Apple Inc. (NASDAQ:AAPL) clearly thinks the 10th anniversary iPhone 8 is going to be a big seller.
At the start of this week, reports said Apple had placed an order with Samsung Samsung Electronics Co Ltd (OTCMKTS:SSNLF) for 70 million OLED display panels. Now, a new report says Apple is pushing Samsung to supply even more, and Apple’s sole OLED supplier is now ramping up capacity to deliver as many as 92 million displays in 2017 alone.
Considering that annual iPhone sales peaked at 231.5 million in 2015, 92 million OLED display panels for just 2017 suggests something important:
Apple is expecting to move the premium iPhone 8 in record numbers.
iPhone 8 Launch to Kick Off Upgrade Super-Cycle
Apple moved to a three-year iPhone product development cycle. That means the basic form factor of its flagship iPhones remains virtually identical for three years. A new iPhone will have improved components compared to the previous generation, but visually there is little difference. That’s why the iPhone 7 looks just like the iPhone 6 and the iPhone 6S.
And that close resemblance makes upgrading a tougher sell.
Many consumers are happy enough with the performance of their older iPhone. So if it looks like they’re carrying a new iPhone around, and their current phone works just fine, it will be difficult to convince them to shell out $649 for the latest spec-bumped model.
Apple is expected to release an iPhone 7S and 7S Plus this fall. Even with whatever spec bumps or new colors are offered, no one expects a flood of iPhone owners to rush out to upgrade — just the usual new buyers and the natural upgrades by people with older phones that have seen better days.
However, the company is also releasing the 10th anniversary iPhone 8. This will be positioned as a new ultra-premium model. Analysts expect a big visual departure from recent iPhones, with a glass back, wireless charging and a curved OLED display panel. Pricing could start as high as $1,000.
Despite that stratospheric price tag, the iPhone 8 is expected to kick off an upgrade super-cycle in 2017. The usual upgrades to the iPhone 7S will happen. But in addition to that annual wave, every iPhone owner — even the ones who just bought the latest (PRODUCT)RED iPhone 7 — will consider upgrading to the iPhone 8.
After all, it will become an instant status symbol.
Report: Apple Ups Its OLED Order
Rival and manufacturing partner Samsung is Apple’s sole OLED provider. The company currently produces the OLED panels used in the Apple Watch and the latest, Touch Bar-equipped MacBook Pro.
Supply chain sources had reported earlier this week that Apple signed a contract with Samsung to supply 70 million OLED panels in 2017. That number suggested Apple was expecting the iPhone 8 to fly off shelves — remember, 231.5 million was the most iPhones ever sold in a year, and the iPhone 8 will only be available for a fraction of 2017.
An order for 70 million OLED displays wouldn’t necessarily mean Apple is counting on selling 70 million iPhone 8 smartphones this year — there is manufacturing lead time to consider — but it’s an indicator that Apple believes demand will be high at launch and remain strong in the weeks and months after.
But 9to5 Mac is now reporting that under pressure from Apple to boost production, Samsung is now gearing up to produce as many as 92 million iPhone 8 OLED display panels this year.
In other words, AAPL seems to think the iPhone 8 launch will be a monster and demand for that premium model will be even higher than it previously expected.
If Apple is right and fall 2017 turns into the mother of all upgrade super-cycles, the company should be able to put the memory of 2016 and its first annual revenue decline in 15 years well behind it. Especially if the $1,000-plus iPhone 8 does anywhere near the numbers those OLED display orders suggest it might.
The one thing that could derail the celebration for Apple and its investors is production delays that cause an iPhone 8 launch shortage. But you can bet the company and its manufacturing partners are working overtime to prevent that from happening.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.