Maybe I Was Wrong About This Apple Inc. iPhone Prediction

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In a previous column, I laid out a case for why Apple's (NASDAQ: AAPL) upcoming lower-cost iPhone, which I'll refer to as the 6.1-inch iPhone since it'll reportedly have a 6.1-inch liquid crystal display (LCD), will use Apple's A11 Bionic applications -- a chip that'll be about a year old when the device launches -- instead of the upcoming A12 chip.

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The applications processor inside of a smartphone is responsible for many of the key functions of the device, including running applications, rendering 3D graphics, performing image and video capture, and efficiently playing back video. It is the heart of the device and ultimately serves to define its capabilities.

The reasoning behind my prediction was simple: The A11 Bionic should be more than enough to handle the requirements of the device and, as an added bonus, would allow Apple to promote the A12 as a unique selling point for its pricier iPhones that'll use more advanced organic light emitting diode (OLED) displays.

However, there's one piece of evidence -- one that I hadn't considered carefully enough before -- that leads me to have second thoughts about this prediction.

The wireless subsystem

Generally accurate analyst Ming-Chi Kuo with KGI Securities recently claimed that all three of the iPhones Apple plans to introduce next year will include new, high-performance cellular modems. More to the point, all three devices will include the same cellular capability.

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While it is entirely possible that Apple could use a new cellular modem paired with an older processor, it's reasonable to believe that Apple is planning to use the newer cellular modem because it'll make the device more marketable. This suggests that despite the fact that the 6.1-inch LCD iPhone is expected to be cheaper than its siblings with more advanced OLED displays, Apple still cares about endowing it with leading-edge performance.

The A11 Bionic is competitive, but...

To be clear: Apple's A11 Bionic chip is easily a best-in-class mobile processor and it'll probably still be highly competitive in many respects with whatever we see come from Apple's competition. And, from a purely pragmatic perspective, the A11 Bionic should pack more than enough horsepower to deliver a fluid user experience in the 6.1-inch LCD iPhone.

However, considering how much positive press Apple seems to get for its mobile processors -- unsurprising considering how good those chips are -- Apple may want to stick an A12 chip inside of the LCD iPhone in a bid to further boost its competitiveness. The 6.1-inch LCD iPhone is expected to launch in September 2018 and likely won't get an upgrade until September 2019, so while the A11 Bionic is leading edge today and will still be great in about a year (or even two), it won't be quite as ahead of the competition as the A12 will be.

To the extent that chip performance and capabilities constitute selling points, an A12-powered 6.1-inch LCD iPhone will be in better competitive shape than an A11 Bionic-powered one.

Summing it up

Like any product decision, there are pros and cons. The pros to Apple using the A12 in the 6.1-inch LCD iPhone is improved marketability, better performance, improved power efficiency, and enhanced camera/AI capabilities. A better chip, all else equal, means a better phone.

The downside is that Apple can't use the A12 as a key selling point for its pricier OLED iPhones. Fortunately, there are other ways -- ways that may be more important to typical smartphone consumers -- that Apple can differentiate those devices: casing materials, camera performance, display features, and so on.

It's anybody's guess as to how Apple will choose to segment its upcoming iPhone models, but if Kuo is correct that the 6.1-inch LCD iPhone will get the same cellular capabilities as the higher-end OLED iPhones, then that might be a strong indication that the rest of the internal specs of the 6.1-inch LCD model will be the same as the OLED models, too.

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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.