What you have described is applying for a new account. At American Express "upgrading" means converting a charge card from one color to another, typically without a credit inquiry, and retaining the same account number.
Mia you're 100% correct. Technically it's not upgrading you're opening a new account, however I have read on FT and TPG that this is the one way around the annual fee and the signup bonus for current card members. Maybe another member could provide details if AMEX does a hard credit pull if you are logged out of your AMEX account when applying for a new card.