To improve their stake in the low-cost and/or prepaid smartphone market, Apple may be preparing to release an “iPhone nano,” according to The China Times.

Haven’t we been here before?

Last June, prior to the start of WWDC 2011, the blogosphere was abuzz with rumors of a possible “iPhone nano.” Of course, what occurred was something completely different. Not only did Apple not release a smaller handset, but they waited until October to release their fifth generation smartphone, the iPhone 4S.

A year later and now “iPhone nano” rumors have begun anew. According to the Times, Apple will release a less expensive iPhone later this year, used primarily to compete with Android-based devices at the lower end of the smartphone market. Here are five reasons this won’t happen.

Remember the iPhone 3GS?

First, Apple already has a low cost handset and it is called the iPhone 3GS. First released in 2009, Apple’s third iPhone model is available through AT&T for just $0.99. When the sixth generation iPhone debuts later this year, don’t be surprised if the two-year-old iPhone 4 replaces the iPhone 3GS at the $0.99 price point.

The iPhone is everywhere

Five years ago, if you wanted to buy an iPhone, you were most likely forced to do so through one or two carriers, depending on where you lived. Today, Apple’s handset is available at many locations. And sometimes this means lower prices.

In the U.S., for example, the iPhone 4S and iPhone 4 are available through regional carriers for slightly less than what is charged by the national carriers such as AT&T, Sprint, and Verizon Wireless. In other words, more competition already equals lower prices and this trend will almost certainly continue.

Inferior vs. Less Expensive

Creating an inexpensive “iPhone nano” would require cutting corners. This would mean releasing a handset without Retina display, a usable camera, and/or acceptable battery life.

Sure the “iPhone nano” would be less expensive than other iPhones on the market. But would Apple want to be accused of creating something inferior? Probably not.

How much smaller?

Thanks to the likely use of in-cell touch panels, the next iPhone could be as thin as 7.90mm versus 9.3mm for the iPhone 4S/4. How could Apple possibly create something even smaller and offer it at a lower price?

Most likely, they couldn’t. Besides, the smaller you go, the less likely an “iPhone nano” would be used successfully by gamers. Isn’t that what the iPod touch is all about?

Sales aren’t hurting

Perhaps the most likely reason Apple won’t release an “iPhone nano” is because they don’t have to. In the holiday quarter alone, Apple sold 40 million handsets, with another 30 million-plus most likely sold during the last quarter. These numbers will almost certainly grow again once Apple releases the next iPhone sometime later this year.

Summary

Sure, Apple could release an “iPhone nano,” but I’m pretty confident that they will not. Almost certainly, Apple will continue slashing the price of their older handsets to account for the lower end of the marketplace. At the same time, the company will release a new iPhone each year with all its new bells and whistles.

Would you be interested in buying an “iPhone nano”?

(Photo: iPhone nano concept by iLounge)