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Apple Inc. iPhone 7, 7s, and 8: Charting a Course to Growth

By Ashraf Eassa - Jan 25, 2016 at 8:45PM

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Apple will need to make significant advances each year to get iPhone back on a growth track. Here's a look at what kinds of innovations the iDevice maker could bring to the table to do so.

At this point, it is well-known that Apple (AAPL 0.88%) is facing significant challenges in trying to grow iPhone sales during fiscal 2016. Respected analyst and supply chain guru Ming-Chi Kuo recently put out his iPhone shipment estimates for the first quarter of Apple's fiscal 2016, predicting a nearly 30% year-over-year plunge in unit shipments.

If this comes to pass, then it's hard to characterize this as anything less than an abject failure on Apple's part to deliver a product compelling enough to drive enough upgrades/share gains to deliver growth.

However, I don't believe all is lost; with compelling enough products, Apple has a very good chance of bringing its iPhone business back to growth, beginning with the iPhone 7, and continuing at least through the iPhone 8.

iPhone 7 should be well positioned
In a recent column, I discussed my expectations for the iPhone 7. This phone has the potential to be something of a game-changer in terms of useful, interesting new features and enhancements relative to the iPhone 6s.

It should be thinner and lighter, include upgraded internals, sport a gorgeous new display (with potentially much more vivid colors), and have potentially significant camera enhancements.

Not only should it be much better than the iPhone 6s on the inside, but it should be immediately obvious from the outside that it's a newer, better design.

I think Apple should have little problem doing its job correctly and driving year-over-year growth during the iPhone 7 cycle.

iPhone 7s is trickier, but growth still possible
Like the iPhone 6s, the iPhone 7s will have the unfortunate trait of being an "s" model iPhone. If Apple keep with tradition, it will stick to the same exterior design (perhaps adding an additional casing color) while giving the internals a good upgrade.

With the iPhone 6s, Apple added 3D Touch, upgraded the internals (rather significantly, actually), improved camera resolution, and made the metal casing both stronger and, unfortunately, thicker.

It was by no means a bad update, but it seemingly lacked compelling enough features to drive growth after the monster upgrade cycle the iPhone 6/6 Plus triggered.

With the iPhone 7s, I see Apple largely sticking to the same playbook. However, the "trick" for this iPhone probably won't be in user input like the iPhone 6s' trick was (though if "multi-3D touch" doesn't appear in the 7, I'd expect it to happen in the 7s), but instead in the camera.

Just about everybody uses their smartphone cameras, so I believe customers will appreciate and ultimately reward innovation in this area.

The iPhone 6s/6s Plus brought camera improvements over the 6/6 Plus, but they seemed to be mostly about increasing image resolution. The improvements from here on out need to be more substantial than that, particularly during the "s" cycle, to really "wow" customers.

Oh, and I don't expect Apple to make the "mistake" of making the iPhone 7s thicker and heavier than its predecessor, something I think actually dinged the 6s/6s Plus in consumers' eyes.

iPhone 8 has the potential to be huge
New number phones are typically quite exciting, but the iPhone 8 has the potential to really be something special across the board.

For one thing, it will be getting an all-new industrial design. More importantly, though, I believe because the iPhone 8 will have an OLED-based display, Apple will have the freedom to do a lot of interesting things from a design perspective, particularly if it employs curved OLED displays.

So, not only will Apple be able to deliver a big jump in display quality (and potentially do an interesting revamp of its user interface to take advantage of the inky black levels that OLEDs provide), but we could see the beginnings of some very creative and unique industrial designs.

Additionally, Apple's chip manufacturing partner TSMC (TSM -0.83%) has said it will have its 7-nanometer chip manufacturing technology ready for mass production in the first half of 2018. This means Apple should not only get the benefit of moving its chip to a new manufacturing technology for the iPhone 7s, but it will get another big manufacturing technology advancement with the iPhone 8.

All in all, the iPhone 8 should make the iPhone 6s and older devices look, frankly, outdated, potentially helping to catalyze a significant upgrade cycle.

Ashraf Eassa has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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