M.I.C. Gadget reports that they’ve gotten hands on with an iPhone they’re pretty sure isn’t an iPhone 4, but possibly an updated model that includes a 3.7″ display, and the same proximity sensor as the white iPhone 4. The new display is nearly edge-to-edge, bumping up the screen size but not nearly large enough to be a 4″ display as previously rumored. M.I.C. Gadget also speculates that it may have an A5 processor (a prototype model) that game developers are using to build games. Strings in iOS 4.3 revealed that the iPhone was slated to receive the updated processor, and recently a white iPhone was rumored being tested on T-Mobile’s network packing an A5 processor. A bigger screen has been seen floating around on leaked design documents in the past.

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Apple.pro reports this afternoon that Apple may be testing three different iPhone protoypes (including the mini iPhone we’ve been hearing about), one of which is a model with a slide out keyboard. The translation to English is very rough:

There are three iPhone5 prototype
one is a sliding cover which
Is the introduction of the keyboard after the side cover

Being a fan of physical keyboards (especially those on the Palm Pre), an iPhone five with a portrait slider might be enough for me to switch to the next-gen iPhone. Rumors aside, would it be wise for Apple to differentiate with an entire iPhone family to compete against Android, HP, and other competitors? We’re skeptical that Apple would actually launch an iPhone with a physical keyboard, but we’ll have to wait and see.

Also in the mix is a rumored upgrade to the camera, getting a bump to 8 megapixels from the iPhone 4′s current 5 megapixel camera. The report also notes that the transition to the next iPhone will be similar to the transition from the 3G to the 3GS: different guts with the same basic hardware design.

[Apple.pro via MacRumors]

Editors note: Image via TechShout

With the tech world still suffocating from iPad 2 rumors and John Gruber’s predictive iPad 3 lineup bomb, Bloomberg reports this afternoon that Apple may be planning to rekindle their iPhone line with new models to better compete with Android. What’s in the mix? A rumored Apple iPhone prototype is said to be a third smaller than the current iPhone 4, meaning it would be on par with HP’s Veer at approximately 2.3 inches diagonally. How do you undercut the competition? By finally offering American consumers the option to purchase a $200 smartphone without an obligatory contract.

Apple can sell it at a low price mainly because the smartphone will use a processor, display and other components similar to those used in the current model, rather than pricier, more advanced parts that will be in the next iPhone, the person said. Component prices typically drop over time.

Whether or not you care to dig into the gigahertz war in smartphone processor technology, the current hardware for the iPhone 4 would still be relevant for the next year, despite Android handsets launching with dual-core processor. iOS, being extremely efficient would fly with a 1GHz processor pushing pixels on a 2.3 inch display. With the same great camera, the baby iPhone would be an excellent edition to Apple’s lineup when paired with larger display of an iPad. (Personally, I don’t think these smaller displays are just for tweens.) The phone would be free if purchased on contract.

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