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By Bloomberg News
Thursday, June 23, 2011

Apple Inc. plans to introduce a new iPhone in September that boasts a stronger chip for processing data and a more advanced camera, according to two people familiar with the product.

The device will include the A5 processor, the more powerful chip that Apple added to the iPad 2 earlier this year, along with an 8-megapixel camera, up from the 5-megapixel model in the iPhone 4, said the people, who asked not to be identified because the details aren't public. Apple is testing a new version of the iPad that has a higher resolution screen, similar to the one used in the iPhone 4, one of the people said.

The iPhone is Apple's top seller, accounting for half of revenue last quarter. A faster chip will enable speedier loading of programs and help the device vie with handsets being introduced by rivals such as Samsung Electronics Co. that are powered by Google Inc.'s Android software. The iPhone's gains versus the BlackBerry partly explain why Research In Motion Ltd. last week forecast its first-ever quarterly sales decline.

The new phone will run the iOS 5 operating system Apple previewed at a developer's conference this month. Codenamed "Telluride," it will feature features such as improved messaging and photo-sharing, one person said. It's designed to run on all of Apple's mobile devices, the person said. Until late last year, iPads, iPhones and iPod touches used slightly different versions of iOS.

Natalie Kerris, a spokeswoman for Cupertino, Calif.-based Apple, declined to comment.

Apple pushed back the release of the next iPhone -- its fifth -- to coincide with the release of the iOS 5, the people said.

Apple has not kept pace with Google in the smartphone market, projected by researcher IDC to reach almost 1 billion units by the end of 2015. This year, Apple is projected to account for 18.2 percent of the global market, compared with 38.9 percent for devices running Android, according to IDC in Framingham, Mass.

The release of a new iPhone may help Apple cut in to Android's market share, Charlie Wolf, an analyst at Needham & Co. in New York, said in a report this week. He said Android customers are waiting for the next-generation iPhone, especially those on the Verizon Wireless network, which added Apple's handset this year.

Apple is working to finish a cheaper version of the iPhone aimed at attracting customers in developing countries, the people said. This device would use chips and displays of similar quality to the iPhone 4, the people said. Apple's work on a smaller, lower-priced version of the device was discussed by people familiar with the matter in February.

The screen resolution on Apple's new iPad would be about one-third higher than that of the iPad 2 and boast a more responsive touchscreen, one of the people said.

The new iPhone will closely resemble the iPhone 4, the people said.

As Apple upgrades its mobile operating system it may eventually stop guaranteeing that all iOS apps run on older models, such as the iPhone 3G and iPhone 3GS, one person said.

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