Why the iPhone 8 may play hard to get

Why the iPhone 8 may play hard to get
iphone plus vs

As of today, Apple’s flagship phone comes in two sizes. (We’re not counting the iPhone SE.)

Apple

For the past three years, each September has brought us two new iPhones: the “regular” 4.7-inch model, and the “extra large” 5.5-inch one, with a bigger screen and better camera.

This year? A long-rumored, radically redesigned iPhone may finally be on deck. To picture it, imagine if the 5.5-inch screen of an iPhone Plus could fit in the body of a regular iPhone — but in a sleek new design without big bezels to get in the way. Rumors suggest it could have an OLED display, amped-up augmented reality capabilities and wireless (inductive) charging, too.

There are just two problems: It might start — start! — at over $1,000 (roughly £760 or AU$1255).  And even at that price, Apple may not be able to make enough of them for you to buy one this fall. 

That’s why all signs are pointing to three new iPhones for 2017. That fantasy iPhone 8 will likely be joined by the familiar S phones we see every odd-numbered year, while the iPhone 7S and 7S Plus would look nearly the same as their predecessors, while incorporating some under-the-hood upgrades to keep them interesting. That could throw a wrench into any Apple fan’s usual upgrade plans — especially since many have been waiting for the first significant redesign in years.

Is this really going to happen? Apple didn’t respond to our request for comment, and we have very little hard info here. But here’s why we think we could get a trio of new iPhones this year.

Who believes this crazy theory, anyway?

Clever people, and more of them than you’d think.

In March 2016 — before even the iPhone 7 was unveiled — KGI Securities analyst Ming Chi-Kuo (who has a solid track record for Apple rumors) reported that the company was considering a new iPhone design for 2017 with a 5.8-inch OLED screen, wireless charging and a glass back.

But Kuo said one other thing too, something many reporters missed: if Apple couldn’t get enough OLED screens for that flagship iPhone, it might launch a pair of standard 4.7-inch and 5.5-inch iPhones as well. Three iPhones in total.

iphone-rumor.jpg

There may be three new iPhones in 2017.

KGI Research

In the months since, Kuo has continued to beat the drum for three new iPhones, but he hasn’t been alone. The Nikkei Asian Review and Bloomberg’s Mark Gurman each corroborated the idea. But it wasn’t until this July, when a report in China’s Economic Daily News warned of a delay for Apple’s OLED phone, that Wall Street joined the bandwagon.

At one point, we counted as many as a dozen financial analysts that agreed that Apple was having problems building its new phone to meet its normal September release schedule, and would either have to delay it or ship it in limited quantities to start. However, Apple has since forecast huge earnings for the September quarter, effectively confirming that some sort of new iPhones will be released by the end of September.

But questions remain: Will all three presumed new models hit at once? And how much will the high-end model cost? Because many of those aforementioned analysts — as well as respected Apple watchers John Gruber, Jason Snell and Rene Ritchie — believe you’ll have to pay more than ever before.

Why can’t Apple make enough of the iPhones we want?

Four letters: OLED.

It’s no surprise Apple wants to add an OLED screen to the iPhone, to get the deep colors, inky blacks and battery efficiency that display technology can afford.

samsung-galaxy-s8-plus-s8-12.jpg

With an OLED screen, each pixel generates its own light… so when they’re black, they’re off, and not wasting electricity.

Andrew Hoyle/CNET

But unlike most pieces that go into a phone, those OLED screens can only realistically come from a single source. The problem: Samsung controls at least 98 percent of the phone-sized OLED market, according to analyst firms IHS and UBI Research. 

Other companies like LG do produce OLED panels, and more are gearing up, but no other firm can produce as many as Apple would need for a phone. Samsung has a virtual monopoly on these screens, and there’s no backup if anything goes wrong.

Apple is so big that it needs suppliers who can provide hundreds of millions of each iPhone part each year — anything below those thresholds, and it can’t afford to use those parts at all.

And apparently, Apple isn’t asking for any ol’ OLED screens, either. Supposedly, Apple wanted to build an OLED screen with a built-in fingerprint sensor. More recently, Apple’s HomePod leak hints that a face-recognizing infrared camera may be integrated directly above Samsung’s panel as well.

