According to Kevin Chang, a senior JP Morgan analyst based in Taiwan, Apple is readying a new, cheaper type of iPhone with the looks and feel of an iPod Nano.

Chang apparently spoke to inside sources in Taiwan who confirmed that the Cupertino, CA-based giant is preparing a low-end version of its recently launched iPhone, which should debut in Q4 2007.

The analyst also pointed to a patent application recently filed by Apple in regard to a multifunctional handheld device with a circular touch pad control, similar to the Nano’s scroll wheel.

Chang said the best way to come up with an entry-level iPhone is to convert an iPod Nano into a phone and offer the handheld for about $300. The two models of iPhone currently on sale are the 8GB and 4GB ones, both Flash memory-based and separated by the price tag: $599 and $499, respectively.

“We believe that iPod Nano will be converted into a phone because it’s probably the only way for Apple to launch a lower end phone without severely cannibalizing iPod Nano,” he said noting that the new phone could have “rather limited functionality.”

Because of the anticipated lower price, 2008 sales of 30 million to 40 million units “is achievable,” Chang said, cited by Reuters.

Apple is targeting 10 million iPhones in consumers’ hands by the end of 2008, but the hefty gadget- which managed to sell around 700,000 units in the first week of availability- is facing (besides the heavy competition with the likes of Motorola, Samsung, SonyEricsson or LG) the inertia of the US market, where 85 percent of consumers tend to spend $100 or less on cell phones.