Apple prepares for September the launch of a new iPhone 5 which will have a more powerful processor and an advanced video camera, said two sources close to the situation.

The phone will be equipped with the A5 processor of the iPad 2, and an 8-megapixel camera, compared to the 5-megapixel on the iPhone 4, said the sources, adding that Apple is also testing a new version of the iPad tablet, which boasts a higher resolution screen.

Apple representatives declined to comment on this information.

A faster chip will allow faster processing of data and will strengthen iPhone’s market position in relation with the smartphones launched by rival companies such as Samsung and HTC using Google’s Android platform.

The new Apple phone will run the iOS 5, recently introduced by the company at a WWDC conference. The system has improved messaging features and photo-sharing and can run on all Apple mobile gadgets. By the end of last year, the iPhones, iPads and iPod Touch were using slightly different versions of the iOS.

The company has delayed the introduction of the fifth iPhone to coincide with the launch of the iOS 5, said the sources.

The iPhone is Apple's best selling product, generating half of the revenues in the last quarter.

Market research firm, IDC, estimates that the smartphone market will reach one billion units sold by the end of 2015. The IDC also predicts that Apple will have a market share of 18.2% this year compared to 38.9% for Android phones.

Apple is close to completing a cheaper and smaller version of the iPhone for consumers in emerging countries, the sources added. This gadget would use chips and screens close to the current seen on iPhone 4.

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