Apple building cheaper 8GB iPhone 4: Could this be the iCloud iPhone?

Apple suppliers are currently in the process of building an iPhone 4 with a reduced 8 gigabytes of memory, Reuters reports.

Such a model would be less expensive than current iPhones for Apple to build, since flash memory is among the most expensive elements in the device. It would provide Apple a low-cost alternative to unveil alongside the iPhone 5, and it would likely replace the current low-end 8GB iPhone 3GS, which retails for $50 with a two-year contract.

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In truth, the news isn’t too surprising. Apple has traditionally offered a cheap version of its previous iPhone generation when unveiling a new generation. This time, Apple actually has to build new devices, since the iPhone 4 is only available in 16GB and 32GB versions at the moment.

The 8GB iPhone 4 also falls in line with rumors of an iCloud iPhone, which Apple could offer for free on contract and marry to its iCloud service to make up for the lack of on-board storage. Apple likely couldn’t offer the iPhone 4 for free at this point without drastically changing the device’s design — the rumor pointed to a less expensive case without rear glass and to a simpler antenna design.

Apple traditionally hasn’t focused too much on emerging and low-end markets with the iPhone, but having an inexpensive model that it could offer for free on contract would pay off big. It would help Apple to compete against the onslaught of free and cheap Android phones, and it would open up Apple’s app ecosystem to a whole new audience.