Rumors are floating around that Apple is planning to release a 4-inch iPhone early next year which is expected to have a similar design as the iPhone 6S but resemble an upgraded 5S overall.
The rumors, originating from a research note issued by KGI Securities analyst Ming-Chi Kuo and published on MacRumors, suggests that the new 4-inch iPhone will have an A9 chip manufactured by TSMC and Samsung as well as 2.5D cover glass with curved edges, like the iPhone 6S. However, the phone will also come with an 8-MP rear-facing camera and 1.2 MP front camera - the same camera specs as the iPhone 5s.
The new phones, which are expected to come with Apple Pay and at least two to three color options, are forecasted to have full-year shipments reaching 20 million, with production for the model starting in early 2016. Kuo added that the new phone could be priced somewhere between $400 and $500 dolars in the U.S. which would make it $149 to $249 cheaper than the 16GB iPhone 6s, according to IGN.
One of thing of note that set it apart from current-gen iPhones is that it is believed that the phone won't support 3-D touch.
Rumors of the phone confirm that despite consumers continuing to move toward larger devices, Apple will continually release smaller versions of pre-existing models and fill demand for higher-quality small phones, reported The Verge. Kuo believes that the new model wouldn't generate huge sales for Apple, but a smaller and, more importantly, cheaper iPhone would grant it access to markets where low-cost Android phones continue to thrive.
It should be noted that Kuo has been wrong in the past about various specifics and shouldn't be regarded as a guaranteed roadmap. It does, however, still present a good sketch of Apple's inner workings.