The iPhone 8 May Cost $50 More Than The iPhone 7

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The iPhone 8 is expected to be Apple’s biggest upgrade ever because fans, investors and analysts are all expecting something huge for the device’s tenth anniversary. However, investors are understandably wary about whether Apple will be able to deliver on all those lofty expectations, and unsurprisingly, analysts are trying to calm those fears.

Investors may be too optimistic about the iPhone 8

Goldman Sachs analysts recently visited with some of Apple’s suppliers in Asia, and in a research note dated Dec. 4, they described those suppliers as being “optimistic” about the next iPhone. They believe much of the optimism comes from a major change to the design of the iPhone 8 because the last three iPhone models have all looked pretty much the same.

However, they also warn that investors might be expecting too much from the iPhone 8 because it will come in a year with a “weaker upgrade cohort,” meaning a year that usually Apple offers a smaller S upgrade rather than a major overhaul in design.

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What analysts are predicting for the iPhone 8

After their field work, they suggest that the iPhone 8 may have a curved-edge OLED display, glass back that’s either transparent or translucent, and a stainless steel unibody frame. They also suggest that the display could be a little bigger than that of the iPhone 7 Plus, coming in at 5.8 inches due to the curved edges being extended to the sides of the handset. They also echoed the rumor about the Home button being removed.

The Goldman Sachs team also suggests that wireless charging could be included with a glass back, and the dual-lens camera may receive yet another upgrade to have two optical image stabilizers. They didn’t see any evidence that the iPhone 8 could have virtual reality or augmented reality capabilities, but they don’t discount the possibility.

They believe the design of the iPhone 8 must be finalized by the first quarter so that Apple’s suppliers could execute their capacity expansion and capital expenditure spending in plenty of design. Most of the suppliers expect a September launch, and most are looking for only some of next year’s iPhone models to have OLED displays.

iPhone 8 may cost $50 more

There’s been much debate recently about whether suppliers would be able to supply enough OLEDs to outfit Apple’s full iPhone 8 lineup next year. However, Credit Suisse analyst Kulbinder Garcha and team believe the concerns about a shortage of OLED capacity are overblown.  They said in a research note dated Dec. 6 that they’re confident that the growing investment in boosting OLED production capacity means that suppliers should be able to outfit up to 270 million iPhones with OLED displays.

Their biggest question is whether all that added capacity will be up and running at full speed in time for the iPhone 8 launch. Because of this concern, they see three potential scenarios. One is that Apple will offer two iPhone models, both with OLED displays. The second is that there will be three iPhone models, only one of which will have an OLED display, and the third possible scenario is that there will be three iPhone models all of which will have OLED displays.

Will Apple sacrifice gross margins?

Garcha said the other key concern investors appear to have about the iPhone 8 is the gross margin, and all those lofty expectations make it clear why margins are in focus. Because next year’s model is expected to be fully redesigned and have so many new features and improvements, investors are starting to worry that the gross margin for the iPhone business will start to decline.

However, Garcha believes Apple could keep the margins intact. One way it could do this is by raising the average selling price of the OLED iPhone model by about $50. He also suggests that the company could keep the mix of the new phones to about 35%, which is close to current levels. He said these suggestions assume that the bill of materials on the device increases $25 due to the OLED display. The analyst also believes that growth in the services business could offset some of this impact.

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