The feature reduction would allegedly be triggered by national political demands on China Mobile, which is state-owned and so has been asked to push the Chinese government's TD-SCDMA format for 3G over Western-made counterparts like HSPA, which are present in the iPhone 3G and used by smaller rivals such as China Telecom. Concerns have been raised by outside analysts that Apple shouldn't have to customize the hardware for just one region given the use of one design everywhere else.

The California-based company has typically shied away from hardware localization outside of keyboards and other language-related necessities.

Market incentives, however, are expected to play significantly into any final iPhone launch in the country. China Mobile is the world's largest individual cellular carrier and counts approximately 415 million subscribers, giving it the most exposure. The Chinese market is also said by In-Stat to lean heavily in favor of Apple, as a full fifth of phones sold in 2007 alone, or 28 million, were priced at the equivalent of $533 or higher. Most of these devices were also bought more for entertainment than the still business-oriented devices in Europe and North America.

China Mobile hasn't responded to the latest claims, though Apple chief Steve Jobs has previously said he hoped a deal could be reached for the iPhone in China by the end of the year.