The news agency said that Asian suppliers have already begun manufacturing the 8GB iPhone 4, without naming its sources. The flash drive for the 8GB iPhone 4 is being manufactured by a Korean company, Reuters added. Apple currently sources its flash drives from Japan's Toshiba and South Korea's Samsung Electronics.
The 8GB version is expected to launch within weeks, the sources said.
Apple and Samsung have not commented on the report.
The existing iPhone 4 was first launched in June 2010 with 16 GB and 32 GB versions.
In addition to the launch of the smaller iPhone 4, Apple is targeting an end-September launch for the next-generation iPhone 5, one source said, confirming earlier reports on Apple follower blogsites and industry websites.
The new iPhone, which some call the iPhone 4S because of its largely identical appearance to the existing iPhone 4, is expected to have a bigger touch screen, better antenna and an 8-megapixel camera.