New reports have added weight to claims made last week that Apple is working on cheaper, smaller iPhones in order to stem the surge of Android in the mobile phone market.

Bloomberg last week said that an iPhone nano-type device was already at the prototype stage and a new report in the Wall Street Journal at the weekend appears to confirm this.

According to the WSJ, the new line of iPhones is due to launch in the summer and would be around half the size of the iPhone 4. It has an edge-to-edge screen that can be manipulated by touch, as well as a virtual keyboard and voice-based navigation, the report said.

It would be available to mobile carriers at around half the price of the iPhone 4, the report said, allowing the carriers to subsidise the cost of the handset and offer low-cost monthly plans to customers.

The WSJ's report also claims that Apple is planning a revamp of MobileMe, turning it into a free service where a users' photographs, music and videos can be stored in the cloud that would eliminate the need for portable Apple devices to carry large amounts of memory.

The revamped MobileMe would fit in with rumoured plans to turn iTunes into a cloud-based service, where customers could access their music via the internet rather than having to sync purchases with devices such as the iPhone, iPod or iPad.

Apple has not officially commented on the reports regarding the iPhone 'nano' or revamped MobileMe service.