According to generally reliable analyst Ming-Chi Kuo with KGI Securities, Apple (NASDAQ:AAPL) is planning to launch three new iPhones next year. One of these new iPhones will be a new version of this year's iPhone X, which incorporates a 5.85-inch organic light-emitting diode (OLED) display; another will be a larger version of that updated iPhone X, but with a gigantic 6.46-inch OLED display; and the last will be an iPhone with 6.1-inch liquid crystal display (LCD).
The LCD model is expected to be the cheapest model in the lineup, as LCD technology costs less and and is less advanced than OLED technology. Additionally, per Kuo, the LCD model will "differ significantly from the OLED models in hardware and design specs."
There's quite a lot of skepticism about this report. For example, respected Apple blogger John Gruber expressed doubt that the iPhone X's core design would "trickle down to the $750 price range after just one year."
He also doesn't think the display size makes sense and ultimately concludes that he doesn't think Kuo's report is correct.
Here's why I disagree. In fact, 6.1-inch mainstream LCD iPhone makes perfect sense.
Think like Apple
Apple has sold phones with the same basic form factor as the iPhone 6 and the iPhone 6 Plus for four product generations now: iPhone 6, iPhone 6s, iPhone 7, and iPhone 8. While Apple has, of course, brought numerous technology and user experience innovations with each new model, the truth is that form factor is an important selling point to the average consumer.
Considering this, Apple really wouldn't be smart to try to trot out the same basic form factors to handle the traditional iPhone price points next year, especially as the competitive environment will only intensify over the next year. At the same time, Apple probably wouldn't be wise to compromise on the features and designs of next year's 5.85-inch and 6.46-inch OLED iPhones, either, as the apparent success of the iPhone X seems to indicate that many iPhone buyers will pay premiums for compelling features and aesthetics.
Nevertheless, Apple still needs a product to serve customers that don't want to pay more for the iPhone X.
So, to Gruber's point, not only do I think that Apple cascade down the basic iPhone X features to lower price points (albeit with some compromises such as the use of LCDs instead of OLED displays), but Apple really won't have much choice but to do so if it wants to stay competitive.
A perfect balance
An iPhone with a 6.1-inch full-face LCD would probably occupy a physical footprint that's just a bit larger than that of the current iPhone X (which has a 5.85-inch full-face OLED display). This means that it'd occupy a larger footprint than the current iPhone 8 with 4.7-inch LCD and a smaller footprint than the current iPhone 8 Plus with a 5.5-inch LCD.
In terms of physical footprint, think of it as the average of the 4.7-inch iPhone 8 and the 5.5-inch iPhone 8 Plus. But, thanks to a full-face display, it'd offer users more screen real-estate -- a clear win.
Considering that Apple's iPhone 7 Plus performed surprisingly well during the last product cycle and Apple CEO Tim Cook's commentary about the iPhone 8 Plus getting "off to the fastest start of any Plus model," there's a clear shift in customer preference toward larger-screen devices.
What about those that prefer smaller-screen iPhones?
A 6.1-inch LCD iPhone serving as Apple's entry-level flagship iPhone would mean that Apple is, yet again, forcing a screen-size increase upon users, just as it did when it introduced the iPhone 6 and the iPhone 6 Plus back in the fall of 2014.
There will, of course, be those folks that may resist such a screen size increase. However, I think that those within the iPhone installed base that are reluctant to move to even larger screen sizes will ultimately (and perhaps grudgingly) move to larger-screen iPhones and then quickly find that something like the iPhone 8 is simply too small.
Apple's making the right call here, and I think the performance of Apple's iPhone business in the years ahead will bear that hypothesis out.
Ashraf Eassa has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.