Apple preps new iPhone lineup with focus on larger screens, higher prices

Apple Inc. is gearing up to unveil its new range of iPhones at a Sept. 7 event.

The iPhone 14 lineup is expected to include four models: a standard and Pro version at 6.1 inches and a Max and Pro Max version at 6.7 inches each. The higher-end models are expected to cost $100 more than 2021's lineup. The standard iPhone 13 started at $799, while the iPhone 13 Pro Max started at $1,099.

Although macroeconomic issues that have gripped the tech world are expected to weigh on Apple as well, analysts believe that there is enough pent-up demand from consumers to upgrade their devices to pave the way for the iPhone 14 to become yet another smashing success for the company.

"Apple's growth story remains well intact with clear momentum around iPhone 14 around the corner despite the shaky macro," Wedbush analyst Dan Ives said in a research note.

Anticipation around the phone has impacted Apple's stock, which is up more than 15% in the last two months. The company's shares year-to-date have consistently outperformed the tech-heavy Nasdaq index.

Changes for iPhone 14

The new iPhone 14 line is expected to ditch the notch at the top of the display in favor of a punch-hole for the front camera and Face ID system. This change would allow for a more useful status bar at the top of the display, said Ken Hyers, director for emerging device strategies at Strategy Analytics.

However, the most significant move Apple is anticipated to make with the iPhone 14 line is including the current-generation A15 Bionic chipset in the base model of the phone, while reserving the new A16 chip for the high-end Pro models, Hyers said.

While not upgrading the processor of a new iPhone would be a first for Apple, the move would allow the company to alleviate supply chain issues while keeping the bill of material costs down.

"This is a very smart decision by Apple, as retaining the A15 chip should smooth out supply issues that typically impact the company in the latter half of the year when they introduce a new iPhone model," Hyers said.

Apple is likely to skip a mini version of the iPhone 14 due to anemic sales of previous models, said Angelo Zino, a senior equity analyst at CFRA Research.

"After absolutely dismal sales of previous mini versions, Apple is placing increasing emphasis on larger screens that possess higher price points," Zino said. "Dropping the mini from the iPhone lineup in favor of the Max will naturally increase the average selling price across Apple's platform."

Softening sales

The second quarter was rife with issues that took a toll on device sales around the globe. Component shortages continued to linger, while macroeconomic factors such as currency exchange headwinds led to lower overall consumer demand.

Despite its market dominance, Apple was not immune to the pressures and saw its total second-quarter product shipments decline 1.1% year over year, according to estimates by Kagan, a media research group within S&P Global Market Intelligence.

While every Apple product segment tracked by Kagan was either flat or down year over year, iPhone shipments still managed to grow 5% to 47.5 million in the second quarter.

Apple reported iPhone net sales of $40.67 billion in the June quarter, up 2.8% year over year. However, the growth rate was significantly lower than the 49.8% reported in the prior-year quarter.

Looking forward

Wedbush projected that Apple placed an initial order of 90 million iPhone 14 units out of the gate, roughly flat compared to the iPhone 13.

"While the softer macro will clearly play a role in the demand story, we believe the baseline for 220 million iPhone units in FY23 is likely a low bar given the pent-up demand story that we are seeing globally for Apple," Ives said.

CFRA forecast sales growth of between 0% and 3% for iPhones in the fiscal-year period ending September 2023, mainly due to macro uncertainty and headwinds that are weighing on the smartphone space. However, the firm also estimated the average selling price for the next cycle would increase about 3%, driven by expected price increases for the higher-end phones.

"We do see a possibility for Apple to increase the price of its two higher-end Pro devices, given the greater upgrade capabilities that this device offers versus prior generations, coupled with the natural inflationary environment that would make such a move acceptable by consumers," Zino said.

Given the more challenging macroeconomic backdrop, Zino thinks that Apple increasing the price of its standard iPhone is unlikely.

Apple Watch

Apple is also expected to unveil new Apple Watch models at the Sept. 7 event. The new Series 8 watch will have no major changes to the aesthetics but will have minor updates to the internals, including a new "S8" chip, Zino said.

At the low end, Apple will provide minor updates to the Apple Watch SE, and the company is likely to announce that it will no longer sell the lower-priced Series 3 watch, according to the analyst.

"This natural move should help boost the average selling price for the Apple Watch along with the company's intent to unveil a new high-end watch," Zino said.

The new higher-end model will likely target extreme sports enthusiasts with an expected larger display, longer battery life and a more shatter-resistant screen.

"Under the assumption that this device will go on sale for $800 or more, we expect unit sales and demand for the product to be minimal," Zino said.

New versions of the iPad tablet are expected to be announced in October. Apple's new augmented and virtual reality headsets are not expected to show up at the September event.