Apple Inc. (NASDAQ:AAPL) is under considerable pressure to deliver a smash hit when it unveils the next new iPhone in 2017. Sales are down, and margins are being pressured.
However, now it’s possible that Apple may fight back against both of those problems next year by releasing an iPhone Pro alongside the iPhone 8.
The All-Glass iPhone 8
We’ve previously reported that the case continues to mount for an all-glass iPhone 8. With 2017 being the 10th anniversary of the first iPhone’s release and the first year in a three-year development cycle AAPL has adopted for its smartphones, it’s time for a big change.
Adding a glass back to the glass front will ensure that no one mistakes the iPhone 8 for a previous model (one of the complaints about the iPhone 7). It would differentiate AAPL’s smartphones from the metal-backed look it first made popular, but is now the norm among Android smartphones. A glass back also makes wireless recharging more efficient, and Apple is known to be actively pursuing that feature.
What about earlier rumors of a curved-screen iPhone in 2017?
That’s where the case for an iPhone Pro starts to become more clear.
A Curved OLED Display iPhone Pro?
However, a report in the Wall Street Journal suggests two problems with that plan. First, ramping up OLED production on a scale to meet iPhone 8 demand may not be possible. Companies that make OLED panels — including Samsung and LG — face multibillion-dollar expenditures to bring that level of capacity on line, and time is short.
The second issue is cost. According to the WSJ, an OLED display could add $50 to the manufacturing cost of the iPhone 8. Considering a $649 iPhone 7 is estimated to cost AAPL $225 to manufacture, going to the OLED display would mean AAPL either hiking prices or taking another hit to its already squeezed profit margins.
Neither option is palatable. That’s where the idea of an iPhone Pro comes into play.
iPhone Pro Could Solve Two AAPL Problems
As suggested by 9to5Mac, Apple could stick with its current LCD displays for the iPhone 8 models next year, but add a new higher-tier, premium iPhone Pro that incorporates the fancy curved OLED display.
This strategy would give AAPL the curved screen look to splash across its marketing campaigns. The all-glass iPhone 8 still would look cool — and different from the past three years — without the additional pressure on margins of incorporating an OLED display. Meanwhile, the company could follow the model it has adopted with the iPad Pro and MacBook Pro, charging a significant premium for an iPhone Pro.
An iPhone Pro may not sell in the same quantities as the iPhone 8, but by positioning it as a new flagship device with a key differentiating feature, AAPL could charge a much higher premium for it.
Naturally, we will have no idea about which direction Apple chooses to take until next September. The WSJ points out that Apple is considering more than 10 new iPhone prototypes, so the final decision on models is very much up in the air at this point.
However, by going with a mainstream iPhone 8 release and adding a new iPhone Pro to the mix in 2017, Apple would not only boost iPhone sales in a meaningful way, it also could introduce premium pricing into the mix to help offset the downward pressure on its profit margins.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.