of the iPhone narrows its reach in many areas of the worldwide mobile market, including the hge markets in China and India, something a cheaper handset could potentially rectify.

US reports suggest a new iPhone could sell for around $200 and be available without the a long-term contract – another off-putting factor for many people in emerging markets.

Apple is expected to announce an updated iPhone in the next month or so, though there's as yet no news on a press conference.

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