Apple is almost certainly working on a digital television based on its iOS operating system, according to multiple sources in Silicon Valley.

An Apple-based television makes sense in light of Apple’s continued expansion out of the computer industry into the larger consumer electronics market. But is it real?

Multiple reports, as well as sources interviewed by VentureBeat, support the rumor, which is widespread among the gadget industry.

• Piper Jaffray analyst Gene Munster, a longtime Apple analyst, predicts that Apple will produce a television in  late 2012 or early 2013. In an interview with VentureBeat, Munster cited multiple sources, including component suppliers as well as an internal Apple source, to back up his theory. Munster predicts this will be an actual TV, not just a set-top box, and most likely running a version of iOS. (Note: Munster made a similar claim in 2009, except then he said that Apple would have a TV by 2011. He now says “I think the probability is almost zero that it will be this year.”)
• Venture capitalist Stewart Alsop, of Alsop Louie ventures, lent credence to the “iTelevision” theory in an interview with VentureBeat. Alsop sits on the boards of TiVo and Sonos, follows the hardware industry closely, and says he has heard from multiple sources throughout Silicon Valley that the Apple television project is underway.
• The Wall Street Journal mentioned that Apple is “working on new technology to deliver video to televisions, and has been discussing whether to try to launch a subscription TV service,” according to “sources familiar with the matter.” That’s typically code for an inside source.
• And Cult of Mac notes that the time may be ripe for Apple to make a television, as high-end TVs have started to dip below the $1,000 price threshold.
• Even former Apple CEO Steve Jobs turned the wheels of the rumor mill in 2010, saying that it made sense for Apple to integrate its technology into television sets.

Apple has been testing the waters with its AppleTV, a set-top box that provides access to movies and TV from iTunes as well as other online video content. The company has a number of partnerships with movie studios and television networks, giving it an impressive content library. And its lightweight iOS operating system seems ideally suited for consumer devices (the OS is already under the hood in AppleTV).

Alsop figures the only thing holding Apple back is the cost of LCD screens, which has been a limiting factor in all of Apple’s iOS products since 2007.

The company initially planned to make a tablet when it started planning a touchscreen-centric computer in the mid-2000s. But, Alsop says, the cost of the display was prohibitively expensive, so Apple instead focused on applying the technology to a device with a smaller, cheaper LCD: The iPhone.

The price of LCD panels has droped fairly steadily, thanks to increased manufacturing efficiency, so eventually quality screens became cheap enough to make the 9.7-inch iPad economically feasible.

It won’t be long, Alsop predicts, before 15-inch or 19-inch touchscreen televisions running iOS hit the scene, probably in time for the 2012 holiday season. That’s big enough to be a serviceable TV for the kitchen, bedroom or dorm room.

More importantly, iOS will enable Apple to transform the television into something that doesn’t just show videos, but also plays games, runs apps, lets you check your schedule and tweet about what YouTube movie you happen to watching at that moment.

And it could tie seamlessly into other Apple devices, like the iPhone, iPad and MacBook Air, giving the company an enviable full-circle consumer product line. The vision might look something like what Corning, the makers of Gorilla Glass (widely believed to be the glass used for the face of the iPhone and iPad), predicted in a promotional video it published in February, below.

“You look at TVs in Best Buy and they’re the same damn things that they’ve been building for 30, 40, 50 years,” said Alsop. Although the display technology has changed and the screens are flat and high-resolution now instead of huge, low-res cathode screens, the fundamental act of watching TV is pretty much the same: Sit back and flip the channels.

“Apple will do to television manufacturers what it did to phone makers with the iPhone,” Alsop said.

Illustration: Sean Ludwig/VentureBeat

Tags: digital video, interactive TV, ipad, iPhone, iTelevision, media, television, VentureBeat