[Tyrannosaurs]

There are a whole load of reasons why we've not seen an iPhone Nano but primarily I think it's that a smaller screen is just a bad form factor for a smart phone. where the move is generally towards larger screens and the current iPhone screen is already seen by many as too small.

Beyond that there are a host of practical things - that getting everything into the existing phone at that size is already a challenge, battery life given the need for a far smaller battery, developers having to cope with another screen resolution.