Sorry but a 737 replacement isn’t coming until there’s a massive step change in engine technology. As it stands now they would be investing billions for diminishing returns.
The issue may be that the 737 is so low to the ground. You can put more powerful engines on the neo as it’s higher; there is a 35,000-lh thrust option available. Another issue is cargo. The 737 can only accept bulk cargo, or it needs the Telair container system installed across the network. By contrast, the 320 family can accept a standard LD3-45 cargo container. ULCC carriers may prefer the 737 MAX, but many others value belly cargo capabilities.
This is the truth.
However, Boeing has faced the 737 replacement 3 different times and decided to continue to "perfume the pig".
In the 1980's Boeing recognized a need to replace both the B732 and B727. There were studies of all-new designs then, but WN and UA, both large B732 users, wanted the same basic airframe with new engines, hence the B733, which slotted between the B721 and the B732 in capacity. A little bit later, Piedmont wanted a similar-capacity B727 replacement, so Boeing developed the larger B734. WN and UA wanted 1 for 1 replacements for their B732's, so Boeing offered the smaller B735.
Things went along swimmingly for Boeing's upgraded B737 "Classics" for several years until United came looking for a direct replacement for the B722's in their fleet. Boeing originally offered the B734, which UA rejected due to inadequate hot & high performance (e.g. Denver). Controversially, UA broke ranks and angered congressmen when they placed their historic major order for A320's in the early-1990's to replace their large B722 fleet.
After losing the United order, Boeing was in no shape to pursue an all-new narrow body design, since they were still developing the B777. However, engine technology was rapidly improving to the point that CFM had already evolved their CFM56-3 engines that powered the "Classics" by offering the CFM56-7 variants that offered significant improvements in power and fuel economy. Boeing needed an answer to the A320 and A319 (which had also garnered significant orders in the US market) and WN was ready to work with them once again. They settled on a new, significantly-modified B737 design that offered better aerodynamics, newer avionics and the new CFM56-7 engines. The New Generation series aircraft were bigger, flew farther and used less fuel than their predecessors. And just as important, with the B738 variant, Boeing now had a true, direct competitor to the A320 in terms of performance and capacity.
Since it is relatively recent history, and it has been hashed out on this forum many times, I will skip detailing the B737MAX saga. However, it is ironic that Airbus surprised Boeing by hanging new PW GTF and CFM LEAP engines on their A32X's aircraft, taking a page right out of the Boeing narrow body airliner development book. It also went down when Boeing was struggling mightily with their B787 program. Therefore, the MAX development was already running from behind at the start and as it progressed, there were schedule delays which led to corners being cut to hurry this plane series to market. Some of this corner cutting led to tragedies and a mass grounding of the type.
I think that Boeing has extracted all of the "goody" out of the basic B737 design that is possible, plus they went so far that they clearly demonstrated this platform's design limitations. Watch a B737-9MAX blunder off an 8,000' runway on a hot day and you will see what I mean.