When Apple announced earnings this week, one of the surprising revelations shared by Tim Cook was that only 40% of iPhone owners have upgraded to a larger-screen iPhone. Cook has two plans to address the hundreds of millions of iPhone loyalists who are still sporting smaller, older models. First comes in March, with the iPhone 5se, a nice upgrade to the 5s. But the second is more intriguing: A series of upgrades to the flagship models that Apple believes will be compelling enough that people won't be able to resist.
If things work out as Apple hopes, it could reignite growth in iPhone sales -- which plateaued in the most recent quarter and even Apple expects to be down numerically for the three-month period ending in March -- and get people hooked on Apple's iPhone Upgrade Program. So far, only a small number of customers have signed on to pay a monthly fee for the privilege of being able to easily get a new iPhone every year (about 250,000 according to Gene Munster of Piper Jaffray, though many more engage in similar programs through wireless carriers), but it's not hard to imagine that figure growing with time and additional marketing. And, of course, if Apple can show customers why they need the latest and greatest iPhone every year.
Let's look ahead at what the next three iPhones are likely to bring to see where Apple is casting its bets.
iPhone 7, 2016: Expected this fall, the iPhone 7 will certainly sport an all-new design from Jony Ive and company as even year models have since the iPhone 4. Safe bets include an upgraded A10 processor, an even thinner chassis, and an upgrade to the snapshot/iSight camera. It seems likely, too, that Apple will be removing the headphone jack and bundling a set of earbuds that connect to the Lightning port. Expect a Beats-branded set of wireless earbuds -- likely with no wire between them -- to be offered as an upgrade. Don't be surprised if they run $99 and roll out alongside the iPhone 7. One bonus is that the iPhone might finally get waterproofing as a result of this change, though it's possible Apple won't tout that as a selling point.
As reported in Forbes, well-regarded Apple analyst Ming-Chi Kuo expects a dual-lens camera to debut, but only on the 7 Plus. That kind of separation between the large and small models has precedent from the 6 series, where only the 6 Plus offered optical image stabilization. This new camera should allow not only for better pictures overall, but also for wide angle and telephoto shots without clunky add-on lenses.
Another intriguing feature that might not be iPhone 7 specific is an opening up of the NFC chip that enables Apple Pay. Expect to hear more about transit partnerships in 2016 and 2017 (the iPhone already works as a de facto Oyster card in London) and iPhone will find use as an ATM card replacement as well.
Finally, there's intrigue in the possibility the new design will shrink the space around the screen to make the phone smaller and easier to hold. That might get some skeptics of the 4.7-inch screen (expect the screens to remain mostly the same) to move up and some who found the 5.5-inch Plus a bit big (like me) to go for the phablet next time around. So long as the Home button remains Apple is constrained somewhat, but there's definitely room for trimming around the edges. Additional rumors have suggested the white antenna lines on the back of the phone will disappear. Apple has needed them to allow radio signals to enter and exit the iPhone as metal tends to block radio signals. But there may be some tricks forthcoming to change that.
Prospects: Will these upgrades be enough to entice users to move? It's hard to say, especially since the elimination of the headphone jack is likely to both generate negative publicity and annoy people with investments in old-style headphones. But this year might be the least important of the trio. Why? Because with so many non-upgraded phones and Apple's installed base growing by many tens of millions (of the 200+ million iPhones that will be sold in the coming year lots will go to customers new to iPhone), there should be a burst of upgrades large enough in this generation.
iPhone 7s, 2017: The odd-year cycle has proved somewhat perilous for Apple in that the design of the phone remains constant and the company has to provide under-the-hood improvements to excite customers. This year's iPhone 6s offered a strong boost to processor speed and finally went to 2GB of RAM on board, but the rest of the feature set was less instantly compelling. As always, the camera got better, though perhaps by a smaller margin than usual. And some features felt either gimmicky (Live Photos, the new rose gold) or unfinished (3D Touch). That Apple marketed the phone with "the only thing that's changed is everything" points out the challenge of selling something new that doesn't look new. Personally, I find the 6s to be an excellent upgrade, but I don't generally tell people who have a 6 to rush out and get one.
It appears what Apple hopes to deliver with the iPhone 7s is truly wireless charging. A report in Bloomberg suggests Apple is targeting 2017 for a solution that will allow phone charging at distances perhaps as great as 1 meter. Apple has been a long-time skeptic of wireless charging that uses pads, like the Qi charging used by many Android phones, because those pads need to be plugged in and the phone physically placed on them. If Apple could make "ambient" charging work, it would allow you to just put your phone or iPad down on a counter or table near where the charging device is plugged in and that would do the trick.
