Kuo previously said the phone, which he calls the iPhone SE2, will include the same processor that's in the new iPhone 11 . It will succeed the iPhone SE, which launched in 2016.

TF Securities analyst Ming-Chi Kuo says Apple's new and more affordable iPhone will launch in the first quarter of next year for $399.

In a note to investors Sunday, Kuo reiterated that the iPhone SE2 will have a similar design to the iPhone 8. That suggests Apple will be able to reuse parts from that phone while upgrading some of the internal components, like the processor and camera. It will be offered in silver, space gray and red, Kuo said.

Kuo also predicted that the budget iPhone will likely attract people who are still using the iPhone 6 and 6s, which he estimates are still being used by as many as 200 million people, even though those phones launched five years ago. He said the new phone will be a "key growth driver" for Apple next year.

The "iPhone 6 and 6s series are the best-selling iPhone series, and we estimate that around 170–200mn people are still using iPhone 6 and 6s series now," Kuo wrote. "The iPhone 6 series users may have more urgent replacement demand for an upgraded model because iOS 13 doesn't support iPhone 6 series."

The iOS 13 software is Apple's latest iPhone operating system, but it doesn't support the iPhone 6. It was released last month.