Key Details of Apple Inc.'s Next iPhones Revealed

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KGI Securities analyst Ming-Chi Kuo, by way of MacRumors, just published some information about Apple's (NASDAQ: AAPL) next-generation iPhones slated to launch in the fall of 2018. Kuo says Apple is prepping three new iPhones. All three of them, he says, will include full-face displays as well as the company's TrueDepth camera systems, which enable features such as Face ID biometric authentication as well as animated emojis, which Apple calls "animoji."

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The cheapest of the bunch will apparently have a 6.1-inch liquid crystal display (LCD) with a pixel density of between 320 and 330 pixels per inch. That means the display will be about as sharp as the one found on today's iPhone 8 but noticeably less sharp than the one found on the current iPhone 8 Plus.

This is consistent with recent reports that Apple was planning to introduce an iPhone with a large-screen LCD next year alongside models with more advanced organic light-emitting diode (OLED) displays.

Apple is also reportedly prepping two higher-end models. The first is expected to be a direct successor to this year's iPhone X, with a 5.8-inch OLED display, while the second will be a larger version of the successor to the iPhone X, packing a 6.5-inch display. The latter bit of information is consistent with previous rumors, which claimed that Apple was preparing an iPhone X with a 6.46-inch display for launch next year.

If this information is accurate -- and I have no reason to not believe it -- then Apple should have an incredibly strong lineup of smartphones next year.

An iPhone X for the masses

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A next-generation iPhone X as well as a larger-screen iPhone X should both serve to solidify Apple's position in the ultra-premium portion of the smartphone market. This year's iPhone X is already a best-in-class product, and so offering an updated version as well as a larger-screen model should both serve to catalyze upgrade activity and continue to persuade Android owners to switch over to the Apple ecosystem.

The most interesting phone of the bunch, though, is probably the LCD model. I see this as the iPhone X for the masses, and I think it could help to catalyze a substantial amount of upgrade activity. Those who found the iPhone X's features and aesthetics attractive but wouldn't shell out $999-plus for a smartphone are probably going to be attracted to next year's 6.1-inch LCD iPhone.

The 6.1-inch display size also appears to be well chosen. It's nearly the average of the display sizes of the OLED models: The average of 6.46 and 5.85 is approximately 6.16.

Considering Apple is reportedly set to slash production of the 4.7-inch iPhone 8 as demand for the iPhone 8 Plus exceeds expectations, and as demand for the iPhone X seems to be strong, it's clear that iPhone customers are increasingly finding value in larger-screen devices.

Sufficient differentiation to protect product mix

Obviously, Apple isn't going to want potential buyers to choose the lower-cost LCD iPhone over the more expensive OLED versions if it can help it. That's why Kuo's claim that the LCD model will "differ significantly from the OLED models in hardware and design specs" makes so much sense.

I wouldn't be surprised to see less advanced rear-facing camera subsystems on the LCD iPhone compared with the ones found on the OLED models, nor would I be surprised to see the LCD iPhone include less system memory and come in fewer storage options than the higher-end iPhones will.

I'd also expect the OLED iPhones to use stainless-steel frames, as this year's iPhone X does, but next year's LCD iPhone to continue to use an aluminum frame, like this year's iPhone 8 and 8 Plus.

The trick for Apple is to make the LCD iPhone appealing to those who simply won't pay more for higher-priced iPhones, while adding enough extra innovation to the higher-priced models so that those willing to pay more for meaningful innovations will do so.

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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.