Piper Jaffray analyst Gene Munster is convinced that Apple will launch a low-cost iPhone priced at around $199 (£130 ex VAT) in the September quarter of 2013.
He expects that the new handset will unlock a market estimated to be worth $135 billion (£88b) this year.
Munster thinks that Apple will release this affordable phone to target the emerging markets in China and India, and he thinks that in the final quarter of 2013 Apple could move 37 million units of this budget iPhone.
Morgan Stanley analyst Katy Huberty is similarly confident that Apple could benefit from launching a low cost phone to these markets.
She believes that a new budget iPhone could help double Apple's market share in China. The iPhone currently has 10% of the China smartphone market, according to reports.
The market for smartphones
The reason why so many reports are pointing to the need for Apple to address these emerging markets is the realization that the smartphone market has hit a plateau in developed markets where smartphone penetration levels have reached saturation point.
It has recently emerged, in a report from research firm Flurry, that China has now surpassed the US in terms of smartphone in operation, and there are a lot more people in China than there are in the US.
According to that report, by the end of February China should at the about 246 million devices, compared to 230 million in the US.
Incidentally, during January 2013 the UK had 43 million active iOS and Android device, according to Flurry Analytics. (We are surprised by that figure as there are only 62.6 million people in the UK, so that suggests that 69% of people here already own smartphones).
Are lower margins bad news for Apple?
Many have expressed concerns that if Apple produces a budget iPhone it will affect the company's profit margins. Munster disagrees: "Despite its lower margin, it should accelerate gross profit growth given the size of the low-end market (we estimate $135b in 2013)," he said, reports Apple Insider.
Huberty also notes that margins may shrink, but thinks it will be inconsequential. She notes "Even in a scenario of low 40% gross margin and 1/3 iPhone cannibalization rate (flattening legacy iPhone shipment growth), which we view as conservative, the iPhone Mini adds incremental revenue and gross profit dollars," Apple Insider reports.
Even if Apple's gross profit margin declined by 2% to 49%, the new handset would boost the company's iPhone business by almost $2.4 billion in gross profit, she suggests.
China Mobile iPhone delays
Huberty notes that the iPhone is currently only available through two of China's mobile networks, and significantly not from China Mobile, which is the world's largest mobile carrier.
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