Apple plans to come out with a radically different iPhone design within two years, according to a top Wall Street firm.

Bank of America Merrill Lynch said the smartphone maker is working with its Asian partners on a foldable phone.

"We expect the iPhones this fall to be largely unchanged for the OLED versions although size changes have proved to be a catalyst in the past," analyst Wamsi Mohan wrote in a note to clients Friday. "Our checks also suggest that Apple is working with suppliers on a foldable phone (that potentially could double up as a tablet) for launch in 2020."

Mohan wrote his report after meeting several Apple suppliers in Asia.

Analysts and bloggers have speculated for years foldable phones were the next major form factor for the smartphone. Lenovo and Samsung have demonstrated concept devices with foldable screens, and other companies have filed patents, but devices have yet to materialize.

Citing unnamed sources, a Korean media outlet said in October that LG and Apple could have something in the works.



Mohan reiterated his buy rating for Apple shares. He also reaffirmed his $220 price target for the company, representing 30 percent upside to Thursday's close. The stock price was flat in Friday's premarket.

The analyst does not believe the company's products will be affected by increasing trade tensions between U.S. and China.

"Given that a substantial amount of iPhone and other electronics manufacturing is done in China, we do not see this as a particular area of retaliation from a trade context," he wrote.

Apple did not immediately respond to a request for comment.

— CNBC's Anita Balakrishnan contributed to this report.