NEWS

iPhone 8 sales are forecast to be blockbuster

Jon Swartz, and Eli Blumenthal
USA TODAY
Analysts are expecting a big overhaul and blockbuster sales for the next iPhone.

SAN FRANCISCO — The most significant update to the iPhone in three years promises not only to upend the smartphone market but Apple's financial results for several quarters.

On the heels of the iPhone's 10th anniversary this week, and before Apple unveils its expected new models in September, analysts expect flat year-over-year iPhone sales as consumers wait for the revamped phones. After that, however, they expect record-setting sales, dwarfing the success of the wildly popular iPhone 6.

Angelo Zino, a senior equity analyst at CFRA, predicts record iPhone shipments of 241.5 million in the 12 months following the iPhone 8 launch — smashing the previous high, set by iPhone 6, following its introduction in late 2014.

Demand for the new iPhone could vault Apple to the top-selling spot of smartphone sellers worldwide but it needs to set itself apart in three key areas — its voice assistant Siri, augmented reality and artificial intelligence, according to Tuong Nguyen, an analyst at market researcher Gartner. Siri, while still the most popular digital assistant, has squandered some of its early lead to rival Google Assistant. On the hardware side, Samsung has already established a beachhead with certain popular features, such as wireless charging and water resistance.

Apple briefly held the No. 1 spot last year amid Samsung's Note 7 woes before the South Korean electronics giant retook the lead. (It led Apple, 20.7% to 13.7%, in the first quarter of 2017.) Before that, the larger iPhone 6 grabbed the top spot, also briefly.

Anticipation — and stakes — are sky high for what is expected to be an overhaul of iPhone after several years of incremental changes that left consumers yearning for more and contributed to its first yearly drop in sales. The new iPhone 8 is said to be packed with features previously unavailable and comes in a new hardware design, according to reports. A revamped iPhone is crucial if Apple is to keep pace with rival Samsung's popular Galaxy S8 and inexpensive smartphones from Chinese vendors,  which are gobbling up market share, Nguyen says.

Investors, who have bid up Apple shares 30% this year, are also keenly watching how the new iPhone fares during the coveted holiday shopping season.

"There is pressure to make the new phone different and unique," said analyst Tim Bajarin of Creative Strategies. He expects augmented reality, which has the potential to be big for businesses in home improvement, to give it a distinct advantage.

In the interim, Zino, like many analysts, expects a "considerable slow patch" of iPhone sales in the months leading to the introduction of the new iPhone. He predicts shipments of 41 million (in the quarter ending in June) and 47 million (September) before a surge to 85 million (in December).

Such wildly diverging paths for iPhone sales the next several quarters are tied to the impact of the highly anticipated iPhone.

Overhaul

The iPhone 8 is believed to feature a redesigned glass back, according to an April report from Bloomberg, and the first significant iPhone design change since 2014’s iPhone 6.

A sharper new OLED screen is expected to cover the nearly entire front of the device with the physical iconic home button becoming a virtual one, similar to what Samsung has done with its recent Galaxy S8 and S8+ phones. Apple is reportedly working on embedding the TouchID fingerprint sensor, a staple since 2013’s iPhone 5S, into the display as well.

Wireless charging and faster wired charging could be coming to iPhone 8.  Wistron, an India-based manufacturer of iPhones, told reporters this month adjustments were being made to allow for assembling phones that were waterproof and supported wireless charging, according to Nikkei Asian Review.

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Three models are expected in September or October, but iPhone 8 (sometimes also referred to as the iPhone X or iPhone Pro) is said to be facing production delays and will be available in limited quantities, according to Ming-Chi Kuo, an analyst at KGI Securities.

Apple declined to comment on the reports.

The iPhone 8 is also said to feature enhanced camera capabilities for augmented reality, a space Apple has shown increasing interest in. At the most recent edition of its annual developer's conference earlier this month, the company introduced ARKit to allow software developers to begin creating apps that take advantage of AR.

Apple will need a hit iPhone model, Zino and others say, to sustain its cash cow — iPhone accounts for about two-thirds of revenue — and ease doubts that the company has lost its innovative touch.

"Samsung has pretty much recovered, and there is the rise of [Chinese vendors] Oppo and Vivo in terms of market share that make it increasingly harder for Apple," analyst Nguyen says.

Eli Blumenthal reported from New York.

Follow Jon Swartz on Twitter @jswartz. Follow Eli Blumenthal on Twitter @eliblumenthal.