It is said the company is looking to retake ground in markets like India and China where it has lost out to companies including Samsung, Huawei and Xiaomi with plans for a spring launch.
As reported by Nikkei, Apple's upcoming iPhone SE2 is said to be similar to the 2017 4.7-inch iPhone 8 with "most of the same components" as this year's flagship devices.
Featuring an LCD display, it was previously suggested the phone will also add details like 128GB of storage and a single-lens rear camera.
There have been rumours since last year that the tech giant needs to produce a $299 iPhone to compete in India.
The 4-inch iPhone SE cost almost $400 when it launched over three years ago, and the handset was discontinued late last year after selling around 40 million units.