Apple (NASDAQ:AAPL) may have a long range problem if emerging technology supplants the iPhone, but in the short term, the company has nothing to worry about.
Since the first quarter of 2012, the company's smartphone has accounted for more than half of its total revenue. That number jumps nearly into the 70% range early in the life cycle of a new model.
With iPhone 8 being introduced on September 12, Apple is poised for a strong close to the year. Exactly when those sales will come depend upon the available supply for the new phone, especially the rumored high-end model, but supply will likely catch up with demand before the year ends.
What you need to know about iPhone 8
Apple has not confirmed any details of its new phone or phones, including whether it will even be called iPhone 8. However, The New York Times has published what my colleague Ashraf Eassa called a credible report claiming that the company plans to release a $999 entry-level version of the new phone, which we assume will be called iPhone 8.
In addition, Apple will offer refreshed versions of the iPhone 7 and 7 Plus in a variety of storage configurations. That should mean the 64GB model will come in at $649, while the 256GB version will sell for $749 -- the same way the company has priced the current models of the handset. The Plus version will likely cost $769 for the 64GB model, with the 256GB version priced at $869.
Adding a premium model that starts at $999 (with higher prices for more storage) will push Apple's revenue higher. It's hard to know what percentage of customers will need to have the latest and greatest. But with the expected iPhone 8 expected to have an edge-to-edge screen -- a first for Apple -- demand will likely be high.
What Apple shareholders should worry about
The biggest risk for Apple is that at some point, smartphones will stop being a thing. That does not appear imminent, but it's not out of the question that some sort of virtual or augmented reality device, or even an implant of some sort eventually supplants a handheld phone.
That's a risk, but it's a distant one, because it takes quite a bit to get the population at large to embrace radical new technology. The iPhone itself is, for all its wonders, really just a modern version of the old crank telephone. It's possible that someday we give those up for implants that project holograms or something else entirely, but it's by no means imminent.
A good year ahead
The demand for iPhone 8 (or whatever it ends up being called) should be very strong. Apple has trained its customer base to be either on an every-year or every-two-year replacement cycle. Generally, the audience that needs the latest and greatest upgrades every year, while those with a little more patience wait for every other year, when there is a major refresh.
This is a major refresh year, and it's a major refresh year with the option of a higher price point. There's almost no risk for Apple that consumers won't upgrade to the new phones -- many to the higher-end model -- and that should push the company to new earnings heights.