Apple (NASDAQ: AAPL) is expected to launch three new iPhones this fall. One of these devices is expected to be an upgraded version of the company's current flagship iPhone, the iPhone X, and another that's a larger version of the updated iPhone X, a Plus version.
The third is anticipated to be a lower-priced model that uses less advanced display technologies and a cheaper construction than either the next iPhone X or its larger iteration. KGI Securities analyst Ming-Chi Kuo recently predicted that the lower-cost model will be the best-selling of the three new iPhones, making up roughly half of the shipments of the three devices combined.
I'd like to make the case that the second-best-selling model of the trio won't be the standard-sized iPhone X but instead its larger counterpart.
Image source: Apple.
Go big or go cheap
There has been an industrywide shift toward larger-screen smartphones going on for quite some time. With each generation, iPhone Plus smartphones have become a larger percentage of Apple's latest-generation smartphone shipments, with the iPhone 8 Plus reportedly overtaking the standard iPhone 8 in the current product cycle.
As smartphones increasingly become people's go-to personal computing device (and, in some cases, people's only computing devices), the larger screen real estate becomes more valuable.
In this coming product cycle, the cheaper iPhone is expected to have a liquid crystal display (LCD) that measures 6.04 inches along the diagonal, while the iPhone X successor and its larger counterpart are said to have more advanced organic light-emitting diode (OLED) displays that measure 5.85 inches and 6.46 inches along the diagonal, respectively.
Price-sensitive buyers are likely to go for the LCD model as it should offer most of the capabilities of the 5.85-inch OLED model for a much lower price. Those who value the additional features that the OLED models are said to have (better displays, 3D Touch, better cameras, and more memory) will have their choice between two devices that primarily differ in screen size.
In the table below, I offer my view of what customers who would've bought the iPhone 8, iPhone 8 Plus, or iPhone X in the current cycle will most likely opt for in the coming product cycle.
|2017 iPhone Purchase||2018 iPhone Purchase|
|iPhone 8||6.04-inch LCD iPhone|
|iPhone 8 Plus|| |
6.46-inch OLED iPhone
|iPhone X||5.85-inch next-generation OLED iPhone OR 6.46-inch OLED iPhone|
A customer who picked the iPhone 8 over the iPhone X likely did so for price reasons, as the physical footprints of the devices are similar but the iPhone X's specs and aesthetics are superior.
On the other hand, a customer who chose the iPhone 8 Plus over the iPhone X likely didn't do so for cost reasons but instead because he or she valued the larger screen and the Plus-specific software features present on the iPhone 8 Plus but not the iPhone X.
Finally, I think somebody who bought an iPhone X in the current product cycle could go either way when they buy a new iPhone later this year. Those who were willing to pay more for a device with more advanced technology but wanted one that fit roughly the physical footprint of an iPhone 8 are likely to pick the direct successor to the iPhone X rather than the larger one.
However, those who bought the iPhone X because they wanted the best and most expensive iPhone available are likely to pick the 6.46-inch OLED iPhone. Moreover, those who value the Plus-specific features and size but compromised by buying the iPhone X in the current cycle because they wanted the more premium construction, facial recognition features, and higher-quality rear-facing camera are likely to choose the 6.46-inch iPhone X in the coming product cycle.
Put simply, I see the iPhone X Plus appealing to would-be iPhone 8 Plus and iPhone X customers and the next-generation iPhone X attracting only a portion of today's would-be iPhone X buyers. It seems reasonable, then, to conclude that the coming iPhone X Plus will, in fact, outsell its smaller counterpart.
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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.