Apple is expected to revamp its iPhone line-up later by launching two new handsets at its headquarters in California. As with previous announcements, the technology giant has kept the schedule of its Cupertino event a closely-guarded secret.

However, it is believed to have been developing the iPhone 5C, a cheaper handset featuring coloured plastic casing, and the iPhone 5S, a higher specification phone with a fingerprint scanner and near field communication, which would allow the phone to be used to pay for items in shops.

The devices, which would run on Apple's latest operating system, iOS 7, could be unveiled alongside a smart watch to rival the Samsung Gear. That gadget is expected to cost around €225 when it goes on sale later this month.

Apple's current iPhone 5 model launched last September and has generated US$88 (€66.3) billion in revenue.

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However the company share price has tumbled by around a quarter since then, with its rivals launching a range of cheaper products, many of them built around Google's Android operating system. A stripped-down handset would appeal to consumers unable to afford the price tag attached to a SIM-free iPhone 5.

Reporter Mark Stone in Beijing said the rumoured iPhone 5C would be particularly appealing "to the young and upwardly mobile Chinese consumer".

"The balance for Apple is tricky though," he said. "It likes to be seen as a premium brand - a cut above the rest perhaps. Introducing a cheaper phone may well diminish that brand but to crack the Chinese market properly, that might be a price worth paying."

Apple declined to comment about its California event, although invitations sent to journalists featured the company's logo surrounded by coloured bubbles.