Apple has also reportedly started testing the next version of its iOS software
Apple is developing a cheaper version of its iPhone which is expected to be released later this year, reports suggest.
According to the Wall Street Journal, Apple may use a different shell made of polycarbonate plastic, unlike the iPhone 5 which currently has an aluminum casing.
Most of the other parts could remain the same or be recycled from older iPhone models.
Apple is currently selling older models that include the iPhone 4 and 4S at a reduced price.
Earlier this month, several reports suggested that Apple started testing a new iPhone, as well as the next version of its iOS software.
Last year, research firm Kantar Worldpanel ComTech's report found that in November 2012 Apple had taken the lead in the US smartphone market, as the iPhone 5 sold more devices than Google's Android operating system.
In the third quarter of 2012, a report from IDC revealed that Apple held 15.16% share of of global smart connected device shipments.
Smartphones and tablets are expected to grow to 66.7% and 13.4% respectively by 2016, while the PC market is expected to decline by 19.9%.