According to a report from Reuters this morning, Apple has instructed its Asian manufacturers to begin production of a lower priced iPhone 4 with just 8GB of on-board storage. The information comes from “People with knowledge of the matter”. The flash drives for the 8GB iPhone 4 will be manufactured by a Korean company according to the same sources but no company name was revealed.
To be clear, this doesn't sound like the [iPhone nano/budget iPhone] TiPb previously heard Apple was working on, nor is it the greatest of revelations when you consider previous Apple release patterns -- When the iPhone 3GS was launched, the then-current iPhone 3G was offered as a cheaper entry level iPhone with 8GB of storage. Again when the iPhone 4 was launched last year, the iPhone 3GS was offered with 8GB of storage at a much cheaper price.
Having said that, an iPhone 4 with 8GB of storage at a very competitive price would still be a very compelling device for many, though not as compell.
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