Bloomberg reports that Apple is planning to develop new models of the iPhone, including one that would be both smaller and cheaper than that current model, to aid the company in its battle against Android in the smartphone market.

Apple Inc. is working on new versions of the iPhone that are aimed at slowing the advance of competing handsets based on Google Inc.’s Android software, according to people who have been briefed on the plans.

One version would be cheaper and smaller than the most recent iPhone, said a person who has seen a prototype and asked not to be identified because the plans haven’t been made public. Apple also is developing technology that makes it easier to use the iPhone on multiple wireless networks, two people said.

the report says that the Nano iPhone will cost around $200 and it will be about one third smaller than iPhone4 and it will contain all the features which all the iPhones has got up till now.

While Apple has aimed to unveil the device near mid-year, the introduction may be delayed or scrapped, the person said. Few Apple employees know the details of the project, the person said. Apple often works on products that do not later get released.

Just imagine a Nano iPhone. What it will be called an iPhone Nano 5 or what?

See the image below and see if this will be the new iPhone Nano?