Why Did Apple Inc. Cancel Its Future 5.28-Inch iPhone X?

The Korea Herald, citing a report from The Bell, just said that Apple (NASDAQ: AAPL) had originally planned to launch three new iPhones with organic light-emitting diode (OLED) displays next year measuring 5.28, 5.85, and 6.46 inches.

This year's iPhone X packs a 5.85-inch OLED display, so the 5.28-inch and 6.46-inch display models would've complemented the size introduced this year, presumably in the hopes of catering to a wider range of tastes and price points.

However, per the report, Apple nixed its plans to build the 5.28-inch model "possibly due to the low marketability of the smaller version."

Does this make sense? I think so.

The smaller one was probably a lower-cost model

The larger a display is, the more expensive it is to manufacture. Moreover, since Apple is reportedly stuck sourcing most, if not all, of the OLED displays for its 2018 iPhone lineup from rival Samsung (NASDAQOTH: SSNLF).

That supply arrangement, at least according to respected analyst Ming-Chi Kuo with KGI Securities, has led to high iPhone X display costs for Apple.

My guess is that the 5.28-inch model, had it not been canceled, would've been designed to bring the iPhone X's display technology and form-factor to a smaller, lower-cost device.

A lower-cost iPhone X-like device may have allowed Apple to transition all its new iPhones to OLED displays and a design language like that of this year's iPhone X.

People don't want smaller phones

Although there are smartphone buyers who want smaller form factor devices, larger-screen devices with high screen-to-body ratios appear to be what premium smartphone customers want these days.

Indeed, The Korea Herald observes that Samsung's 6.2-inch Galaxy S8+ has sold better in the marketplace than its smaller, lower-cost 5.8-inch sibling.

Considering this, Apple's reported replacement for this 5.28-inch lower-cost iPhone X -- an iPhone with a 6-inch liquid crystal display (LCD) at entry-level price points (within a stack of new flagship iPhones) -- could make more sense from a business perspective.

Not only would such a phone probably sell better than a 5.28-inch iPhone X-like device, but it would probably be cheaper to manufacture thanks to the use of an LCD rather than an OLED.

On top of that, the adoption of OLED screens on both a next-generation 5.85-inch iPhone X as well as a new 6.46-inch iPhone X could lead to further tightness in OLED display supply. Adding a 5.28-inch OLED iPhone to the mix would further drive demand up for OLED panels, potentially jeopardizing Apple's ability to secure enough displays for the new 5.85-inch and 6.46-inch iPhone X successors.

What should Apple do to appease buyers who want small iPhones?

I don't think Apple should leave customers who really want advanced technologies in small form factors -- or, in other words, the iPhone SE demographic -- out in the cold.

Apple could build a low-cost successor to the current iPhone SE with updated internals, a more aesthetically pleasing design, and a more advanced LCD if it thinks the business case is there for it. There's no need for Apple to use an expensive and relatively scarce OLED screen for such a device -- at least not yet.

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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 a disclosure policy.