The phone will be priced at US$330 and available in a variety of colours, with market analysts saying young people are most likely to be lured by the phone as it is hard to misplace, attractive and durable.
The phone is expected to eliminate the need for a subsidy, with people buying them directly or signing contracts with network providers and receiving them at no cost rather than paying the usual US$200 upgrade fee.
The low price will also give users the choice to change handsets at will.
The report has however questioned how the US market will handle a low-priced iPhone, with speculation rife that it could majorly target the Chinese market.
The low-cost handset could open up the brand to developing countries where the company has very little market share, following the likes of Nokia who have introduced cheaper phones targeting mostly Africa and Latin America.
It is also rumoured have one of the fastest processors.
Mozilla has also announced that a smartphone running on Firefox OS would hit the market before the end of the year, retailing at about US$80.