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Apple Inc. Is Doing Something Really Cool With the iPhone 7 Plus

By Ashraf Eassa – Jan 27, 2016 at 2:25PM

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Two variants, one with some seriously slick camera features to potentially drive mix -- and ultimately, iPhone average selling prices -- upward.

In an earlier article, I argued that in order to boost its iPhone average selling prices further, Apple (AAPL -0.40%) should work to differentiate its Plus line of iPhones significantly relative to its non-Plus flagship iPhone. The Plus line of phones are more expensive than the non-Plus models at every storage tier, so the more Apple can convince customers to move to its larger phone, the better.

It would seem that Apple will be doing just that with its next-generation iPhone, except this time with a very interesting twist.

Two different iPhone 7 Plus variants
According to generally reliable KGI Securities analyst Ming-Chi Kuo (via 9to5Mac), Apple is actually planning two variants of its next-generation iPhone 7 Plus. The first will come with a standard single-lens iSight camera and the second will feature a dual-lens camera with support for optical zoom, reportedly utilizing technology that Apple got as part of its acquisition of LinX Imaging.

The iPhone 7 Plus with dual cameras would, as suggested, be a premium variant to the vanilla iPhone 7 Plus. I wouldn't be surprised if Apple reserved the dual lenses for the configurations with 128 GB and 256 GB of on-board flash storage, with the smaller configuration models (16 GB and 64 GB) as a means by which to convince customers to buy up the product stack.

This is a credible, time-tested strategy
I always found it strange that Apple didn't do much to differentiate its Plus iPhones from the regular models. Sure, it added little features like optical image stabilization and a sharper display (albeit less color accurate and with worse contrast) to the bigger model, but they really were effectively two sizes of the same device.

However, it would seem that Apple is finally taking the proverbial kid gloves off with respect to the larger iPhone and will be endowing it with features that simply wouldn't work from a technical/financial perspective in the smaller phones.

Of course, I would expect the vanilla 4.7-inch iPhone to still be an excellent device for most smartphone buyers, but it's looking more and more that the really interesting innovations -- ones that hardcore smartphone enthusiasts should appreciate -- will come in the Plus line.

So long, iPad?
In its most recent earnings release, Apple reported that iPad unit sales plunged 25% year over year, with revenue down 21%. There is little doubt in my mind that the iPad is being cannibalized by larger iPhones, with the Plus model likely doing the most damage.

As Apple continues to introduce innovative and interesting new technologies into its iPhone lineup, with the Plus iPhone models seemingly getting the best of the best, I suspect that the value proposition of iPad will continue to erode. There will still, of course, be buyers interested in the large displays and the iPad-specific software, but iPhone is clearly the better product and in my view it will only get better with time.

That being said, selling an iPhone 7 Plus in place of an iPad mini 4/iPad Air 3 is still a net win for Apple (assuming of course the customer wouldn't have bought both a new iPhone and an iPad otherwise) as the iPhone not only commands higher average selling prices but per-unit margins are probably much better, too. 

Ashraf Eassa has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Apple. 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.

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