Pegatron Corp, an assembler of Apple Inc's iPhone and iPad, said it would increase its number of workers in China by up to 40 percent in the second half of the year, fuelling market speculation of a new cheaper iPhone.

Pegatron currently employs 100,000 workers.

Suppliers have told Reuters that Apple is developing a cheaper model of the phone, broadening its sales base to lower-income buyers in growth markets such as China and India.

A supplier source in Japan said small-scale production of the display panel for the model would begin in May, ramping up to mass production in June.

Apple is widely expected to launch the cheaper version of the iPhone in the third quarter.

Pegatron's Chief Financial Officer Charles Lin told Reuters on Thursday that 60 percent of the company's 2013 revenue would come from the second half.

He declined to comment whether the cheaper iPhone was among the new products to be made in the second half. He said there would be new computer models after Intel launches its new Haswell processor.

Pegatron President and Chief Executive Officer Jason Cheng told an investor conference on Wednesday that revenue from communication products would contribute up to 40 percent to total in the six months from June, compared to 24 percent in the three months in the beginning of the year, local media reported.

Pegatron posted a 81 percent surge in net profit in the first quarter from a year earlier to T$2.31 billion ($78.59 million), while its operating margin improved to 0.8 percent from 0.3 percent in the previous quarter.

"Making the cheaper iPhone will further help Pegatron's operating margin because its plastic casing is easier to make than iPhone 5's metal casing; this should ensure a good yield rate," said Fubon Securities analyst Arthur Liao.

Liao added a higher yield rate would also be bring an edge to Pegatron's profitability over Hon Hai Precision Industry, the major supplier to Apple.