The iPhone 12 could be Apple's most important product release in the last decade
Apple's iPhone 11 series Crystal Cox / Business Insider
Apple's iPhone 12 line of products is expected to be a major smartphone launch that some analysts predict could represent a once-in-a-lifetime opportunity for the company.
The combination of 5G support, new size options and designs, affordable pricing, and the fact that many active iPhones are aging is likely to result in a massive iPhone upgrade cycle.
This is especially important as Apple has been grappling with the slowdown in iPhone sales in recent years and needs to boost other product segments such as wearables and services.
Apple is expected to introduce its new iPhones on Tuesday.
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Apple's annual iPhone product launches are always closely watched by customers and Wall Street. However, 2020 is a particularly critical moment for the tech giant.
Analysts believe the iPhone 12, slated to be unveiled at the company's Tuesday event, will mark Apple's biggest upgrade cycle in years.
Daniel Ives, an analyst at Wedbush Securities, says many active iPhones around the world are now several years old and ready to be upgraded. The iPhone 12 is also expected to be Apple's first 5G iPhone. This means the upgrades are expected to continue into the next year as 5G networks continue to evolve and customer demand for 5G enabled devices increases.
The combination of 5G support, new size options, affordable pricing options for both the iPhone 12 and possibly older models, and the fact that many active iPhones are getting older could make this a blockbuster for iPhone upgrades.
"Everything will be iPhone from start to finish," Ives said in an interview with Business Insider ahead of Apple's event. "In my opinion, this is the most important product cycle for Apple in the last decade."
The expected start comes after Apple reported a drop in iPhone sales in its quarterly earnings reports over the past few years.
Some have attributed this slump to rising smartphone prices, and new features have been viewed as too incremental to warrant an upgrade for many consumers.
Apple began reversing that trend with the iPhone 11 lineup, which performed better than many expected, but the iPhone 12 is expected to get the big boost Wall Street has been waiting for.
Apple has also made efforts in recent years to reduce reliance on the iPhone and offset the decline in sales in its key product line by strengthening other areas such as digital services and accessories.
Analysts predict that Apple will usher in a major iPhone upgrade cycle with the debut of its iPhone 12 lineup on Tuesday.
Wedbush Securities estimates 350 million of the 950 million iPhones in use worldwide are about to be upgraded. According to Bloomberg, Apple is said to have ordered at least 75 million units of the iPhone 12 for 2020. According to Wedbush's Ives, 40% of Apple's installed base haven't updated their phone in 3.5 years, which presents a great opportunity for upgrades.
"It's almost the perfect storm of demand for Apple, so it's really a super cycle," said Ives.
According to analysts, it's not just instant sales that make the iPhone 12 such a monumental upgrade cycle for Apple. It is the notion that consumers will likely update their iPhones in the coming year as 5G networks evolve.
"These speed improvements happen every six to eight years," Gene Munster, managing partner at Loup Ventures, told Business Insider. "It's pretty rare. So that's remarkable, and consumers care about it."
It will likely be some time before 5G becomes the standard. For example, Verizon's 5G network is only found in certain areas of just over 30 cities in the United States. There are also many areas of the country that are not covered by AT & T's 5G network, as shown in the coverage map.
However, some analysts see the iPhone 12 as the beginning of a long-term upgrade cycle as carriers expand their 5G presence.
"We anticipate this year's line-up will usher in a significant cycle of replacements that we believe will be a multi-year process as new applications and frequencies become available over time," wrote Robert Muller, Analyst at RBC Capital Markets, and Michael Murray, Senior Associate, in a recent report.
A team of Morgan Stanley analysts, led by Katy Huberty, said in a recent research report that the iPhone launch this fall will be "the biggest iPhone event in years."
Aside from 5G support, Apple's iPhone 12 line of products is expected to come in new sizes and likely have an updated design. The iPhone 12 should be available in four variants: a 5.4-inch iPhone 12 "mini", a 6.1-inch iPhone 12, a 6.1-inch iPhone 12 Pro and a 6.7-inch -iPhone 12 Pro Max.
The 5.4-inch and 6.7-inch sizes are new to Apple's smartphone range and represent a departure from the 5.8-inch iPhone 11 Pro and 6.5-inch iPhone 11 Pro Max Previous year.
Ives and Munster expect these two new variations to be the most popular. Ives says he's seen a surge in pent-up demand for the larger 6.7-inch model, largely because bigger phones are more popular in China and there are likely to be many iPhone upgrades there over the next year.
"There are currently around 60 to 70 million iPhones in the upgrade window in China," said Ives. "And ultimately, this isn't a super cycle without China. So it's important that the China component continues to be strong for Apple."
Munster, on the other hand, believes the move to larger phones in recent years is likely to mean high demand for a smaller flagship iPhone. The smallest phone Apple currently sells is the 4.7-inch iPhone SE for $ 400. It shares the same processor as the iPhone 11 family but lacks modern features like Face ID, a borderless screen, and a multi-lens camera.
"I understand the movement towards bigger screens, but I think there is a group of people in the last seven years who have felt left out," said Munster. "I think there is a pent-up demand for the latest and greatest in a smaller form factor."
New size options and the move to 5G aren't the only factors that could make this a big iPhone launch for Apple. The company is also expected to continue leaning on its strategy of rating the iPhone more aggressively against Android offerings. This tactic has proven successful with the iPhone 11 for $ 700 and the iPhone XR for $ 600.
Despite new features like 5G, the entry-level iPhone 12 is expected to be priced at $ 700 like its predecessor, which could be particularly important given the economic impact of the COVID-19 pandemic.
If Apple is discounting an older model like the iPhone 11 after announcing the iPhone 12, as it did in previous years, there may be even more opportunities to convince budget-conscious iPhone owners with aging phone models to upgrade.
Apple could also launch a smaller, cheaper new version of its HomePod smart speaker during its October 13 event. But the all-important iPhone will almost certainly be the main attraction. And keeping the price of the iPhone competitive with new offerings from Google and Samsung is the key to the success of the iPhone 12.
"This is not a company that typically drives prices down," said Ives. "But I think they realize they have to have different prices because they can't miss this opportunity."
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