While the A-series processor will certainly keep getting a refresh, it seems likely the value of this will diminish at least until Apple pushes up the pixel count on its smartphones. Perhaps most importantly would be increased power efficiency from a new generation, with improved battery life. Along those lines, another intriguing prospect is that Apple could begin designing its own radio components for the iPhone, instead of relying on Qualcomm (or Intel) for those parts. Better integration between the Apple A series system on a chip and the radio could make a meaningful difference in longevity on the days you're on the go, where the iPhone battery is clearly at its worst.
Prospects: It could be that 2017 is the "year of power" where Apple talks up wireless power, battery power, and perhaps some benefits associated with improved processing power -- it's typically the odd years where the A series makes bigger leaps. The dual-lens camera will certainly improve and might migrate down to the 7s from the 7 Plus, if space allows.
Perhaps more than anything, though, if Apple wants to sell more iPhones next year it would strongly benefit from having lower-priced offerings. The least expensive iPhone is $450 (often higher outside the U.S.), which limits it to a small number of customers in many emerging markets and even parts of Europe. While playing down in the sub-$100 price band isn't Apple's cup of tea, even a move to $350 would likely matter a great deal in India, Brazil and elsewhere. Whether the 5se opens the door to a lower price point in 2017 remains to be seen, but is closely worth watching if Apple wants to move from 1 billion devices in use -- a figure it touted in its earnings -- to 2 billion over the next half decade.
iPhone 8, 2018: Looking ahead this far is fraught, but one thing seems almost certain: This is the year iPhone goes OLED. Increasing evidence suggests Apple has contracted with Samsung, the leading maker of mobile OLED displays, and longtime display supplier LG to produce screens for iPhones. It's also been rumored to be working with another partner, Japan Display, to get it ready to produce OLED displays.
While this change is a big deal structurally, allowing for a potentially even thinner iPhone that finally again has a class-leading display, it's unlikely to wow too many customers. Samsung's Galaxy series has sported OLED for several years now and Apple will be a latecomer to the party. One killer feature of OLED is that it theoretical allows for flexible, foldable displays, making it possible to build an iPhone that could double its screen size to that of an iPad. But to produce a device like that in the quantities Apple typically sells won't be realistic in 2018 so the phone itself is likely to still be a solid slab with a glass front.
A radical change, however, would be to do away with the home button allowing a further shrinking of the chassis. If TouchID could be embedded behind the screen, such a change would become possible. As with a folding iPhone, though, it's not clear whether the technology to enable this will be realistic even by 2018. TouchID is made possible by a dedicated sensor that's far more sophisticated than the magic that enables 3D Touch, for example. To allow you to still use your fingerprint (for security), but do so on an arbitrary area of the screen might be a bridge too far, especially as Apple integrates OLED into the iPhone for the first time.
Still, this will bring yet another new design and perhaps a willingness to be radical. Google has a fingerprint sensor on the rear of its Nexus phones. Apple might find a way to embed something workable into the side edge of the iPhone.
Another killer feature that could entice more users to upgrade would be increased unbreakability. Apple spends tremendous time designing beautiful devices only to have most people (1) put them in cases (2) find ways to shatter the screen anyway. Mitigating the effects of damage is a hard problem, but Apple likes hard problems. And there's already a Motorola with a nearly unbreakable front.
Prospects: Hardest to tell, of course, without a better sense of what you'll be getting. The exciting feature here would be a truly radical redesign that makes the iPhone look and feel new all over again. The "white swan" would be some kind of breakthrough in battery life that allows heavy users to forget about getting a Mophie or worrying about nursing their phone through the day. iPhone will be more than 11 years old at this point and on what amounts to its seventh design. The smartphone market will nearly be one entirely of replacements and while Apple will certainly still occupy the premium tier, it may well have decided to take on a bigger chunk of the middle as well.
For all the hand-wringing over Apple's latest quarter, it recorded an all-time record profit and ended the calendar year with 232 million iPhones sold. Much of the angst concerns how the company plans on topping that total going forward in a slowing global economy and maturing smartphone market. As the above shows, there's still some obvious room for innovation ahead, not to mention the countless ideas Apple has that those of us outside Cupertino haven't yet conceived of. It's a safe bet that Apple plans on selling more iPhones in each of the next 3 years than they did in 2015, even with the first-quarter slowdown they've forecast for 2016. The question is will the new offerings be compelling enough to make that happen.
