iPhone 8 Predicted to Start at $850 to $900 for 64GB Model, $950 to $1,000 for 256GB Model

Apple's widely rumored high-end iPhone with an OLED display is expected to cost upwards of $1,000, but UBS analyst Steven Milunovich believes that a base 64GB model could start at $850 to $900 in the United States. That price point would be similar to Samsung's new Galaxy S8+, which starts at $840 to $850.

"iPhone X" concept by designer Gabor Balogh

Milunovich said the flagship iPhone could start at under $1,000 as part of Apple's "mainstream luxury" pricing strategy. He also believes the 5.8-inch device will be competing at a screen size disadvantage compared to the 6.2-inch Galaxy S8+, leading him to predict Apple will adopt similar pricing as Samsung.

Milunovich thinks that a 256GB model could cost between $950 and $1,000, so the iPhone could very well be the first smartphone in the United States to have a four-digit price tag. He also predicted that the tentatively named iPhone 7s and iPhone 7s Plus will start at their usual $649 and $749 prices respectively.

An excerpt from Milunovich's latest research note obtained by MacRumors:
Contrary to some perceptions, Apple prices quite competitively. Apple likes to position its entry-level products at the mid-market with "Pro/Plus" products close to competitors at the high end. Therefore, we do not think Apple will stray far from the price point of Samsung's most expensive model at $840-850 and will keep the entry OLED model at $850-900. Apple's 256GB OLED model could be $950-1,000, but the 256GB 7 Plus already is $970.
The research note cites UBS Asia hardware analyst Arthur Hsieh, who estimates the factory cost of the tentatively named iPhone 8 could be $70 to $90 higher than the iPhone 7 Plus, which starts at $769. Milunovich's prices appear to be merely predictions, however, and not based on other inside information.

In addition to an edge-to-edge OLED display with narrow bezels, the iPhone 8 is expected to resemble the Galaxy S8 in many ways, including wireless charging, no physical Home button, and potentially 3D facial recognition and/or iris scanning. Touch ID might be embedded in or under the True Tone display.

Milunovich maintains a "buy" rating for AAPL with a $151 price target. AAPL closed at $144.77 on Tuesday.

Related Roundup: iPhone 8 (2017)
Tags: UBS, Steven Milunovich

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Apple Exploring AR in Israel as Robert Scoble Insists ‘Mixed Reality’ Glasses Coming This Year

Augmented reality could be the "next big thing" for Apple, according to the latest research from UBS analyst Steven Milunovich.

Milunovich believes that Apple could equip the iPad and iPhone with AR-enabled hardware such as sensors, 3D cameras, and custom chipsets over the next two to three years.

He speculates the iPhone 8, for example, could have "moderate 3D mapping using stereoscopic vision" based on a technology called Simultaneous Localization and Mapping.

An excerpt from his research note obtained by MacRumors:
SLAM solves the chicken and egg problem of mapping a space without prior knowledge. The device starts from one angle and collects points of data. As the device moves, it observes how objects shift and begins to fuse data to create an environment. As the 3D map is forming, the device begins to understand its own positon in the context of the environment it is trying to map.

SLAM underlies most of the advanced AR technologies available today and will likely be critical in the future. In 2015, Apple bought software company Metaio, which had one of the most advanced SLAM-based AR engines available at the time. The company has been silent since being acquired, but according to our industry checks it's likely the core team has remained and the IP could play a key role in Apple's strategy.
Milunovich, citing "some industry sources," added "there may be over 1,000 engineers in Israel working on projects that could be related to AR," but he expects Apple to slowly roll out augmented reality features until the technology becomes more mainstream and "reaches a level of maturity suitable for Apple's brand."

Perhaps related, iPhone 8 development is said to be ongoing at Apple's offices in Israel. Earlier this month, Apple acquired Israeli startup RealFace, a cybersecurity and machine learning firm specializing in facial recognition technology. And in November 2013, Apple acquired Israeli 3D sensor company PrimeSense.

Milunovich said that because new technologies must fit within and grow the Apple ecosystem, the company will likely release an augmented reality SDK that is tightly integrated with iOS.

Beyond the next two to three years, Milunovich thinks an additional AR-enabled hardware device is possible, citing tech evangelist Robert Scoble's belief that Apple will launch a pair of smart glasses in partnership with German optics company Carl Zeiss. The report said the glasses could launch as early as 2017.

In November 2016, Bloomberg likewise reported about Apple working on a pair of smart glasses that would connect wirelessly to the iPhone and display "images and other information" to the wearer.

Scoble recently told MacRumors that Apple is "readying a three-ounce pair of glasses that pair with the iPhone 8 for mixed reality." He insists that "mixed reality," which he refers to as "next-generation augmented reality," will be key to Apple's future products. Treat this info with a proverbial grain of salt for now.

Apple CEO Tim Cook has repeatedly expressed his interest in augmented reality. He recently said AR is "a big idea like the smartphone," but noted "there are things to discover before that technology is good enough for the mainstream." In the past, he said AR is "profound" and should "amplify" human contact.


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Apple Forecasted to Report Record Earnings Next Week, but Will iPhone 8 Keep Driving Growth?

Barclays estimates that Apple will report a record-breaking $76.6 billion in revenue when it announces its earnings results for the first quarter of fiscal 2017 on January 31. Apple reported revenue of $75.9 billion in the year-ago quarter, and offers guidance of $76 billion to $78 billion for this quarter.

Apple-Bonds
UBS estimates Apple will report revenue of $77.8 billion next week, which falls on the higher end of Apple's guidance. UBS analyst Steven Milunovich maintained a "buy" rating for Apple stock with a target price of $127—compared to $120 currently—in a research noted issued to investors today.

Meanwhile, Barclays analyst Mark Moskowitz lowered his price target for Apple's stock from $119 to $117 in a research note issued to investors today.

Moskowitz does not expect "meaningful upside potential" for Apple in 2017. He believes customers increasingly "mixing down" by opting for the iPhone 6s in favor of the iPhone 7 could weigh on Apple, while he is also concerned about China and India failing to emerge as growth catalysts in the next 12 months.

He said the so-called "iPhone 8" will potentially have "no must-have advanced features," making him skeptical of a meaningful growth rebound for Apple in the second half of this year. He added that smartphones have become "more than good enough" to serve the needs of most users over multiple years or until the device breaks.
While not likely to have a similar replacement cycle of PCs (i.e., 5-7 years), we think the smartphone market and thereby the iPhone franchise stand to face incremental headwinds this year and next, as the smartphone useful life extends to 3 to 4 years from 2 to 3 years previously. As a result, the prospect of revolutionary technology incorporated into the next iPhone (iPhone 8) is not likely to counter the expanding useful life of smartphones in general.
Specifically, he said OLED display options, bezel or bezel-less designs, an embedded Home button, and wireless charging are commonly mentioned in its discussions with industry participants about the next iPhone, but that the new features might not be able to reassert that "must have" element for customers.

Wireless charging in particular may be limited by the need to be close to a charging base. Moskowitz does not expect wireless charging over greater distances to develop until 2018-2019 at the earliest. He acknowledges that Apple could be making strides in this space by partnering with firms like Energous, but he maintains his view.

Nevertheless, he said Apple has a "sticky ecosystem" and a large cash balance that provide decent support for long-term investors.

Barclays predicted Apple has long-term growth opportunities related to India, its growing services category, the enterprise market, artificial intelligence, and possibly the cloud, but it does not expect those potential "what's next?" opportunities to emerge as "major needle movers" for the company over the next 12 months.


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