Does the 6.1-inch LCD iPhone Replace iPhone 8 or iPhone 8 Plus?

Respected analyst Ming-Chi Kuo with KGI Securities recently published a research note (via MacRumors) in which he claims that Apple (NASDAQ: AAPL) will ship around 100 million units of its upcoming mainstream iPhone with a 6.1-inch liquid crystal display (LCD). Such shipment figures would make it the most popular of Apple's upcoming iPhone models, as Apple usually sells around 200 million iPhones each year.

Although Kuo has published many of the key specifications of the device, he doesn't appear to be entirely sure as to how Apple will price it. He claims that it'll be priced between $699 and $799, with the pricing depending on whether Apple views the device as the successor to the $699 iPhone 8 or the $799 iPhone 8 Plus.

I'd like to make the case that it doesn't replace either one of them, but rather both of them. Allow me to explain.

Understanding the coming iPhone lineup

The current iPhone lineup consists of three smartphones: iPhone 8, iPhone 8 Plus, and iPhone X. The iPhone 8 and iPhone 8 Plus represents Apple's mainstream iPhone models -- they're improved versions of their respective predecessors being sold at roughly the same price points.

The iPhone X, on the other hand, represented a seemingly entirely new tier of iPhone -- a device made of premium materials and packing unique features with a higher price tag to match.

Apple's upcoming iPhone lineup is expected to also include three models, but instead of including two standard iPhone models and a premium model, the current rumors point to a single lower-cost model, a direct successor to the current iPhone X, and a larger, pricier version of the successor to the iPhone X.

The way to think of the transition between the current lineup and the upcoming lineup is this, then: The lower-cost iPhone with a 6.1-inch LCD will serve as a replacement for both the iPhone 8 and the iPhone 8 Plus, while the updated version of the iPhone X and its larger sibling will replace the current iPhone X as the company's premium options.

What does this mean for pricing?

The iPhone 8 starts at $699 and the iPhone 8 Plus starts at $799, so it makes sense that Kuo would expect the 6.1-inch LCD iPhone would launch at either of those price points. However, I'm not convinced that those are the only two options for the pricing of the 6.1-inch LCD iPhone.

I wouldn't be surprised to see Apple offer the 6.1-inch LCD iPhone at $749 -- the average of the iPhone 8 and iPhone 8 Plus starting prices -- for the model with the smallest amount of storage (likely 64-gigabytes), going up to $899 for the model with additional storage (likely 256-gigabytes).

Although $749 would represent a hike from the $699 starting price of the iPhone 8, I suspect that consumers will view such a price point positively as they'll now be able to get what is effectively today's $999 iPhone X (with some internal upgrades, to boot) for a $250 discount. Moreover, because customers are probably getting used to the idea of $999+ flagship smartphones, a $749 device that has most of Apple's latest and best technologies might even seem like a bargain.

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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.