In late 2014, Apple (AAPL +0.49%) introduced its very first "phablet" -- the iPhone 6 Plus. Although the smaller iPhone 6 was the more popular of the two (and it's very likely that the current iPhone 6s is more popular than the iPhone 6s Plus) overall, there are some very important, high-growth countries such as China in which the larger-screen iPhones are probably more popular.
It's also worth noting that for models with equivalent storage capacities, Apple charges a full $100 more for the Plus variants of its phones. There's little doubt in my mind that Apple would prefer that iPhone customers "buy up" to the larger iPhones than go with the smaller 4.7-inch model.
To that end, I believe that investors and consumers alike should expect Apple to increasingly endow the Plus versions of its iPhones with special features and improved specifications relative to the smaller, standard iPhone.
So, this is how I think Apple will differentiate the iPhone 7 Plus from the iPhone 7 next year:
Higher resolution, greater number of pixels per inch
For both the iPhone 6/6 Plus and the iPhone 6s/6s Plus pairs, Apple used a much higher-resolution display on the Plus models than it did on the standard models. The iPhone 6/6s used 1334-by-750 resolution displays while the 6s/6s Plus used much higher-resolution 1920-by-1080 displays.
Not only do the larger phones pack in more pixels by virtue of the fact that they are larger, but the larger phones use displays that cram in more pixels per inch. This means that the displays on the larger phones also appear quite a bit sharper than the displays on the smaller phones.
I believe that with the iPhone 7 Plus, Apple will deliver a significant improvement in pixel density relative to the displays found on the iPhone 6 Plus/6s Plus.
My initial thoughts were that Apple would include a 2560-by-1440 display on the iPhone 7 Plus (improving pixels per inch to around 534). However, given that the iPhone 6/6s Plus internally render images at 2208-by-1242 and downscales them to 1920-by-1080, it seems more reasonable to expect that the iPhone 7 will feature a 2208-by-1242 display (462 pixels per inch).
This won't be quite as sharp as the 2560-by-1440 displays that are commonly found in high-end Android phones today, but it would be a solid improvement over the already razor-sharp 1920-by-1080 panel found in both the iPhone 6 Plus and 6s Plus.
I also expect Apple to improve the resolution and pixel density found on the standard iPhone 7; it would be nice to see a full 1920-by-1080 display in a 4.7-inch display, but this would result in a display with a greater number of pixels per inch than what I believe the iPhone 7 Plus will sport -- likely a no-go.
Before the iPhone 6 launched, there were reports that Apple was testing a display with resolution of 1704-by-960 for the 4.7-inch device. Such a resolution could mean a very nice boost in image sharpness as the number of pixels per inch would move up from "just" 326 to 416, while at the same time making sure that the iPhone 7 Plus is the premium option in terms of pixel density.
Faster processor to go with that additional memory
I don't think Apple will design a special variant of its A10 processor for the iPhone 7 Plus. However, it's worth noting that the larger (and likely thicker) body of the iPhone 7 Plus relative to the iPhone 7 should allow for increased thermal headroom for the processor.
Indeed, in Ars Technica's testing of the iPhone 6s and 6s Plus, although both phones were able to sustain essentially peak CPU performance for 10 minutes. The processor inside of the 6s, however, began to throttle over the following 20 minutes, per the review. The chip inside of the 6s Plus, on the other hand, was able to sustain maximum performance "until well past the 20 minute mark."
From these results, it would seem that Apple should be able to increase the peak CPU (and likely graphics) clock speeds on the A10 inside of the iPhone 7 Plus relative to the one inside of the vanilla iPhone 7.
A boost in peak clock speeds, coupled with the rumored additional gigabyte of RAM in the 7 Plus relative to the 7 (per KGI Securities' Ming-Chi Kuo), would make the iPhone 7 Plus a clearly faster/higher-performance device.
Additional software perks for the larger screen device
The iPhone 6 Plus and 6s Plus devices offer some additional software features relative to their smaller counterparts such as additional functionality in certain apps when the devices are used in "landscape" mode.
I wouldn't be surprised to see Apple add even more iPhone Plus-exclusive software features and functionality in the iPhone 7 Plus and beyond. Although doing so would mean incremental research and development spending, it would probably be well worth it if those features pushed more of Apple's installed base to move to the more expensive iPhone 7 Plus models (improving iPhone average selling prices).
