TAIPEI/HONG KONG: Asian suppliers to Apple have begun manufacturing a lower-priced version of its

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hot-selling iPhone 4 with a smaller 8 gigabyte flash drive, according to two people with knowledge of the matter.

The flash drive for the 8GB iPhone 4 is being manufactured by a Korean company, one of the people said on Tuesday, declining to name the company. Apple currently sources its flash drives from Japan’s Toshiba and South Korea’s Samsung Electronics.

Apple, which demands high levels of secrecy and security from suppliers and employees, declined to comment.

The existing iPhone 4 was first launched in June 2010 with 16 GB and 32 GB versions, with a white version added to the lineup in April. The 8GB version is expected to launch within weeks, the sources said.

Some analysts said the cheaper 8GB iPhone 4 could help Apple boost sales in emerging markets. “Apple may want to push into the emerging market segment where customers want to switch to low- to mid-end smartphones from high-end feature phones, which usually cost $150-200,” said Yuanta Securities analyst Bonnie Chang.

“But I think for an 8GB iPhone 4 the price is hard to go below $200, so Apple will still need a completely new phone with low specifications for the emerging markets.” he added.

In addition to the launch of the smaller iPhone 4, Apple is targeting an end-September launch for the next-generation iPhone 5, one source said, confirming earlier reports on Apple follower blogsites and industry websites.

The new model, which some call the iPhone 4S because of its largely identical appearance to the existing iPhone 4, will have a bigger touch screen, better antenna and an 8-megapixel camera.

The iPhone 5’s two manufacturers have been told to prepare production capacity for up to 45 million units altogether, the source said. The phone will be made by Hon Hai and Pegatron , the person added.

Apple sold 20.34 million iPhones in the second quarter versus an expected 17 million to 18 million, and is increasingly looking to Asia to boost future earnings.

Apple’s chief operating officer Tim Cook said in July the company is particularly optimistic about Greater China.

“I firmly believe that we are just scratching the surface right now,” Cook said about China. “I think there is an incredible opportunity for China there.”