Apple has prepared plans nearly to double production of its iPhone in the fourth quarter, according to reports.

The technology group is now looking to manufacture about 2.7 million iPhones in the next quarter, up from the 1.54 million originally targeted, according to thestreet.com, the financial news website, which cited sources close to the company.

That would mean that Apple is now preparing to ship nearly 5 million iPhones this year, up from a previous target of 3.6 million.

Analysts suggested that a production increase could be related to the recent price cut of the iPhone in the United States and the device’s roll-out in Europe.

Earlier this month, Apple cut the price of the iPhone by 33 per cent only 68 days after its launch in the US. The $200 cut, to $399 (£197), was unprecedented for an Apple product in its speed.

It also fuelled fear that shares in its sector – Apple’s stock is up about 60 per cent this year – could be overvalued.

Steve Jobs, chief executive of Apple, was later forced to admit that his company had failed to look after iPhone customers.

On the Apple website, he said: “Even though we are making the right decision to lower the price of iPhone, and even though the technology road is bumpy, we need to do a better job taking care of our early iPhone customers as we aggressively go after new ones with a lower price.”

Apple is to offer people who bought the iPhone before the price cut a $100 credit note to spend in Apple stores. There will be a full $200 refund for those who bought in the past 14 days. Mr Jobs said: “Our early customers trusted us, and we must live up to that.”

Speculation over a production increase fuelled the view that the much-hyped device is meeting Apple’s expectations.

Earlier this month, Apple said it sold one million iPhones ahead of schedule.

Apple officials were not immediately available for comment to Times Online today.

In Europe, the iPhone’s next battleground, France Telecom said this morning that it had secured exclusive rights to distribute the iPhone in France.

Earlier this week, O2 confirmed that it would offer the phone in the UK and yesterday Deutsche Telekom's T-Mobile division announced it would distribute the iPhone in Germany.

The France Telecom chief executive, Didier Lombard, said the device would be distributed in France “before Christmas, probably in November.”

Meanwhile, iSuppli, the market research company, said that Apple had slashed the cost of components for its newly remodelled iPod Nano – the most popular digital music player on the market.

Components for the iPod Nano came in at $58.85 for the version with 4 gigabytes of flash memory and $82.85 for the model with 8 gigabytes of memory, iSuppli said.

Total component costs for the 4-gigabyte Nano were nearly a fifth lower than the previous version released late last year.

Also in the smartphone sector, Palm, whose Treo device competes with the iPhone, lowered its first-quarter guidance slightly, saying it would break even at best.

For the three months to August 31, the company expects either to report a loss of 1 cent per share or to break even. Palm will report its full financial statement October 1.

In its last quarterly report, the company said it expected to post results in the range of a loss of 1 cent per share to earnings of 1 cent per share on revenue between $355 million and $365 million. Palm also submitted a narrower range of revenue on Wednesday, from $359 million to $361 million, with smartphone sales accounting for between $300 million and $302 million.

Analysts were expecting revenue of $359.9 million.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive