March 28, 2008: 4:40 PM EDT
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Countdown to iPhone 2.0

Citing ambitious production plans, observers eye a big June debut of Apple's next generation iPhone.

By Scott Moritz, writer

(Fortune) -- Apple is gearing up for a big bump in sales of the next generation iPhone, if new production plans are any guide.

The plans show the faster iPhone will be rolling off the assembly line this summer. The initial order calls for 11 million iPhones to be built this year, with that total split between the existing 2.5G phone and the upgraded 3G phone, according to people familiar with the plan.

Apple (AAPL, Fortune 500) appears to be targetting a June introduction of the 3G version of the phone, roughly a year after the original iPhone's debut. And similar to last year, Apple seems to be scheduling a limited initial supply to be followed by more phones in the fall quarter.

Observers are split on how to interpret the plans however.

Bank of America analyst, Scott Craig, who put out a research note Friday dissecting the Apple production plans, says the order indicates a significant production increase. If true, this could provide a surprise boost to the company's numbers. BofA expects 8 million iPhones will get sold this year, and if the 3G model is successful, every additional million beyond their projection translates to about $400 million in added sales and 12 cents per share - or 2% - more in profit.

But other analysts familiar with Apple's order patterns say the production reports are typically overestimated by the company, largely to keep component suppliers fully stocked should demand take off. By this reckoning, Apple will probably make about half of the 11 million iPhones the initial production plan calls for. It will probably have about one million 3G phones ready at launch and 4 to 5 million to follow later this year, says one analyst.

The curious part of the upcoming 3G iPhone introduction is just how Apple plans to handle the older iPhone. The new phone will operate on AT&T's (T, Fortune 500) faster network giving a big speed boost to mobile Internet users. The new phone will also be packed with more features including GPS navigation. Apple will clearly have a big price tag on the new phone, and observers speculate that the older version - which fetches $500 for the larger memory model - will likely get another price cut.

With two premium phones in the market, Apple is looking at a potentially robust second half sales spree. But the Cupertino, Calif. gadget giant will not have the field entirely to itself. Several phone makers are introducing touchscreen phones aimed at the iPhone this year. Sony Ericsson dazzled fans at recent gadget shows with a prototype of its upcoming Xperia phone, a touchscreen design with a slide-open keyboard. Another prototype that is a dead-ringer for the iPhone is Garmin's (GRMN) nuvifone, a GPS touchscreen device with a phone built in.

And probably the most hotly anticipated new smart phone in the wings is Research in Motion's (RIMM) 9000 BlackBerry. Though RIM acknowledges that a new BlackBerry is in the works, there have been scant few details available about its design. It will most likely include a touchscreen and easily be regarded as a sweet piece of handcandy for BlackBerry loyalists. To top of page

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