Holdouts awaiting a modern 4-inch iPhone have a lot to look forward to with the expected iPhone 5se next month. A mix of iPhone 6 and iPhone 6s technology in a one-hand friendly, iPhone 5-sized case.

It sounds compelling enough that I’ve already considered parting ways with my giant iPhone 6s Plus megaphone and returning to the days of easily pocketable iPhones next month. But based on what we know now, the “upgrade/downgrade” depending on how you look at it would mean losing 3D Touch and a 128GB storage option. That’s not a huge deal for me, especially with Live Photos as an expected feature, but dropping from the 6s cameras back to the 6 cameras really sours the deal for me.

While 4-inch iPhone fans will likely be plenty happy with the iPhone 5se next month and the mid-cycle release is an interesting new strategy, a 4-inch iPhone 7 released in the fall alongside the expected 4.7-inch and 5.5-inch upgrades with comparable specs would simplify the buying decision for me. Here’s why I don’t think that will happen anytime soon (and how Apple could pull it off).

It’s all about average selling price, and Apple has found itself cornered.

For years now, iPhones have sold with similar pricing structures. Without factoring in contract subsidies and financing plans, $649 gets you the base model flagship iPhone, spend $100 more to increase your storage or another $100 to increase it further.

Apple had this pricing structure in place for the 3.5-inch iPhone 4 series, maintained it for the 4-inch iPhone 5 series, and kept it again for the 4.7-inch iPhone 6 series. From one generation to the next, Apple increased the screen size without increasing the $649 base price.

That’s the corner Apple created and trapped itself in.

As a way to address the mid-tier smartphone market, Apple’s also offered versions of year-old iPhones for $100 less, so $549 new, and the iPhone 5c demonstrated this same technique only using a colorful plastic shell versus a more costly aluminum casing.

iphone-5c

The first major shakeup to Apple’s strategy in recent years came with the iPhone 6 Plus. Apple introduced two new modern iPhone models at the same time, pricing the larger screened Plus model $100 above the iPhone 6 with the same storage capacity and features (aside from optical image stabilization).

By offering a new, higher-priced base model iPhone, Apple was able to pull off increasing the average selling price of an iPhone which previously required pushing customers to higher capacity models.

Assuming Apple doesn’t part from its pricing structure or display sizes for iPhones, the iPhone 7 will cost $649 for base model storage and the iPhone 7 Plus will cost $749 with the same storage capacity. A truly new 4-inch version of the iPhone 7 would need to cost less than $649, like be priced at $549, and have the side effect of lowing the entry level price for a brand new flagship iPhone.

Maybe Apple could pull it off as a private company, but Wall Street would surely have a fit if Apple intentionally lowered the iPhone’s average selling price. It’s under enough pressure now to combat forecasted year-over-year iPhone sales without growth in the current global economic climate.

iphone-lineup

So the compromise we get is a 4-inch iPhone 5se, not an iPhone 7 mini or iPhone 7 Air (or whatever you’d call a smaller than standard iPhone 7), with a mix of iPhone 6 and iPhone 6s hardware. It’ll be pretty modern to start, but the iPhone 7 will date it further later this year.

Of course if there was a massively huge demand for 4-inch iPhones (and most people stopped buying larger iPhones), Apple could price a 4-inch iPhone 7 at $649, raise the price for the 4.7-inch iPhone 7 up $100, and increase the starting price for the 5.5-inch iPhone 7 another $100 on top of that.

But I imagine this approach would have plenty of side effects. People would be upset that the larger iPhone prices increased while competitors offered larger screens at lower prices. That’s a particularly tricky one.

Another strategy would add further complexity to the iPhone lineup, but I think customers could handle it. Offer both the 4-inch iPhone 7 and 4.7-inch iPhone 7 for $649 each, but only offer the 4-inch version in the increased storage capacity to offset the difference.

For instance (and I’m just pulling these optimistic numbers out of thin air):

  • 4-inch iPhone 7 (64GB) $649
  • 4-inch iPhone 7 (128GB) $749
  • 4.7-inch iPhone 7 (32GB) $649
  • 4.7-inch iPhone 7 (64GB) $749
  • 4.7-inch iPhone 7 (128GB) $849

Add another $100 to each Plus model just like now and you complete the picture.

IPhone_5S_main_camera

Instead, it looks like Apple’s taking an even more complex approach by mixing the iPhone 6 and iPhone 6s hardware into an iPhone 5-sized casing and using a particularly interesting label (5se) that probably has the added benefit for Apple to highlight the newness of the iPhone 7 in the fall.

Don’t pay any attention to the old 5se, this is the year of 7 is my first guess at understanding the marketing approach later this fall. We’ll see next month how most of this plays out.

While I’m pleased to see Apple invest further into the 4-inch iPhone design since it has obvious benefits like one-hand use and being pocket friendly, I do hope for a time in the future where Apple can balance the business needs with customer desire and ship a 4-inch iPhone model with nearly the same specs as the larger iPhones we have now.