Speculation surrounding Apple’s long-rumored budget iPhone has escalated over the last few months, but a first-hand report by China Labor Watch today all but confirmed the handset’s existence.

The non-profit organization sent undercover investigators into three factories owned by Apple supplier Pegatron in China to assess alleged labor rights violations.

Although the report focuses on workers’ pay, hours and working conditions, it also confirms the lower cost plastic materials being used in Pegatron’s Shanghai factory to create Apple’s upcoming budget smartphone.

“(The factory’s) assembled products include iPhone 4, iPhone 4s, iPhone 5, and low-priced plastic iPhones,” the report states.

A diary entry written by one of the undercover investigators while working at the factory continues:

“Today’s work is to paste protective film on the iPhone’s plastic back cover to prevent it from being scratched on assembly lines. This iPhone model with a plastic cover will soon be released on the market by Apple.

The task is pretty easy, and I was able to work independently after a five-minute instruction from a veteran employee. It took around a minute to paste protective film on one rear cover. The new cell phone has not yet been put into mass production, so quantity is not as important. This makes our job more slow-paced than in departments that have begun mass production schedules.”

Photographs allegedly detailing the new iPhone’s packaging were uploaded to the Chinese forum WeiPhone over the weekend. The name iPhone 5C is printed on the side of the box, possibly leaking the name of the device.

The authenticity of the images are re-inforced by further rumors which suggest the new iPhone will be offered in a range of different colors, similar to the current generation iPod Touch. The ‘C’ moniker could certainly equate to color – cheap is another option, but doesn’t have quite the same ring to it – and would help to differentiate the device from its white and graphite counterpart.

The Wall Street Journal first reported that Apple was working on a cheaper version of the iPhone back in January, suggesting that it would launch later this year. Bloomberg quickly joined the fray to report that it would retail somewhere between $99 and $149 – although it wasn’t specified if that was a SIM-free device, or part of a two-year contract.

Apple’s first foray into producing mid-range and low-end smartphones is telling given the iPhone’s notably premium branding up until now. A cheaper iPhone could grow Apple’s userbase exponentially in developing and emerging markets, and also carve out the swelling market share being taken by Google’s Android platform.

September 18 is the date currently being banded about for the cheaper iPhone’s official reveal. Not long now, it would seem.

Image Credit: WANG ZHAO/AFP/Getty Images