March 31, 2017 at 11:48AM
- Analysts are highly optimistic about the next iPhone, which is expected to be a radical reset of the entire line.
- It's the 10th anniversary of the device, so there's a huge amount riding on it.
- It may cost £1,000 in the UK and $1,000 in the US — sums many shoppers would balk at.
- These are significant challenges Apple needs to overcome.
Apple is gearing up to launch what may well be the most hotly anticipated smartphone ever.
2017 is the 10th anniversary of the unveiling of the original iPhone. Smartphones and mobile apps have since transformed business and the global economy — propelling Apple to become the world's most valuable company.
But as the iPhone turns 10, the pressure is on Apple to deliver a genuinely new, innovative phone. People want to see Apple launch a significant new device after several years of merely incremental improvements to iPhone. Rumours are swirling that the California tech company plans to release a special, high-end iPhone alongside the expected "7s" refresh this year, with augmented-reality features.
The prevailing mood among analysts is positive. Some are giddily expecting a "super-cycle" — a massive, record-breaking year for sales, driven by the ever-increasing numbers of older iPhones in the wild that need upgrading and by a particularly compelling product offering this time around.
So a lot is riding on this. And a lot that could go wrong. From pricing risks to hardware costs, Apple has to get several crucial calculations just right.
A radically new design would push up Apple's costs, squeezing its margins. Apple could protect its margins by raising its prices. Some people think a new, high-end iPhone could retail for over $1,000. (Apple tends to sell its products at about the same number in dollars and pounds, which would make the price £1,000 in the UK). That may restrict sales and would make the rest of Apple's iPhones look like cheap deals by comparison.
The price of failure is steep. The Apple Watch, for instance, was supposed to open a new category of consumer wearables, but the devices have appealed to only a small niche.
No one wants the Apple Watch of phones.
Business Insider spoke with Gene Munster, a prominent Apple analyst turned venture capital investor at Loup Ventures, to discuss the risks facing Apple this autumn.
Note: The rumoured high-end iPhone is going by many possible names, including "iPhone 8," "iPhone 10," and "iPhone Edition." Munster refers to it as the iPhone 10, so we will use that name throughout.
The $1,000 phone.
To be clear: These are not predictions for what Munster, or Business Insider, thinks will happen.
Rather, they're theoretical scenarios that Apple is no doubt discussing internally and that — if they come to pass — could have huge consequences for the most important company in the tech industry.
Munster says, realistically, that he expects to see "high-single digit growth ... strong, but not a super-cycle." His concern is that the rumored high price for the iPhone 10 — about $1,000 — would limit its appeal somewhat. But there should still be significant growth, he says, because of the sheer number of people out there looking to upgrade: "This large pool of people with phones three years old or older."
Even if Apple's 2017 product offering is lacklustre, there will still be huge numbers of people who need to upgrade.
One surprising risk: that the iPhone 10 is *too good*.
The big question facing Apple is a simple one: How expensive is too expensive?
There's a risk that some consumers would be put off by a phone that costs $1,000 (or £1,000 in the UK, which equates to $1,250). Munster suggests counterintuitively, however, that Apple might be at particular risk if the phone is better than people expect.
"The simple downside case is that the features around augmented reality end up being compelling, the number of developers they have at launch is something that really catches people's attention, and then people end up holding off and waiting for that iPhone price to come down," Munster said.
In other words: People might see the iPhone 10 and think that it's incredible but that a $1,000 price point is out of reach, so they wait for a year to see whether it gets cheaper. (If the tech had been in line with expectations, and the price were just as high, the consumers might opt for a regular upgrade with the 7s, rather than holding off entirely.) Apple has repeatedly taught its customers that a new launch means all the previously existing models suddenly become a lot cheaper — often when they're nearly as good as the new one.
He considers this too-good problem a "small risk ... the reason why I say it's a 'small risk' is that because the pool of older phones is getting so large, three-year-old and older, that for a lot of people it's not about getting the greatest phone, the $1,000 version — it's about getting one with a better battery and just a faster battery."
So while there's a chance that people will decide to hold off, many won't be in the market for the highest-end model anyway. They'll settle for one that's simply good enough. (Munster estimates that realistically, about 25% of sales will be for the high-end iPhone 10 — so most consumers won't be getting one anyway.)
"I think the worst-case scenario is a couple percent growth, probably put it somewhere around 225 million units" sold over the year, Munster said.
That'd be up on the 211 million sales in 2016 — but below the record-breaking 231 million in 2015.
The tech might be a flop.
Then there's the flipside — that the augmented-reality tech is lacklustre and disappointing.
"Having the first augmented-reality phone is a big deal, and there are technical hurdles to it. Will the 3D mapping be accurate? ... There have been some snafus before," Munster said, pointing to "Antennagate," when issues in antenna placement in the iPhone 4 caused its signal to drop when held a certain way. (Then-CEO Steve Jobs' unhelpful suggestion was that users simply not hold it that way.) Apple Maps was also a fiasco at launch.
"If it doesn't work ... yeah that can damage them, would be in the worst-case scenario, just like Antennagate damaged them," Munster said.
The hardware doesn't need to be faulty to cause problems; it might just fail to ignite the public's imagination.
See the rest of the story at Business Insider
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