Both IHS and Korea’s UBI Research say Samsung’s OLED production for Apple has been delayed, but not because Samsung doesn’t have the factories or manpower. They believe Apple’s custom screen could be the culprit.

Samsung didn’t immediately respond to a request for comment.

Will the price really be $1,000 or more?

That’s what Apple blogger extraordinaire John Gruber thinks, and his argument is fairly compelling.

If Apple can’t produce enough of the new OLED iPhone, it can simply charge more money. Supply and demand in action.

By making the OLED iPhone more expensive, fewer people will be able to buy it. Fewer people will be disappointed, because they’ll be able to write off that flagship iPhone as an ultra-luxury product. And Apple might be able to keep profits high, and/or recoup its higher development costs, by making more money off of each one sold.

With three different iPhones, Gruber argues, the luxury one would need to be meaningfully more expensive than today’s highest-end $969 iPhone 7 Plus with 256GB of storage. By that logic, it seems likely an iPhone 8 would cost $1,000 or more.

But even if Apple wasn’t planning to release three different iPhones, it’s time — statistically speaking — for Apple to raise the price anyhow. In a recent blog post, Asymco analyst Horace Dediu shows that Apple has historically raised the price of its highest-end phone like clockwork every three years — and that if the staircase-shaped pattern continues, we should expect a new price ceiling of $1,100 (roughly £845 or AU$1,390).

asymco-iphone-price-pattern-staircase-crop

According to Horace Dediu, Apple has a clear pattern of raising its highest-end iPhone price every three years, while keeping the average selling price (ASP) and entry-level price roughly the same.

Horace Dediu / Asymco

He’s not alone. Goldman Sachs analyst Simona Jankowski, among others, believes it’ll cost between $1,000 and $1,100 depending on how much storage you want.

It’s worth noting that the iPhone 8 might not be the only unusually expensive new phone. With the rumored price of Samsung’s rival Galaxy Note 8 superphone said to be in the $900 range (about £710 or AU$1,190 converted), and the Red Hydrogen specialty phone starting at $1,200 (roughly £925, AU$1,580), an iPhone 8 with a starting price of $999 doesn’t sound crazy — it could be the new normal.

Who the heck’s going to buy a $1,100 iPhone?

Maybe the kind of people who ran out to buy the original iPhone in 2007, when it cost a then-unheard-of $599 — not counting a two-year AT&T ball-and-chain contract. Those fans knew it was a taste of the future, and the new OLED iPhone could similarly be a chance to try tomorrow’s iPhone today, to borrow a phrase from iMore’s Rene Ritchie.

Maybe it’s for the kind of people who’d happily pay more for a phone with newer, better technology than their peers, instead of settling for the same one-size-fits-all iPhone as everyone else. Apple’s iPads, MacBooks and Apple Watch each have premium versions: why not the iPhone?

But as MacWorld’s Jason Snell argues, Apple is taking a risk here, too. Who’s going to want to buy a “boring” iPhone 7S or 7S Plus if the iPhone 8 looks way the heck better? Will they be angry that Apple’s new flagship is priced out of their reach?

Trickle-down

As a gadget lover, I actually like the idea of a pricier iPhone — because Apple’s huge scale means those new technologies could trickle down faster.

With OLED, for example, Apple seems to be accelerating an industry that’s currently dominated by just two South Korean companies, Samsung and LG — to the point where UBI Research believes Apple could overtake Samsung as the top purchaser of OLED displays, and China could overtake Korea as the top producer, by 2021. Rumor is, every iPhone could have an OLED screen as soon as next year.

But that’s late 2018, at the earliest. Yes, the existing iPhone SE will presumably remain at the $400 (£380, AU$680) entry price point, and Apple will probably knock last year’s iPhone 7 and 7 Plus to $549 and $649-ish. But when the next all-new batch of iPhones hit, how will Apple fans react to three new models instead of two, on a price spectrum from $650 (roughly £500, AU$820) to $1,000 (roughly £763, AU$$1,260) or more? Will fans pay extra and put their names on waiting lists, or stand in long lines once again? Will they opt for a “good enough” iPhone 7S? Or will they give up and start looking at all the Android alternatives?  

We don’t know. But it’s going to be interesting to watch.

Leave a Reply

Your email address will not be published. Required fields are marked *