The word on the street sometime back was that Steve Jobs has termed the next iPhone update (due in June) as “A+”, and the new SDK for OS version 3.2 that would debut with the iPad already seems to be revealing some attractive details about future iPhones. While nothing concrete seems to be out yet, it seems that the next gen iPhone would allow 720p video recording and/or playback (iPhone HD). This also hints at higher resolution screen on the next iPhone. Rumors of a CDMA iPhone are also out and seem very logical, considering that AT&T might well lose the iPhone exclusivity in 2010.
Given the OLED, HD, high res, super camera phones that are coming out on other platforms Apple is sort of left behind in the smartphone race. While there is a lot to like about the iPhone, the openness of Android and a variety of carriers push the competition pretty hard for Apple. Apple enjoyed having the only nextgen device in the market with the 1st gen and the 2nd gen iPhone, but since then others have caught up pretty well.
It is also rumored that Apple has roped in Pegatron (ASUS owned) as the manufacturer for the iPhone (currently Foxconn does the job which is expected to be on board aswell). Apple has faced supply crunch with the 3GS and perhaps they expect more demand/supply issues with the nextgen iPhone coming in. This might be the reason for Pegatron to come in picture, else you know how many Apple rumors turn true – very few!