England and Chelsea star Lampard teamed-up with Goldgenie to launch the 64GB gold-plated iPod at Harrods before the World Cup but they have flopped following the dismal performance of Fabio Capello's side in South Africa.
The 24-carat iPod Touch cost up to £599 and featured Lampard's laser-etched signature on the back.
But Goldgenie, backed by BBC Dragon's Den judge James Caan, now plan to recover the gold and replace them with the Hello Kitty character.
A Goldgenie spokesman said: "We may have over-ordered due to World Cup hopes."
Lampard donated all his royalties on the sale of the iPods to the Teenage Cancer Trust.
A source told The Sun: "They're melting down all the Frank Lampard iPods.
"It's not exactly melting down - it's a chemical process. But basically Goldgenie are recovering all the gold so they can use it again.
"They thought loads of people would want them during the World Cup but the backlash against England was so bad that they've had to scrap the whole thing."
- Frank Lampard
- Fabio Capello