In its second statement, however, JP Morgan does speculate that we'll see another high-end iPhone instead; this time with considerably faster 3G cellular-wireless technology—for accessing the Web, multimedia and other data services—rather than somewhat slow 2.5G networking included in the first iPhone model.

This could happen during the first six months of next year, perhaps earlier.

Of course, any new iPhone model, like the first, would be made available in the U.S. through AT&T, the exclusive provider of Apple’s smartphone series for the next few years in this country.

Chang basis his speculation of a Nano-like iPhone on a recent Apple patent filing (see top picture), referring to a multi-function device with iPod-style scroll wheel, and leaks from folks in Apple's supply channel.

The patent application says: "The invention pertains to a user interface for controlling an electronic device, particularly a multifunctional device that is capable of operating in multiple modes as for example a phone mode for communications and a media player mode for playing audio files, video files and the like."

The Nano-iPhone, at under $300, would be considerably smaller and cheaper than the current $499 (4GB) and $599 (8GB) iPhone models. It would also lose the large screen and Web browsing capabilities of today’s iPhone.

Chang says, “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 cannibalizing iPod Nano.” And, in spite of its “rather limited functionality,” Chang thinks such a device could sell in the 30 million to 40 million-unit range next year.

That's far more than Apple is aiming for in 2008. Apple would like to capture a total of 1 percent of the mobile phone market that year, which means selling about 10 million iPhones.


iPhone iPod Nano

With rumors saying the sixth generation iPod will sport the same multi-touch interface, large screen and Mac OS X as the iPhone, one thing all the scuttlebutt about a Nano-iPhone demonstrates is Apple may not be through with its famous click wheel after all.

AT&T will almost certainly be the carrier of such a device in the U.S., as it has a 5-year deal with Apple to offer the iPhone and its follow-ups exclusively in this country for the next five years.