Asian suppliers of Apple are working on cheaper version of 8GB iPhone 4, also known as the iPhone 4S which will be launched along with the iPhone 5 at the end of September.
It does not come as a surprise as Apple had earlier announced that it will expand its market by extending the price range of iPhones.
Last year, when Apple had launched the 16 GB and 31 GB iPhone 4 to replace the 16 GB and 32 GB iPhone 3GS, it also introduced a cheaper entry level 8GB iPhone 3GS for $99.
Market analysts expect a launch of 32GB and 64GB iPhone 5 models for $199 and $299 along with a cheaper 16GB iPhone 4 for $99.
Some analysts said the cheaper 8GB iPhone 4 could help Apple boost sales in emerging markets.
Apple may want to push into the emerging market segment where customers want to switch to low- to mid-end smartphones from high-end feature phones, which usually cost $150-200, said Yuanta Securities analyst Bonnie Chang.
But I think for an 8GB iPhone 4 the price is hard to go below $200, so Apple will still need a completely new phone with low specifications for the emerging markets.
The new iPhone is highly identical in appearance to the existing iPhone 4, will have a bigger touch screen, better antenna and an 8-megapixel camera,sources said.
The flash drive for 8GB iPhone 4 is being manufactured by a Korean company, the sources declined to mention the name.
Currently Apple sources its flash drives from Japan's Toshiba (6502.T) and South Korea's Samsung Electronics (005930.KS).