While not strictly an iPhone 5 rumour, this news could certainly have huge relevance to the launch of the iPhone 5, with an 8GB iPhone 4 replacing the iPhone 3GS
Sources have suggested to TechRadar that a 8GB flash drive is being built for the iPhone 4, implying a scaled down version of the Apple product, with a suitable price tag to match.
While not strictly what could be called an 'iPhone Nano' it's simply a more wallet-friendly iPhone with memory size and price tag to boot. Some have have suggested this would be released alongside the other iPhone 4 handsets, this would seem like an odd move however with the iPhone 5 just around the corner.
Another theory is that this 8GB iPhone 4 will in fact fulfill the current role of the iPhone 3GS, offering an iOS phone but without the hugely premium price, making way for the iPhone 5 to take the larger memory sizes and higher specs.