Apple is about to take a huge risk with its new iPhone strategy

Sales of the iPhone, iPad, and Mac are all dropping, which is having an impact on Apple’s bottom line.

Apple needs to release new products this fall to turn things around, especially a new iPhone, given that iPhone 6S sales have been disappointing.

Wall Street analysts have come to a consensus about what this fall’s iPhone — let’s call it the iPhone 7 — will look like and include.

And it’s starting to become clear that Apple is taking a huge risk.

The iPhone 7 will have a few upgrades, according to a Deutsche Bank research note, but ultimately will look a lot like the iPhones currently on the market.

Essentially, Apple is moving to a three-year upgrade cycle. Previously, Apple came out with a new model every other year. In the off years, it took the same basic hardware and upgraded the components.

This year will be the third year that the iPhone will sport the same basic design it introduced in 2014. And that could depress sales.

A Quartz survey suggests that only about 10% of iPhone owning adults are planning to buy a new iPhone this year if it isn’t redesigned.

On a more anecdotal level, Tech Insider’s Steve Kovach says he’s considering skipping this latest iPhone upgrade, even though he’s been on a cycle where he upgrades every other year.

Essentially, Apple may be turning the two-year refresh cycle into a three-year cycle. (Earlier this year, Apple confirmed it plans for iPhones to have a three-year lifespan for its first owner.)

That means people will buy fewer iPhones.

Even Apple may be producing fewer iPhone 7 units this fall because it expects softer demand, according to Deutsche Bank researchers, although the iPhone 7 may end up selling better than the iPhone 6S:

“However, a [year-over-year] production decline does not necessarily imply a YoY sales decline for iPhone 7 (vs iPhone 6S) … Apple seldom repeats a mistake, so we believe it will manage iPhone 7 production volumes conservatively.”

Of course, the upside to this is if Apple releases a compelling, brand new, strong-selling iPhone in 2017, it could find a “powder keg” of customers ready to upgrade.

Here’s what Deutsche Bank analysts are expecting from the iPhone 7, based on its supply chain checks:

  • A “Plus” model with a dual-camera for better zoom and 3GB of RAM
  • A standard model with an improved camera and optical image stabilisation
  • Better sound, possibly stereo sound
  • “Professional class water-proofing”
  • A home button that uses motors to simulate a click, which would last longer than the current home button
  • A new colour, so there’s a version that looks different than current iPhones
  • The elimination of the 3.5mm headphone jack, as has been discussed endlessly. Headphones will instead plug in through Apple’s lightning charging port
  • Deutsche Bank expects Apple to include a Lightning-to-audio dongle with the iPhone 7, not a pair of Lightning headphones

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