Apple might release a new 4-inch iPhone with Apple Pay early next year

Apple is believed to be working on a new 4-inch iPhone, which it could release early next year. Details about the possible phone have been coming from analyst Ming-Chi Kuo, who's had a great track record of predicting Apple's plans in the past. In his newest note, published by MacRumors, Kuo says that he expects Apple to build NFC into this new phone so that it can be used with Apple Pay. The phone is also expected to have an A9 processor, which is what's inside the iPhone 6S, and use the same camera as the iPhone 5S.

Kuo believes that the new phone will have a metal case that comes in two or three color options, so it'll likely be more like the iPhone 5S than the iPhone 5C. This model may have an updated design, too, as Kuo expects it to have front cover glass that slightly curves at the edges, like the iPhone 6 and 6S. The 4-inch phone is also expected to have one major difference — aside from size — from Apple's newest phones: Kuo believes that it won't support 3D Touch.

Though consumers have been moving toward larger devices, Apple is one of the few companies that continue to fill demand for higher-quality small phones. That's enough of a reason for Apple to make a new one, Kuo suggests, though he believes that this updated model "may not generate huge sales," only accounting for 8 or 9 percent of Apple's total iPhone shipments in its 2016 fiscal year. Nonetheless, a cheaper iPhone could help it reach into markets where low-cost Android phones have traditionally dominated. Kuo expects Apple to price this device between $400 to $500. The iPhone 5S currently sells for $450, so Apple could either choose to replace that or to add this updated model in as a more expensive alternative.

While Kuo has been accurate in the past, he's been wrong on specifics here and there. So though his predictions typically present a good sketch of what Apple is up to, they're by no means a guaranteed roadmap. Still, Apple showed interest in making alternate versions of its old phones with the iPhone 5C, so it wouldn't be surprising to see it try again. Apple may be hoping to make the phone more appealing this time around by making it comparable in quality — metal body, top-of-the-line processor, and newer features — to its best devices, rather than opting for plastic like it did on the iPhone 5C.