Rumors of a budget iPhone are gaining new momentum, as Apple supplier Pegatron Corp. is looking to increase its workforce by up to 40 percent.

Pegatron Corp., a company assembling Apple's iPhone and iPad, said it would boost its workforce in China by up to 40 percent in the second half of the year, fueling a new round of market speculation regarding the upcoming launch of a cheaper iPhone. Pegatron currently has 100,000 employees.

The news comes from Reuters, which learned from suppliers that Apple is working on a cheaper model of the smartphone in a bid to broaden its reach to lower-income buyers in growth markets such as India and China.

According to one of the publication's supplier sources in Japan, small-scale production of the display panel for the budget iPhone would commence in May, ramping up to mass production as early as June. The Cupertino giant is expected to unveil a cheaper version of its popular iPhone sometime in the third quarter of this year.

Pegatron's Chief Financial Officer (CFO) Charles Lin told Reuters on Thursday, May 9, that as much as 60 percent of the company's revenue in 2013 would come from the second half. The CFO declined to comment on whether the budget iPhone was among the new products set for the second half. He did, however, mention that new computer models will surface once Intel launches its new Haswell processor.

Speculation about a cheaper iPhone also increased after Pegatron President and CEO Jason Cheng said during an investor conference that revenue from communication products would account for up to 40 percent to total in the six months from June, a significant boost from the 24 percent in the first three months of the year.

Pegatron Corp. reportedly posted a 81 percent increase in net profit in the first quarter from the previous year, reaching T$2.31 billion, or roughly $78.59 million. Its operating margin, meanwhile, jumped from 0.3 percent in the previous quarter to 0.8 percent.

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

The analyst further explained that a higher yield rate would, in turn, improve Pegatron's profitability, giving it an edge over major Apple supplier Hon Hai Precision Industry, also known as Foxconn.