Next year, Apple (NASDAQ:AAPL) is expected to release three new smartphones. The first is expected to be an upgraded version of this year's iPhone X, with the second being a larger-screen version of the first.
The third model, which will likely be the lowest-priced of the new devices, is expected to have a 6.1-inch liquid crystal display (LCD) -- a cheaper and less advanced display technology compared to the organic light-emitting diodes that the iPhone X uses -- and use less expensive casing materials than its siblings.
While much of the focus in the press and among Apple enthusiasts will almost certainly be on the next iPhone X and its larger sibling, I think that the 6.1-inch LCD model could have a huge impact on the performance of Apple's iPhone business in the coming product cycle.
An iPhone X for the masses
This year's iPhone X is an expensive device: The baseline model with 64 GB of storage begins at $999, with the 256 GB variant selling for $1149.
Those price points are simply inaccessible to many smartphone buyers, and possibly even to many iPhone buyers.
In countries with hefty import duties and/or weakening currencies relative to the U.S. dollar, the iPhone X is even less accessible.
The rumored 6.1-inch LCD iPhone is likely to offer many of the key selling points of the iPhone X -- all-screen display, 3D-sensing front-facing camera, and possibly many of the internal upgrades that the next iPhone X models will get -- at a more accessible price point.
KGI Securities analyst Ming-Chi Kuo thinks that such devices will come in between $649 and $749 -- or, in other words, at pre-iPhone X pricing.
I think this device has the potential to help both the average iPhone selling price and Apple's unit-shipment story.
Helping both unit and average selling prices
In terms of unit-shipment growth, I think the effect will be straightforward: Apple will have a much more compelling product available next year at traditional iPhone price points than it did this year with the iPhone 8 and 8 Plus.
Consumers seem to respond well to form-factor changes, especially those that eliminate bezel in favor of additional screen real estate. Additionally, the 3D-sensing feature in the iPhone X seems to be a hit with consumers, with one report claiming that the TrueDepth camera is a "major driver among positive ratings."
So, bringing that same goodness to a more accessible price point should help accelerate iPhone refresh among the current installed base. It could even help Apple gain additional market segment share.
As for average selling price: At first it might seem that the 6.1-inch LCD iPhone would hurt average selling prices rather than help them. Indeed, if Apple brings the features of the iPhone X to a lower price point, shouldn't that hurt iPhone X sales and actually decrease iPhone average selling prices?
Not so fast!
I think the people buying the iPhone X this year are, by and large, smartphone shoppers who want the best and are willing to pay for it. As long as Apple sufficiently differentiates next year's iPhone X models from the 6.1-inch LCD model, I'd expect minimal share shift from the more expensive X-series iPhones to the regular one.
Where the 6.1-inch LCD iPhone can boost average selling prices is among smartphone buyers who would've picked up an iPhone 8 or iPhone 8 Plus this year, but thought the differences were too small to justify the price premium compared to the now-discounted iPhone 7 and iPhone 7 Plus.
The 6.1-inch LCD iPhone should be a clear winner compared to this year's iPhone 8 and iPhone 8 Plus in form factor and aesthetics; adding in the 3D-sensing front-facing camera, I think the device will easily be worth the premium to those who can afford it.
In short: A larger percentage of the iPhones Apple sells in the coming product cycle are likely to be from its latest generation of devices than in this product cycle.
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.