Apple Inc. Might Be Making a Big Mistake

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KGI Securities analyst Ming-Chi Kuo (via MacRumors) recently said that Apple (NASDAQ: AAPL) is expected to launch two new iPhones next year with advanced organic light emitting diode (OLED) displays like the one used in the popular iPhone X.

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The first is expected to have an OLED display that measures 5.85-inches along the diagonal, just as this year's iPhone X does. The second is expected to have a much larger 6.46-inch OLED display.

Given continued customer preference for larger-screen displays, as such displays are commonly viewed as more immersive, it makes perfect sense for Apple to add such a product to the lineup. What I found particularly interesting, though, was Kuo's claim that the "major hardware difference in the two OLED models is size." If this is true, then Apple is making a mistake.

The Plus should get something extra

For as long as Apple has been selling regular-sized iPhones and their Plus counterparts, the Plus phones have had a few extra features that the regular-sized iPhones didn't have.

With the iPhone 6/6s generation, the Plus models had optical image stabilization on the rear camera lens for better image quality as well as sharper displays. With the iPhone 7/8 generations, the Plus models had dual-lens cameras that the regular iPhone 7/8 lacked, as well as the sharper displays.

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These differences aren't huge, but as we saw during the iPhone 7 cycle (and what we're likely to see during the iPhone 8 cycle), the dual-lens camera coupled with the larger screen proved to be an effective selling point. The battery life on the Plus phones has generally been better than that on the regular-sized phones, too, thanks to the larger chassis that could accommodate larger batteries.

With next year's iPhone X Plus, the device will have natural screen size and battery life advantages over its smaller-screen sibling. However, I think Apple will need to throw in something extra so that people who may view the larger size as a disadvantage (not everyone wants a bigger device) will be compelled to see past that drawback and buy the phone anyway. There are a few directions that Apple could go with respect to that.

Better camera or faster display

Apple could follow the same playbook that it did over the last several generations and endow the iPhone X Plus with better camera specifications as well as a sharper display, and I think that'd work out fine. However, there's another angle Apple could go with if it chooses to: ProMotion on the iPhone X Plus.

Apple was rumored to be testing its ProMotion technology, which is Apple marketing speak for a screen that can display its contents at up to 120 times per second (twice what current iPhone displays can do), for the iPhone X. The feature was ultimately cut from the phone.

High refresh rate displays chew up more power than lower-refresh rate ones, all else being equal, so I wouldn't be surprised if this feature came to the iPhone X Plus next year since the iPhone X Plus should have an even larger battery than the next-generation iPhone X and would, therefore, be able to handle the increased power draw of a faster display.

At this point, if I had to bet on which way Apple will go to try to differentiate next year's iPhone X Plus from the standard iPhone X Plus -- assuming it differentiates them at all -- I'd bet on the faster display over the improved camera subsystem. In an ideal world, though, Apple would endow the iPhone X Plus with both, which would ultimately make it an irresistible device to iPhone enthusiasts.

Foolish takeaway

Ultimately, as the overall smartphone market sees slowing growth, Apple will need to turn to average selling price growth to substantially boost iPhone revenue. By making the iPhone X Plus a phone that's irresistible to smartphone/iPhone enthusiasts by giving it compelling, unique features said enthusiasts will be more willing to pay up for Apple's most expensive iPhones.

I think Apple has a huge opportunity ahead of it with next year's iPhone X Plus to continue enriching its product mix and ultimately boosting its average selling prices. I hope that the company doesn't squander it by trying to normalize the feature sets between the iPhone X and iPhone X Plus.

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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.