Apple filed a patent application document dated July 5 that refers to a multifunctional handheld device with a circular touch pad control, similar to the Nano's scroll wheel.
Sales in the first weekend of the iPhone aavailability were as high as 700,000 units, according to estimations.
Chang said a way to follow up the iPhone with a cheaper version would be to convert the Nano into a phone and price it at $300 or lower. The iPhone sells for $500 and $600, depending on storage space.
Another analyst Gene Munster of Piper Jaffray said he expects Apple to bring out iPods that resemble iPhone, which features such as a touch-sensitive screen, later this year.
Sales of the iPhone are expected to be limited to a small percentage of the market due to its high price tag, particularly in the United States where 85 percent of consumers tend to spend $100 or less on cell phones.
But analysts forecast that a cheaper phone from Apple, which leads the digital music player market, could pose a much bigger threat to long-established phone makers such as Nokia , Motorola, Samsung and Sony Ericsson.
Taiwan's Catcher Technology will be the "major source of metal casing" for the new phone, according to Chang, who cited an unidentified channel source.