A report by Bloomberg suggests that Apple is working on new iPhone form factors. People “who have been briefed on the plans,” report that one version would be both smaller and cheaper than the current models.
The cheaper device would allow Apple to compete against the growing number of Google Android devices which are available from entry-level up to high-end handsets. Apple has considered selling this smaller device as low as US$200 without a service contract. It would achieve the lower price by using current components rather than next-generation components that will likely make into the next full-size iPhone.
Apple is also looking at a dual-mode phone which would support both GSM and CDMA. This would allow a user to switch networks without having to switch SIMs.
Rumours of a cheaper iPhone model first surfaced back in early 2008 and have never really gone away. It appears that Apple has been considering such a device for a while. The question is whether it will ever hit the market.