The upcoming iPhone 6 continues to be the focus of attention for analysts, fans and investors. Some may have been unimpressed with the iPhone 5S, especially since the TouchID fingerprint sensor seems to be an epic fail for so many people since it doesn’t work much of the time for them. And so the dreaming about the iPhone 6 continues.
Basic expectations for the iPhone 6
Analysts at Susquehanna Financial Group have done some supply chain checks for Apple Inc. (NASDAQ:AAPL) and provided their own insight on what the iPhone 6 “should” include. Remember, supply chain checks aren’t always the most reliable source of information, but since many of the features named by these analysts are already available in other smartphones, it may be logical to hope Apple would catch up with the iPhone 6.
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Next obvious technology for iPhone 6
Of course it is generally expected that the iPhone 6 will have a bigger screen and be thinner. Analysts Chris Caso and Liz Pate also expect a better A8 processor manufactured using TSMC’s 20 nm processor, compared to the 28 nm A7 chip in the iPhone 5S. They are also looking for Apple Inc. (NASDAQ:AAPL) to add .11 ac WLAN and use the 9625 cellular modem made by Qualcomm, which enables advanced LTE features. These advanced features could be used by carriers to double LTE download speeds to 150 Mbps, increase their network capacity through the use of “non-contiguous spectrum” and add power saving features.
They believe that the iPhone 6 will actually push other handset makers to “quickly embrace” this advanced LTE technology, thus creating another catalyst for the upgrade cycle.
Why aren’t these features already on iPhone 5S?
With the exception of advanced LTE capabilities, many of the above features are already available on Android devices, so it looks like Apple Inc. (NASDAQ:AAPL) is lagging behind. The analysts consider why the company didn’t include them in the iPhone 5S and suggest that Apple “prefers forced obsolescence over future proofing.” In other words, the company doesn’t offer something that might be useful in the future but isn’t necessarily useful right now. For example, many carriers aren’t really ready for advanced LTE capabilities, so it won’t be useful for many users right now, although it could be in the future.
They also note that Apple doesn’t “give away features for free.” They believe this means that Apple won’t include a feature unless they are ready to monetize the feature. The analysts note that most smartphone buyers don’t even know what .11 ac WLAN is, so the lack of this feature isn’t a deal-breaker for many people. They expect this feature to be included in the iPhone 6 if Apple can pair it with upgraded Apple TV devices and better AirPort base stations. This would provide additional products for Apple to sell and profit off of this feature.
iPhone 6 could be more expensive
The analysts at Susquehanna also suggest that Apple Inc. (NASDAQ:AAPL) might raise the price of the iPhone 6 next year. This would be aimed at avoiding the margin erosion which came with the release of the iPhone 5. Like the iPhone 5, the iPhone 6 is expected to have a much better display. The bigger and better display will raise the cost of materials for Apple, so they believe Apple will raise the price of the phone to make up for that increased cost.
Of course Apple doesn’t comment on its pricing strategy, but it would follow the precedent set by the company this year with the launch of the iPad Mini with Retina display. The new mini model is more expensive than last year’s mini was when it was launched. The higher cost was aimed at offsetting the more expensive display.
Apple could be aiming for greater segmentation of its iPhones
Along with more stable margins, Apple Inc. (NASDAQ:AAPL) could also be moving toward a three-tier product strategy, which would increase market segmentation. The analysts note that if the iPhone 6 does indeed have an increased price, elasticity would increase as well. There could be a negative impact on unit sales, however.
Nonetheless, they believe this is why Apple launched the iPhone 5C—because it segments their phone lineup. The analysts admit that their supply chain checks “don’t yet have visibility about what AAPL intends to build next year.” However, they think further segmentation of Apple’s phone lineup is likely, with screen size being the major differentiator among the three tiers.
What will Apple do at the low end of the market?
They also address the past habit Apple has of dropping the price of last year’s model and suggest that this three-tier strategy goes beyond it. They believe it would make Apple Inc. (NASDAQ:AAPL)’s margins more sustainable in the future. Their biggest question right now, however, isn’t anything to do with the iPhone 6. It’s about what Apple does at the low end of the smartphone market.
Will the company choose to keep the iPhone 4S at the low end? Will it refresh the 4S with a 4-inch screen? Or will it lower the price of the iPhone 5C to the entry level price? The analysts said they will be looking for clues on this during their trip to Asia next month.