Apple will launch a cheap iPhones with a design that could be based on the ultra-slim iPod Nano music player later this year, according to a JP Morgan Chase analyst.

JP Morgan Chase analyst Kevin Chang said the new model could sell for less than $300 (£150) in the US and he based his speculation on patents filed by Apple and unidentified component suppliers. The iPhone sells for $500 and $600 (£250 and £300), depending on storage requirements.

Apple filed a patent application document dated July 5 that refers to a multifunctional handheld device with a circular touch pad control, similar to the Nano's scroll wheel said Chase. Apple did not respond to the report.

The lower price could let Apple sell 30 million to 40 million of the devices in 2008, Chase said.

Even at its current price Apple’s iPhone could grab as much as 10 percent of the US smartphone market by the end of the year, according to the analysts at Strategy Analytics. Strategy Analytics Associate Director Neil Mawston said: "We forecast 20 million smartphones to be sold in the U.S. during 2007. We expect Apple and its iPhone portfolio to account for two million of that total, giving it a 10 percent share by the end of the year."

"We believe that iPod Nano will be converted into a phone because it's probably the only way for Apple to launch a lower end phone without severely cannibalising iPod Nano," he said, noting that the new phone could have "rather limited functionality”.

Since it had great success with its stripped-down Nano version of the iPod, it's not a great surprise Apple would do it with the iPhone, experts say. Such a move would put great pressure on competitors such as Nokia, Motorola and Sony. It could also open up new competition for its services, which are currently under exclusive contract to AT&T.

Apple iPhone: the definitive review

Apple iPhone listed on

O2 to launch iPhone in the UK