Smaller iPhone reportedly designed by Apple

Apple is expanding its line of handsets to include a smaller, cheaper iPhone, Bloomberg reports today. Apple, for its part, is declining to comment on the rumor – which was sourced by Bloomberg to a couple of anonymous insiders.

The move would make sense. Apple's biggest competitor these days is Android, the extremely popular mobile operating system developed by Google.

And as we noted back in January, shipments of Android smartphones totaled 32.9 million in Q4 of 2010, enough to best even Nokia's Symbian, long king of the smartphone market. (This week we learned Symbian is basically no more. But that's a different story.) By comparison, Apple shipped 16 million handsets in the same time period – not shabby, but not exactly gangbusters, especially as compared to Android.

Part of the success of Android is its range – the operating system is available on cheaper phones and more expensive phones, and all sorts of phones in-between. The iOS is only available on iPhone 4 and the previous iterations of the Apple handset (plus iPod Touch and iPad, but those aren't phones). By expanding the kinds of iPhones available to consumers, Apple could compete more readily with Android.

“Instead of targeting 25 percent of the global mobile-phone market, Apple would be going after 100 percent,” Charlie Wolf, an analyst at Needham & Co. in New York, told Bloomberg today. Thoughts on the Bloomberg report? Drop us a line. In the meantime, sign up for the free weekly Innovation newsletter, which is emailed out every Wednesday morning.