So to answer your points in order:
1. This was an extreme example. Let's say that 16 year old girl grows up, is now 20 and working on her own. She still doesn't know the small tech differences, but sees a huge screen on the 8 that looks completely different, and the 7S that now looks dated in comparison. The situation is still the same, the only difference is she now has the money to buy the phone on her own. People are very fickle, a lot don't do extensive research to come to educated decisions.
2. First off, these are all rumors, but we're on a rumors site so we're letting that slide. Second, it absolutely does matter what the issue is. If the tech in the screen just doesn't work, than that's a serious problem. But, if the tech does work but it's difficult to manufacture or takes a long time, than increasing resources would help.
3. This is my point exactly. How long will it take to get to that level? Previous releases show it only takes about 6 weeks before people no longer need to wait, so estimating that it would only take about 2 months isn't unrealistic. Let's say we even push it to 3 months to account for delays, there's still 9 months until the new release that the 7S holds no purpose for.
Listen, there are reasons that Apple has decided to go this route, and I'm sure you're right that it mostly has to do with launch availability. However, my biggest gripe is, if it is produced, there should be far less supply of the 7S than 8, especially after 8 supplies increase. I just don't see a 7S selling in April when it's sitting on a shelf right next to an 8.
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I don't care about storage size or color, so take that out of the picture. The current iPhone line up is less fragmented than you make it out to be because a lot of it has to do with screen size. I am personally in favor to the high end iPhone (I want it all) but have NEVER owned a Plus because it is far too large for me. So the line up is really 7-Series (regardless of size), 6S-Series (regardless of size), and SE which is an oddball because it appeals to multiple markets at once (people who want a cheap iPhone, people who don't understand tech, people who want a super small screen).
There will always be exceptions to the rule, for example there is still a small market for people who want 3.5 inch iPhones, but you can't over-fragment the line up. There could be a small market of people whom the 7S appeals to, but I find it very hard to believe that once the 8 is readily available that people will purchase a 7S Plus over it. The has everything someone buying the Plus is looking for (larger screen, top tech) in a smaller footprint. I just don't see the market for it.
Listen, I could be wrong. Even top corporate execs make market mistakes. I don't have Apple's market research, I don't have their numbers, I don't know how many units they sell from each model. But looking at it objectively, taking it at face value, looking at it from a business perspective, I think the iPhone line up is becoming more fragmented than it needs to be. To offer the 8, 7S, 7S Plus, 7, 7 Plus, and potentially the SE still, at some point Apple has to say "Whoa, this is too much". Historically, the line up has always been "New phone and previous years model (reduced price)". They split the screen sizes, but ultimately they were still the same phone which kept with that pattern. Then they added the SE - fine, it filled multiple market needs. But to now offer three brand new phones, two of which are pretty much the same, it just feels unnecessary.
Sorry, I know I ramble but I love a friendly debate

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