Merchant Innovation

The Apple Crystal Ball: Separating Safe Bets From Wild Speculation

Apple

In a little over a week, the festivities will officially kick off in Cupertino’s Apple Park Headquarters as industry followers, Apple fans, tech enthusiasts and journalists crowd into the Steve Jobs Theater (or around their favorite live-streamed screen) for Apple’s annual fall event. This tradition is rapidly becoming as autumnal a ritual as leaf peeping and pumpkin spiced consumer goods as the world anxiously awaits the “one more thing” that will define Apple’s next year.

And in some regards, 2019 will be very much like fall events of years past. For the next week or so the speculation will reach its annual pitch as leaks and “leaks” make the rounds. Someone will speculate that Apple is about to suddenly drop the iCar into the market, several articles will be written speculating about how “make or break” this event is for Apple.  When the day comes, millions will tune in, Tim Cook will use the words “incredible” and “world-changing” several times and an entire segment of Twitter will keep track of every technical glitch Apple suffers during a presentation in real time.

But the fall event in 2019 will also be different, because the product that it is built around is in a different position than the one it has been in for the last seven years.  The iPhone, as of last quarter, is no longer generating the majority of Apple’s sales on its own.  According to the firm’s last earnings report, the iPhone accounted for only 48.3 percent of Apple’s overall revenue in FYQ3. That is the first time that has occurred since 2012.  iPhone sales missed analysts’ expectations as well, bringing $25.99 billion in revenue as opposed to the $26.31 billion forecast. Apple has remained upbeat on the topic of the iPhone, noting it returned to growth on an annual basis in June and that its active installed base is at all-time highs and was up year on year in all of the firm’s top 20 markets.

But Apple’s executive team also continually pointed out Apple growth strength in arenas outside of smartphones — particularly its relative dominance of the wearable market and its rapidly expanding services portfolio.  The iPhone is critical to the business, but in recent quarters Apple has been working overtime to remind the market that its business is bigger than the iPhone.

Will that trend carry on during the fall event — colloquially known at the Fall iPhone event — in a week?

The iPhone Knowns, Unknowns And  Rumors

Whether the iPhone will continue more of the spotlight sharing that has become the trend in Apple’s 2019 earnings reports remains to be seen, but it seems safe to say that even if it has co-stars this time around, the iPhone will still take top billing at the event.

It was widely taken for granted for most of the summer of 2019 that Apple will once again release three new editions of its “iPhone 11” product, much the way it did last year. Reports in Bloomberg indicate the next edition of the iPhone will be called the “Pro.”

How big the changes are that are coming to the phone is a matter of some debate among speculators.  Some, like the analysts at JP Morgan Chase, are expecting the changes to be relatively tame this year — and mostly iterative.  The expectation is for “relatively few design changes,” with J.P. Morgan Chase analysts agreeing that major updates would happen in 2020.

That has mostly been conventional wisdom since early June, with wide belief that there is a 5G compatible phone on the horizon for Apple in that next release.  But, according to the experts, not this one.

“Our expectations include all three Sep-2020 iPhones (5.4″/6.1″/6.7″ screen sizes) will adopt OLED displays and 5G baseband modems (with support for mmWave frequencies), and at least two of the three models adopting world facing 3D Sensing (Time of Flight) driving industry leading AR/VR capabilities which can be leveraged by custom built applications (including games),” analyst Samik Chatterjee wrote.

But as the event gets closer, that consensus is wavering a little. Industry watcher Eldar Murtazin — a mobile industry journalist with a long, proud history of getting early access to hard-to-see unreleased phones — took to Twitter to announce that Apple’s new iPhones are “completely different” to anything we have seen so far.

Murtazin offers few details, but does offer some pretty revealing speculation that the tech watcher world has been more or less faked out by Apple going into its fall release.

“The new iPhones are completely different than in [leaked pictures]”, Murtazin tweeted, “outwardly different than current [iPhones]” — and that Apple has surprises lined up in their design which no one has sneaked out just yet. Other than whoever sneaked it out to Murtazin, of course.

Is Murtazin right? We either lack his sources or his imagination and would be surprised to see one tech reviewer get it right when everyone else got it wrong.  Big design changes are hard to hide in a world where there are analysts watching even the most minute details of Apple’s supply chain looking for any change whatsoever to deduce a future move.

But Apple has pulled off a surprise or two in this arena — and 2019 is theoretically a “tik” year when the firm rolls out its big design upgrades, as opposed to “tok” years which are generally more iterative in nature.

We wouldn’t bet on a surprise design change — but it might not be entirely shocking if one gets pulled out.

Other Areas To Watch

As for the iPhone’s potential co-stars this time around, the Apple Watch is looking like an increasingly likely candidate to take some share of the limelight.  Recent data revealed that the North American wearables market hit $2 billion in the second quarter of 2019, led by Apple, which grew 32 percent to 2.9 million units sold. And while North America falls into second place in the wearables market in terms of units shipped (behind China), it is still the most valuable. In fact, in Q2 2019, more than 60 percent of Apple’s 4.7 million global watch shipments were into North America.

Wearables are also becoming an increasingly competitive market, with Samsung logging 121 percent growth for its Galaxy smartwatch line, and trailing Fitbit announcing this week a slew of upgrades, including an integration with Amazon’s Alexa.  Its fall event is an excellent place for Apple to assert the continuing dominance of the wearables market, and most watchers are expecting see the Apple Watch 5 make its first world appearance.

Whether that will mean any major changes are coming is another matter.  Again, the expectation is after the major design revamp on the Apple Watch 4, the Series 5 will likely be more iterative and focused on software upgrades announced earlier this year at WWDC.

There is some outside speculation, however, that a name change could be on the way — and that the newest version of the Apple Watch might not be called the Series 5.  What the new branding might be is unknown, but most speculators favor “Pro” to go along with the speculated iPhone switch.

In the dark horses to watch arena: Home Pod is a source of speculation from many corners, with some positing a major Siri upgrade is afoot and others speculating that a cheaper version of the Home Pod is the most likely announcement, while yet others are speculating on a full overhaul of the product that will border on being a do-over.

The Home Pod was the “surprise” announcement of the fall event two years ago — but despite the great fanfare around its announcement, it was plagued by difficulties entering the market. The product has been widely criticized for being out-of-step with the smart speaker trend. Apple has not given up on the product in recent years, exactly — but it doesn’t get a lot of mentions in earnings calls or big staged presentations as of late.  Whether that means Apple is setting up for some changes on September 10th or is just less than focused on the project remains to be seen.

But, of course, in a week or so the waiting will be over, and we’ll be able to offer you a first look at Apple’s big fall show. Until then, whether the iPhone’s star seems a bit dimmed and what, if any, major left turns are on the way remains to be seen.

 

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