Apple working on budget iPhone

Apple is working towards launching low-cost iPhone models to compete with Android at the lower-end of the smartphone market, according to online reports.

At least one of the devices will be cheaper and smaller than the iPhone 4, according to unnamed sources familiar with the plans cited in a Bloomberg report.

The device is said to cost around $200 (£125) on a contract-free basis and will feature technology found in the current generation of iPhone rather than the next in order to help keep costs down, according to a source that has reportedly seen the prototype.

According to the report, the budget iPhone is "one-third smaller than the iPhone 4, and it had no 'home' button". It could be released mid-2011, providing it doesn't get cancelled or delayed at the last minute, the report said.

The move is said to be in an effort to stem the tide of Android handset adoption. In contrast to the high-end iPhone devices — which usually require an up-front payment as well as a monthly commitment — would-be Android adopters can purchase a handset on a pay-as-you-go basis for less than £100.

Apple is also said to be working on developing a dual-mode iPhone model capable of supporting both GSM and CDMA wireless standards but it is unclear whether this is planned for the low-end device, the rumoured iPhone 5, or another different device.