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There has to be major hardware changes in the next iPhone; Apple can't sit still in the phone market. Besides, most of it is almost a given based on component availability, pricing and other tech they've already incorporated into other device.

1. Performance enhancements
  • Faster Processor
  • More RAM
  • Better battery (new tech from 17"MBP?)
2. Increase in storage capacity

3. New I/O
  • Built-in Nike+ support
  • Magnetometer
  • Headphone based volume control support
  • Improved camera

I also think there is a chance for a front-facing camera. Of all companies, Apple has done the most to provide all their customers with the needed computer equipment (via iSight) to make mobile video chat a success. As another poster mentioned, I think we'll see Apple's last addition to their Windows based apps this year, iChat for Windows. With iChat for Windows, Apple will have enabled the the iPhone to be the first successful mobile video device in the U.S.
 
The latest iPod Touch already has a faster clocked CPU (but giving the same battery life as the older slower one). So that's an obvious candidate for a hardware change, since their flagship phone shouldn't lag behind an mere iPod.

The new iPod also has a smarter headphone jack, so that's another obvious candidate.

One thing that most game developers complain about is too little memory left over for apps from the 128 MB RAM (much less than half). But if Apple did that, there would eventually be a whole tier of apps that wouldn't be compatible with tens of millions of existing (and non-upgradeable) devices.

Exactly.
 

I would expect the new iphone to do things the gen one and g3 can't do. What's hard to believe about that. The computer industry has been doing this for years. Let's face it. If apple doesn't have big upgrades in the hardware on the new iphone they will lose standing in the industry. There are some kickass smart phones coming out this year. I say get ready to upgrade this summer if you want the latest and greatest.
 
Don't flame me for this now but i'm still hoping for an announcement of a verizon iphone for when their att contract runs out.:D
 
Don't flame me for this now but i'm still hoping for an announcement of a verizon iphone for when their att contract runs out.:D

I'm hoping for the same thing. I don't think anyone outside of Apple and AT&T really knows what the terms of that deal were - or if Apple can pay to get out of it.

If no Verizon phone is announced in June-July I'll just leave Verizon for an iPhone.

One of my V friends went to the Verizon store today and was told all the BS like that she won't be able to change the battery if she gets an iPhone and that she should get a Storm. I asked her if she'd ever had a cell phone battery replaced. She hadn't.
 
I would expect the new iphone to do things the gen one and g3 can't do. What's hard to believe about that. The computer industry has been doing this for years. Let's face it. If apple doesn't have big upgrades in the hardware on the new iphone they will lose standing in the industry. There are some kickass smart phones coming out this year. I say get ready to upgrade this summer if you want the latest and greatest.

Function-wise, computers of different "generations" do the exact same thing. The PPC PowerBook G4 I own can do everything the latest MacBook Pro can, although it does it much slower probably.

As for falling behind hardware-wise, Macs have been trailing the rest of the industry for years. Dells and other computers have much better specs. But, Macs sell just fine. The iPhone should be no different. Many factors come into play about how Apple can still selling near-obsolete hardware, and sell it well.
 
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