Apple’s App Store now has more than 27,000 free or cheap applications for the iPhone available for downloading ­ and appears set to become a US$1 billion business by the end of the year, according to some estimates.

Charlie Wolf, an Apple-watching analyst with Needham & Co., said App Store application downloads have already surpassed 500 million.

Wolf estimated the store sold $203 million in applications in the December quarter ­ equating to roughly $800 billion annually. Considering application sales increase each quarter, that scenario could push the store to reach $1 billion by the end of the year, he calculated.

Makers of other smartphones have scrambled to copy the App Store formula, with Google’s Android Market already in action and Blackberry’s App World and Nokia’s Ovi set to follow in coming weeks.