|Quick Take – Iphone X Hints at a Post-Smart Phone World|
Apple introduced iPhone X as the future of the smartphone; and for good reason. The iPhone X has advanced 3D-sensing, display, camera, and augmented reality technologies that have never been available in consumer devices. These technologies solidify the platform on which Apple will retain and grow its user base for the next decade.
Impact of iPhone X. iPhone X will ship on November 3, roughly six weeks after we had previously expected. We estimate that some users (about 20% of all new iPhone buyers) will opt for the iPhone X over iPhone 8 and previous models. The ship date likely won’t have a material impact on the number of units sold, but will push some unit sales into the March quarter. Ultimately, roughly 10% of our previous iPhone unit sales in the December quarter will be iPhone X sales that are shifted into the March quarter.
AR Hints at a Post-Smartphone World. But we’re looking beyond the smartphone, wondering how the core technologies shown today will help Apple enable a post-smartphone world. To be clear, we expect the smartphone to remain a dominant computing platform for many years, but a transition to the future of computing is clearly underway. Underneath features like the new iPhone X unlock method, called Face ID, is a set of revolutionary 3D-sensing technology that will enable entirely new experiences with – and through – our devices. As Jony Ive said, “[Augmented Reality] will redefine what’s possible.”
We were hoping to see advanced AR sensors on both the front and the rear of the new device, but the new, advanced sensors are primarily relegated to the iPhone X’s front. This means that the AR capabilities Apple introduced today will be, for the most part, accessible to and backward compatible with iPhones dating back to the 2015 iPhone 6s. Ultimately, this decision will accelerate the adoption of AR and the future of computing.
Freeing You From Your iPhone. Apple’s other big announcement, Apple Watch Series 3 with LTE connectivity, also shows us where the company is positioning itself to win in a post-smartphone world. Apple pitched Apple Watch Series 3 as a device that frees you from your iPhone. Stepping back, the capabilities of the device are astounding, and they hint at a future more dominated by wearable computing devices that enable most of what we can do with our smartphones today, and more.
Impact of Apple Watch. With the introduction of LTE to the Apple Watch Series 3, and the reduced price of the Series 1, today’s announcements could add 10M incremental Apple Watch units in 2018, implying Apple Watch sales of 26M units in FY18. This would bring our estimate for Apple’s overall revenue growth from 12% to 14% in FY18, in-line with street estimates.