An enterprising startup called Yosion Technology has delivered a custom case called the “Apple Peel 520″, which wraps around the iPod Touch and, in effect, turns it into an iPhone.  The case contains a 800mAh battery, dock connector, and a SIM card attached to a Infineon baseband processor-powered cell phone printed circuit board.  The result is a 3G-ready phone that gets 4.5 hours of talk time and 120 hours of standby.  The device also appears to support vibration.

The economic advantage of this approach to those looking to run iPhones on non-endorsed networks seems simple.  The case retails for 8 RMB (Yuan), approximately .33 USD.  An iPod Touch 64 GB costs 9.  The iPhone 4, on the other hand starts at 9 (with service plan) for a 32 GB model, but then you have to pay an early termination fee that may be as high as 0, depending on your national service provider.

At the end of the day you get a 64 GB iPhone for roughly 0 USD with the case approach, where you get a 32 GB iPhone for 0 with the traditional approach.

Of course you have to have a big bulky plastic case around your phone, but that would be true anyways, given the iPhone 4′s severe signal issues that required Apple to give out free cases as a fix of sorts.

There are a few notable downsides, though.  While the iPod Touch is rumored to be getting a front facing camera, it currently does not have one, so video calling, one of the star features of the iPhone 4, is not a possibility.  Secondly, you have to use a jailbreak on the iPod Touch and then install the necessary apps (“Yosion” and “YsSMS”) in order have the device properly function as a phone.  Finally, while the interface that Yosion has implemented is pretty close to the traditional iPhone menu system, it has some quirks.

A final downside is that while the device will be made available in China this week, there’s no plans to bring it to the U.S. yet.  All the menus in the Yosion apps are in Chinese, so unless you’re fluent, you may be out of luck.  If you speak Chinese fluently and are very interested, you could probably pick one up from China or possibly even mail order it.

As to the legality of the device, were it to come to the U.S. Apple would surely call it illegal and try to kill it, much as it did to OS X desktop maker Psystar.  Fortunately for Yosion, those kind of complaints will likely get Apple nowhere in China.  So for now it appears that at least the Chinese have found a way to get a semi-authentic iPhone of sorts for much cheaper than usual — and with more memory.

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