Although it's an interesting time for Apple (NASDAQ:AAPL)-- the company is slated to announce second-fiscal-quarter earnings on April 27 amid euphoria of its newest product, the Apple Watch -- the rumor mill continues to percolate with regards to its core smartphone product. Earlier rumors have centered on Force Touch, carrier-agnostic SIM cards, and increased RAM in the next-gen unit.
More recently, however, the most interesting rumor concerns form factor. And rightfully so: In the event that Apple chooses not to manufacture another four-inch screen variant, non-iPhone 6 upgraders would be forced to upgrade to a larger-screen phone. While that isn't a big problem to many users, there's an entrenched minority that want to stick to their smaller screens. Fortunately for that contingent, Digitimes reports that Apple will offer a four-inch iPhone in its next-gen lineup -- a rumor that builds upon an earlier report from Apple Insider.
A smart move for Apple to stay small
If true, this is a smart move for Apple to make a four-inch premium model. In the U.S., Apple would manufacturer the only small premium handset; as a matter of fact, Apple's rumored four-inch and 4.7-inch variants are among the two smallest premium models.
Google's new Galaxy S6 and Galaxy S6 Edge come in around five inches; Google's Nexus 6 comes in with a massive near-six-inch screen. Even HTC's One (M9) tips the scale at five inches.
For Apple, keeping the smaller model allows for more consumer choice, and allows for a lower-cost option for potential shoppers. Last year, Apple increased the price of its iPhone 6 unit $100 and the iPhone 6 Plus $200 over the corresponding iPhone 5s unit's price to make up for the higher bill of materials, or BOM, cost that the larger screen requires.
Two lines of thought
For Apple fans, there are two lines of thought on how Apple will keep a four-inch variant in its lineup. The first is rather simple -- continue to offer the iPhone 5s and lower it down the value chain. Right now, the current lineup, in order of entry level off-contract cost, is the iPhone 6 Plus ($749), the iPhone 6 ($649), the iPhone 5s ($549), and the iPhone 5c ($450).
While this would be a departure from Apple's normal off-model treatment of dropping down the last-year model to the proverbial bargain bin, Apple could offer only current versions of the 4.7-inch and 5.5-inch models, and keep the iPhone 5s in its current form as the bargain model. Apple benefits by already having the production capability in place, and by using two-year old processing chips (A7) and technology, which should lead to a cheaper BOM.
On the other hand, BGR reports Apple will refresh the four-inch unit with the now-latest A8 chip and newest technologies -- most notably, Apple Pay. Outside of the obvious screen size differences, one of the bigger user-experience changes between the current iPhone 6 and iPhone 6 Plus and the iPhone 5s is the inclusion of Apple Pay. Considering Apple is margin-sensitive in regards to its core product, it may be hard for the company to include these new features while subsequently dropping the price.
In the end, it's possible for Apple's lowest-end model to receive a price bump, as well, joining the current-gen's phone price increase of $100. Regardless of the approach it take, it appears that Apple will keep a four-inch version in its lineup.
Jamal Carnette owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.