This article originally appeared on Real Money on Feb. 10, 2017.
Apple's (AAPL) much-rumored iPhone 8 has long been expected to deliver major design changes and feature set improvements relative to the iPhone 7/7-Plus. But a new set of reports also suggest the device could represent a sea change in terms of how Apple prices and manufactures its latest flagship model.
In addition, one of the reports indicates Apple will be doubling down on its efforts to differentiate its costliest iPhones via camera technology.
A source speaking with Fast Company said the iPhone 8, which is expected to be accompanied by two cheaper models that represent more incremental upgrades to the iPhone 7, will "very likely" cost over $1,000.
The high cost of the phone's rumored 5.8-inch curved OLED display -- expected to be about twice as much as that of the LCDs going into current iPhones -- is cited as a potential reason.
The iPhone 8 also might feature more storage than its cheaper, LCD-based siblings. And a new report from KGI Securities' Ming-Chi Kuo -- pretty reliable over the years -- says this year's iPhones will require "a new graphite component" to protect their 3D Touch sensors from the heat produced by the wireless charging component going into all three of them.
Reports that this year's iPhones will support wireless charging have been around since early 2016. Shares of Energous (WATT) , a developer of over-the-air wireless charging technology, have shot higher on speculation (not yet confirmed) that it's working with Apple on the solution.
Regardless, while higher production costs could play some role in a decision to charge more for the iPhone 8, we're talking about a company that (judging by manufacturing cost estimates) appears to collect a 50%-plus gross margin on its most expensive iPhones.
If Apple decides to charge more than $1,000 for the iPhone 8, its main motivation wouldn't be to protect its margins due to higher costs, but to expand them.
And while a $1,000-plus price tag sounds steep even by Apple's standards -- one possibility is that the iPhone 8 has a 3-figure starting price, but with certain models selling for 4 figures -- the iPhone 7-Plus' success might embolden the company to charge a decent premium for the iPhone 8.
Strong demand for the iPhone 7-Plus, which carries a $769 starting price and comes with a dual-lens camera not found on the standard iPhone 7, helped Apple beat December quarter estimates. It also allows Apple to grow its iPhone average selling price (ASP) by $8 annually to a sky-high $695, despite the ASP pressure exerted by the 4-inch iPhone SE.
The fact smartphones are both a status symbol for many consumers and their primary computing device -- just see comScore's numbers for digital time spent -- works in Apple's favor if it tries to charge more for a smartphone than it does for its cheapest MacBook Air (it goes for $999). Its brand doesn't hurt either.
Fast Company also reports Apple is working with optical component maker Lumentum (LITE) -- among other things, it supplies components for the Xbox One's Kinect motion sensor -- to build "3D-sensing technology" into the iPhone 8.
However, the magazine remains "unclear" on what the technology will be used for. Face-recognition, camera enhancements and augmented reality (AR) are mentioned as possibilities. Lumentum shares surged on the report on Wednesday.
Given the iPhone 7-Plus' dual-lens camera can potentially obtain 3D depth-mapping information about objects that can be used for AR applications, and that Apple has been reported to be adding AR features to its iPhone Camera app, some kind of AR use case is quite plausible.
For example, pairing a dual-lens camera with Lumentum's sensors could provide something similar to Alphabet/Google's (GOOGL) Tango platform. Tango tracks a user's motion and and creates 3D maps of his/her surroundings, and then uses the data to overlay virtual objects and information on a user's camera view.
Separately, Taiwan's Digitimes reports Apple has asked chip and component suppliers to start delivering parts for the iPhone 8 later this quarter. It also reports that Apple has more generally asked suppliers to "start trial production, inspection and prepare inventories for the new iPhone series earlier than usual," and that it has been "more active in placing chip orders for the 2017 iPhone series."
Nonetheless, Digitimes also states the iPhone 8, along with two iPhone 7S models, is (like every recent iPhone model save for the SE) due to launch in September. It looks as if Apple's early orders are an attempt to avoid a fresh round of fall supply constraints for its phones. The company mentioned on last week's earnings call the 7-Plus was supply-constrained throughout the December quarter.
Between its rumored feature set, pricing and manufacturing approach, as well as the fact it's due to launch in tandem with two "S" iPhone models, the iPhone 8 appears set to break with recent iPhone launches in a number of ways. As it comes off a 2016 in which iPhone revenue fell on an annual basis for the first time in history, Apple seems intent on making a splash this September.