SAN FRANCISCO : JP Morgan says Apple will replace its popular iPod Nano MP3 player with an inexpensive Nano-style mobile phone by the end of the year.

Sources in the manufacturing supply chain and a US Patent and Trademark office application indicate Apple will follow the June release of high-priced iPhones with bargain-priced Nano phones, according to analyst Kevin Chang of Morgan's Asia Pacific Equity Research unit.

"Putting all the information together, we believe there's a strong sign that Apple will come out with a second phone that will replace iPod Nano," Chang wrote in a report to investors.

"Or to put it another way, 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 cannibalising iPod Nano."

The "Nano phone" will likely be priced at 300 dollars or less as compared to the 499 and 599 price tags on iPhone models, according to Chang.

Apple's patent filed in November of 2006 indicates Nano phones will have wheels for dialing instead of the touch-screen capabilities of iPhones, Chang's report says.

The patent states the invention regards "controlling an electronic device, particularly a multifunctional electronic 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."

Chang estimated Apple would be able to sell 30 to 40 million Nano phones in the year after its release. - AFP/il