A leading consumer electronics analyst has suggested that the iPhone 7 could be the last smartphone from Apple to feature significant upgrades. Daniel Ives, an analyst at FBR Capital, has indicated his belief that the iPhone 7 could “be the last hurrah in terms of blockbuster upgrades”.
New revenue streams
Apple has been forced to diversify its income away from the iPhone range in recent years, and there has certainly been the suggestion that we may already have reached a peak in the smartphone marketplace. Certainly the major manufacturers are experiencing diminishing returns with regard to serious innovations in their handsets, and Ives now suggests that Apple may focus attention elsewhere in the future after the release of the iPhone 7.
Continued from part one... Q1 hedge fund letters, conference, scoops etc Abrams and his team want to understand the fundamental economics of every opportunity because, "It is easy to tell what has been, and it is easy to tell what is today, but the biggest deal for the investor is to . . . SORRY! Read More
Despite the attempts of the consumer electronics giant to create new revenue streams aside from its iconic smartphone, Apple still has a significant dependence on the iPhone series. Sales of the iPhone accounted for two-thirds of its revenue in the fourth quarter of 2015, which is in fact an increase over the same period just 12 months earlier. In Q4 2014, the iPhone range accounted for 54 per cent of Apple income, so it is clear that the company still has some way to go to reduce its reliance on the iPhone range.
The continuing success of the iPhone is certainly a positive for Apple, but it also helps contribute to the impression that the corporation is a one-trick pony. This is obviously something that Apple would wish to avoid anyway, but the consumer electronics behemoth has already explicitly promised the city that it will attempt to generate new income streams in the coming years.
Apple will be keen to live up to these promises, considering that the share price of the company has fallen significantly recently. Although it remains at a fairly healthy level, still being at well over $100 per share, this is an approximate drop of 20 per cent from the peak that it reached in the summer of 2015. While the iPhone range continues to generate record sales, bringing a valuable $51.5 billion for Apple in the fourth quarter of 2015, the perception remains that Apple needs to move away from iPhone reliance.
Minor niches struggle
Yet there are massive challenges for Apple in developing product revenue that rivals the iPhone series. There has generally been a steady decline in the sales of iPads, for example, while new products launched by Apple such as the Apple Watch, Apple Pay and Apple Music have provided no more than moderate income. These three products contributed only 4 per cent of total sales in the most recent quarter, and this represented absolutely zero growth over the same period last year.
While the iPhone 7 has the potential to boost sales for Apple, the continual refreshing of its smartphone product line with modest improvements every twelve months may eventually lead to its appeal diminishing. This is at least the opinion of analysts, with a recent Credit Suisse report suggesting that there could be “subdued iPhone cycle for the next few quarters”. Apple will certainly be monitoring the situation closely, and has a difficult balancing act to carry out in terms of ensuring the long-term survival of the company, while also protecting short-term revenue.
But analysts are certainly in agreement that Apple has to restrategise in the coming years. Holger Mueller, principal analyst at Constellation Research, commented that Apple was particularly vulnerable to falls in iPhone sales, and that its medium-term strategy must be focused on diversification.
“Apple has a large exposure to the iPhone and has not been able to come up with other growth engines. The iPads aren’t selling and the growth in Macs is limited. (Next year) will be a key year for Apple, when it either can innovate around wearables and TV, or it will have to flirt with lower prices (as it did with iPad last month) in order to keep up volume,” Mueller asserted.
Nonetheless, the smartphone market continues to grow for the time being, although even this trend is showing a general decline. The overall smartphone market grew eleven per cent this year, but this declined from 28 per cent growth in 2014, according to the market research group IDC. While iPhone sales have been particularly robust, the long-term prospect of the market seems to be for stagnation.
Latest iPhone 7 rumors
So when Apple does release the iPhone 7, it is going to need to produce something outstanding in order to really inspire consumers. It is perhaps not surprising then that the latest iPhone 7 news points to numerous significant innovations and new features. The iconic and flagship Apple smartphone is being linked with a fingerprint scanner, USB Type-C functionality and an improved version of 3D Touch in the latest reports.
Another new rumor suggests that Apple has produced five iPhone 7 prototypes, with the corporation still working internally on which one should ultimately be produced. This news has been leaked from sources close to the Apple supply chain, with a post appearing on the Chinese social media service Weibo confirming the news.
It also seems increasingly likely that the iPhone 7 will be both waterproof and dustproof, as numerous sources have been reporting this aspect of the smartphone in recent weeks. Additionally, several other Apple products expected in the coming months have also been linked with this feature, as Apple is expected to place more emphasis on health-tracking functionality in 2016.
One particular patent, entitled “Electronic Device With Hidden Connector,” shows a connector covered by a self-healing elastomer. The smart money is on this appearing in the next generation iPhone 7, as Apple attempts to produce a device that really captures the imagination. Other rumors suggest Apple will be removing the 3.5mm headphone jack for the iPhone 7, with the Japanese blog Macotakara having covered this.
As Apple continues to develop its product range, a revolutionary iPhone 7 is essential for the corporation, and it seems plans are well under way to produce exactly this device.