iPhone 6S or 7: super-strength new iPhone 'too expensive' | The Week UK
Apple's next-generation smartphone, likely to be called either the iPhone 6S or iPhone 7, will make use of a high-grade aluminium alloy that should prevent it bending in users' pockets – but will add significantly to the cost of building the device.
Apple will therefore either have to charge more for the new iPhone, risking a dip in sales, or absorb the additional cost itself, putting a dent in its profit margin.
The revelation that production costs will rise has added to Wall Street's uncertainty about the iPhone 6S or 7 as its likely launch date of 9 September approaches. Analysts fear that without a killer feature to whip up excitement, sales will fail to build on the huge success of the iPhone 6.
There's little doubt that whatever Apple produces will sell by the million and generate queues outside its stores, but Apple shareholders have high expectations, and the company's share price has fallen in recent months as doubt grows about whether the next iPhone will be as much of a money-spinner as the last.
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Jan-Willem Reusink
Description
Jan-Willem Reusink's iPhone 7 concept design envisages a sharp-edged, all-metal frame. That could prove problematic for getting a radio signal, but the finish is crisp and smart.
Unlike last year's all-new device, the iPhone 6S or iPhone 7 is likely to include only incremental improvements over its predecessor – and that could lead to disappointment for Apple's customers, lower sales, and therefore lower returns for the company's shareholders.
"Apple is slumping as the usually high-flying tech company struggles to impress investors with the burden of raised expectations," News.com.aureported last week.
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Acknowledging that the company sold 47 million iPhones last quarter, 35 per cent more than a year ago, it nevertheless notes that analysts had expected even more from the iPhone 6 – and suggests that there could be worse news to come with the launch of the iPhone 7.
"KGI Securities, which has an accurate track record when it comes to predicting the success of future Apple products, is now forecasting zero or even negative growth of iPhone sales in the last quarter of 2015," the paper reports.
In other words, they're predicting that the iPhone 6S or iPhone 7 will sell less well than its predecessor.
"This is unchartered territory for Apple, a company that’s become accustomed to year-on-year growth for its iPhone," says Alphr.
Force touch
Most commentator's expect that the most significant new feature in the new iPhone will be Force Touch - a more sophisticated touchscreen capable of differentiating between a light tap and more sustained pressure.
What that means in theory is that owners of the iPhone 6S or 7 will be able to control the device more efficiently, skipping menus and getting directly to the function they wish to use – but not everyone is convinced. "Little interest in the next iPhone's purported Force Touch feature combined with weak demand in China could sink iPhone sales in the fourth quarter," CNet reports.
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Scavids
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The rear of the phone protrudes, allowing more space for addition battery capacity – something iPhone users have often requested. But Apple has been faithful to flat-backed designs since its first smartphone.
A stronger iPhone – at a cost
Reports this week that Apple will strengthen the chassis of the iPhone 6S or 7 is likely to please consumers, but it may also add to investors' fears that the company's handsome profit margin may be squeezed.
Forbes reports that the iPhone 6S or iPhone 7 will be built using a stronger metal alloys than its predecessor – 7000 Series aluminium rather than 6000 Series aluminium.
The super-strength grade, used mainly for aerospace applications, is Apple's attempt to prevent the new handset bending and cracking in users' pockets – a problem with the iPhone 6 which came to be known as "bendgate".
But the additional rigidity comes at a price: "7000 Series aluminium costs up to 5x more than 6000 Series aluminium," Forbes says. "It is also more susceptible to rust which means it requires a thicker anodisation process (how colours are applied) which adds greater labour".
The resulting increase in production costs will eat into Apple's profitability if the company decides to absorb them, but could damage sales if they are passed on to consumers. The iPhone is already an expensive device, and a price rise could put off some potential customers.
Apple's own expectations
The company itself does not appear to be preparing for a dampening of demand. Last month, the Wall Street Journal reported that the company had ordered between 85 and 90 million new iPhones for the period between the launch and the end of 2015 - more than it has ever built before. Last year, it ordered 75 to 80 million iPhone 6 units for the equivalent period.
"Apple Inc is preparing for a larger initial production run of its next iPhones," the paper reports, "betting that even modest hardware changes will entice consumers to upgrade handsets and outstrip demand for the larger-screen phones that it released last year."
Nevertheless, investors appear to be unconvinced, and have been selling off Apple shares, which were traiding at $133.60 in February. They closed yesterday at $112.65, a fall of 14 per cent since that peak - in part because China's falling currency will make imports more expensive, hurting iPhone sales there (see video below), but also because investors are concerned that the company is not maintaining momentum is sales growth.
Even so, Apple remains by some margin the most valuable company in the world by market capitalisation.