Apple's (NASDAQ:AAPL) iPhone 8 and iPhone 8 Plus are arguably far less exciting than the iPhone X. While the iPhone X includes a full-face organic light-emitting diode (OLED) display and an all-new aesthetic, the iPhone 8 and iPhone 8 Plus continue to use older liquid crystal displays (LCDs) and identical form factors to their predecessors.
The iPhone X also has an improved rear-camera subsystem compared to either the iPhone 8 or the iPhone 8 Plus, as well as a much more advanced front-facing camera with 3D sensing capabilities marketed by Apple as a TrueDepth camera. Despite all this, the relatively tame iPhone 8 and iPhone 8 Plus are still going to be very important to the iPhone business both this year as well as possibly next year. Here's why.
Compelling lower-cost options
This year, Apple can market the iPhone X at a starting price of $999 while still letting users who want the latest iPhone technologies, such as the improved cameras and upgraded internals, to buy new devices (the iPhone 8 and 8 Plus) at familiar price points of $699 and $799.
Next year, I expect the iPhone 8 and 8 Plus to carry on serving the same role, but with a slight twist.
There's a good chance that next year's iPhone X will, once again, start at $999, and that the larger-screen iPhone X that's said to be coming will begin at an even higher price point. Apple is also said to be preparing a next-generation iPhone with a 6-inch LCD for next year, and since LCDs are generally cheaper than OLEDs, it seems likely that this 6-inch model is intended to be the entry-level 2018 iPhone.
However, I doubt that Apple would start the 6-inch LCD iPhone at the same $699 price point that today's iPhone 8 occupies, especially since generally reliable analyst Ming-Chi Kuo with KGI Securities recently indicated that Apple plans to equip all new 2018 iPhones with pricey TrueDepth cameras as well as full-screen designs.
Indeed, my expectation is that even the LCD iPhone that launches next year will start at between $749 and $799 for the base model.
Working under the assumption that next year's new iPhones will begin at $799 and run to something along the lines of $1,349 (this assumes a $1,199 starting price for the 6.46-inch OLED iPhone and an additional $150 for the higher storage tier), Apple will need compelling products at lower price points to satisfy those looking to spend less.
And that's where this year's iPhone 8 and iPhone 8 Plus should fit in.
In terms of key features -- display quality, camera features, processor speed, and so on -- the devices should still be very competitive at discounted price points. Moreover, the use of glass backs on the devices gives them a premium look and feel that could potentially offset the relatively large bezels of the devices compared to similarly priced Android-based competition. I expect the baseline iPhone 8 to get a price cut to $599 next year and the baseline iPhone 8 Plus to be cut to $699 once the 2018 iPhones are released.
Apple would then have a compelling product stack that smoothly spans a wide range of price points.
Ashraf Eassa has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.