Since iPhone 3GS, Apple has kept the previous model at $100 cheaper than the current model. When the iPhone 5S came out, they decided to do away with this tradition and instead come up with the iPhone 5C, likely to squeeze some more profit margin on the low end.
Today, Apple had gone one further than that by introducing an even lower tier of iPhone. This is of note during the recent earnings calls as Apple's ASP has trended downward because of the introduction of these lower cost models. The line up right now looks like this.
- 6S Plus - $749
- 6S - $649
- 6 Plus - $649
- 6 - $549
- 5SE - $399
So iPhone now ranges between $399 to $749. I think that spread in iPhone prices likely will not narrow down given that Apple's focus is now towards developing nations like India (hence the downward trending ASP, I think partly financed by the outrageous $749 6S Plus). So there's likely going to be a $399 iPhone going forward. The question is now, which model?
I think the 6 is likely not going to take the place of the SE next year given that the SE is actually in some ways an upgrade. Apple is pushing Force Touch, it's plausible that the 6 will be discontinued. I think that it is unlikely for the 6S to take that $399 spot given that the natural progression would be for the 6S to take the $549 spot currently held by the 6. Apple wouldn't and should sacrifice that potential margin.
What I think will happen...
1. Year 1: Apple introduces iPhone 7 Pro, on top of the iPhone 7 plus at $849. Apple cuts the price of iPhone 6s to match current iPhone 6's prices and discontinues iPhone 6. iPhone SE receives a $50 price cut. This widens the range of prices to $349 - $849. I think this is ideal.
Year 2: Apple introduces iPhone 8. iPhone 7 line receives a $100 price cut and iPhone SE is updated with iPhone 7 internals.
I think the SE will have an 18 month lifespan to begin with but I do think that going forward, it will be an annually refreshed phone to be competitive in developing markets.