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It looks like small is going to be the next big thing for Apple (NASDAQ:AAPL) when the company releases its next-generation iPhone lineup in the coming weeks.

The grapevine is abuzz with rumors that the company is going to release an iPhone “mini,” which doesn’t seem surprising given the success the company has had by moving lower down the value chain over the past year.

Let’s see why such a device could be a big deal for Apple if it turns out to be more than just a rumor.

Apple’s new pricing strategy has worked well

Last year’s iPhone 11 sold like hot cakes thanks to Apple’s decision to reduce the price tag on each device by $50 to $699. Consumer Intelligence Research Partners (CIRP) reported earlier this year that the iPhone 11 accounted for 37% of overall iPhone sales in the first quarter of 2020 on the back of its accessible pricing.

Image source: Getty Images

Meanwhile, Apple’s launch of the new iPhone SE earlier this year at a starting price of $399 turned out to be yet another smart move by the company. Canalys estimates that the device was a key contributor to a 10% jump in Apple’s smartphone shipments in the U.S. in the second quarter.

The company exited the second quarter with 15 million iPhone shipments in the U.S., which helped boost its market share to 47.1% from 40.8% in the prior-year period. Overall smartphone shipments dropped 5% annually during the quarter to 31.9 million units, indicating that Apple’s move to introduce a mid-range device was met enthusiastically by customers.

The success of the iPhone SE can also be gauged from the fact that the average selling price of a smartphone in the U.S. dropped 10% from the prior-year period to $503 in the second quarter. So consumers are probably looking for lower-priced devices in the wake of the economic havoc wreaked by the novel coronavirus pandemic — and Apple took advantage of this opportunity with its new iPhone SE.

As a result, Apple may have a strong reason to further lower the price of its upcoming iPhones from $699, and the rumored “mini” device could be a step in that direction.

What could the iPhone “mini” be packing?

While such a device is nothing more than a rumor at this point, we have seen Apple’s supply chain rumors getting a few things right of late. For instance, the rumors of a new iPhone SE started making the rounds in February this year before the actual device hit the market in April.

That’s why it wouldn’t be a good idea to rule out the possibility of a 5.4-inch iPhone “mini,” a device that is expected to be priced at $649 — $50 lower than the starting price of last year’s iPhone 11. The device is expected to pack both 5G and an OLED (organic light-emitting diode) screen. The standard iPhone 12 is expected to be priced at $749 and sport a 6.1-inch screen, while the Pro and the Pro Max models are anticipated to be priced at $999 and $1,099.

All four models are anticipated to be launched with 5G (including one with a 5.4-inch screen), which is consistent with rumors that have been circulating since the beginning of the year. Moreover, there have been rumors that Apple could be skimping on accessories such as the charging adapter and the EarPods to reduce the sticker price of the upcoming iPhone models.

So the possibility of Apple making the entry-level model of the upcoming iPhone generation more accessible with another price cut remains wide open. But more importantly, an iPhone “mini” is expected to pack new tech such as 5G and an OLED display at an aggressive price point, a combination that could help make Apple a top 5G stock thanks to the transition to a new smartphone generation.