Apple Aims For Higher Margins With AppleWatch Series 4, iPhone Xs and iPhone XR

Apple’s revealed its Apple Watch Series 4, iPhone Xs, and iPhone XR at it’s September 14 event to much anticpation. $AAPL delivered a larger Apple Watch display with ECG and a new A12 processor and improved iPhone cameras. There was more you may have missed.

Apple’s revealed its Apple Watch Series 4, iPhone Xs, and iPhone XR at it’s September 14 event to much anticpation. $AAPL delivered a larger Apple Watch display with ECG and a new A12 processor and improved iPhone cameras. There was more you may have missed.

 Apple revealed three new additions to its smartphone lineup:

1. A 6.5-inch display iPhone XS Max
2. Two new iphone models the XL and the XS
3. New and larger AppleWatch Series 4

“Look at how much this category has grown in such a short period of time,” Apple CEO Tim Cook said when introducing the fourth generation of the AppleWatch. “To think this category didn’t even exist a short time ago and is now being embraced by so many people around the world. AppleWatch is not only the number 1 smartwatch in the world, it’s the number one watch, period.”

iPhone XS Max

• iPhone XS Max has a $1,099 starting price.
• Incremental camera improvements for the iPhone XS and XS Max with new image sensors and an improved flash. Enhancements to leverage machine learning to improve dynamic range, image detail, background blur, shutter lag and low-light performance.
• The iPhone XS and XS Max’s OLED displays have 60% greater dynamic range than the iPhone X’s display.
• The phones are also promised to respectively deliver 30-minute and 90-minute improvements to battery life under regular usage
• Improved Face ID performance and revamped stereo speakers.
• Gigabit LTE support, and T-Mobile US (TMUS) users will be glad to know they support he carrier’s 600 MHz spectrum, which it has been using to improve rural coverage.
• The XS and XS Max are believed to contain more RAM than the iPhone X (4GB vs. 3GB).
• Aability to change a photo’s depth of field after a shot has already been taken supported by both the XS/XS Max and the iPhone XR.
• The A12 also packs a new image processor, as well as a revamped machine learning co-processor (known as the Neural Engine) that’s said to be able to handle up to 5 trillion operations per second, far more than the A11’s 600 billion.
• 512GB iPhone XS and XS Max models are priced at $1,349 and $1,449 in the U.S., respectively. Prices in many international  arkets will be higher still due to taxes and/or tariffs.
• Apple now offers a new higher-tier level of AppleCare+ coverage. The original AppleCare+ is still there, but you can opt for a more expensive “AppleCare+ with Theft and Loss” plan. It costs $80-100 more than the standard plan, depending on the phone model.

iPhone XR, XL and XS

• Apple has given the standard iPhone XS the same $999 starting price that it gave to the now-discontinued iPhone X
• The iPhone XR, which like the XS and XS Max supports Face ID and has an edge-to-edge display, carries a $749 starting price.  BUT has an inferior display with aluminum frame rather than a steel one and doesn’t support 3D Touch but uses Haptic Touch) and has only one rear camera rather than two.
• The eSIM will be available later this year through a software update.
• Apple’s new iPhones all come with dual SIM support,  together with Dual SIM Dual Standby (DSDS) allows a phone to support two carriers/phone numbers at once.
• Outside of China, where Apple says it can only include two physical SIMs, this feature will be enabled through the pairing of a physical SIM and an electronic SIM (eSIM).
• The SoC powering the iPhone XS and XR is made using a 7-nanometer (7nm) manufacturing process with both performance and power consumption improvements relative to the 10nm process used to make the A11 Bionic SoC found inside of the iPhone X and 8.
• The A12’s two high-performance CPU cores are only said to be up to 15% faster than the A11’s high-performance cores as it looks like Apple is prioritizing battery life.
• The four low-power cores are said to be up to 50% more efficient and its GPU up to 50% faster.
• Apple has now moved to a single modem. The modem itself is likely made by Intel, it is assumed that means that it’s faster, though we don’t yet know how much faster.
• The official Apple specs page still lists two variants: Model A1920 and Model A1921, the iPhone Xs and Xs Max respectively, and they support all the same modes and bands. 

AppleWatch Series 4

• All Series 4 Apple Watches have ceramic backs, and the sides and fronts of the cases are either aluminum or stainless steel. Their display sizes are more than 30% bigger.
• The new Watches are also thinner, feature improved motion sensors and (in the case of 4G models) better cellular reception and contain a new chip module;  the S4 promised to be twice as powerful as its predecessor.
• Apple announced new health features that includes the ability to detect falls and immediately ask users if they want to place an emergency call, the ability to detect low heart rates and irregular heart rhythms
• A new feature is an ECG using electrodes placed on both the Digital Crown and the Watch’s rear sapphire crystal an electrocardiogram (ECG) can be run within 30 seconds.
• The new 600MHz extended-range LTE band T-Mobile acquired last year and has been rapidly building out is included.
• The OLED display still has a maximum brightness of 1,000 nits, but now uses LTPO (Low-Temperature Polycrystalline Oxide) technology.
• This reduces power consumption of the display by 5 to 15 percent.
• The Series 4 new W3 wireless chip supports Bluetooth 5.0, while the Series 3 with the W2 chip only supports Bluetooth 4.2.

What The Analysts Thought

Gene Munster, Loup Ventures:

Largest increase in screen size in four years is good for for ASPs and Unit Growth.

This is the largest increase in screen size since 2014 when the iPhone 6 display jumped 35% from the iPhone 5s. At the time (FY15), consumers responded to the larger display size, propelling a 37% increase in iPhone units (up from 13% in FY14). ASPs also moved higher, growing 12% y/y ($599 to $669). This increases our confidence in our FY19 iPhone unit growth of 3%, compared to the Street at 0%. Separately, we are now modeling for a 7% ASP increase in FY19 (to $791), compared to the Street at 2% ($756). If the iPhone units reach FY15 levels of 231M units, overall iPhone units would grow 6% in FY19. This comparison increases our confidence in our current 3% iPhone unit growth target.

Aaron Tilley, The Information:

The iPhone gets bigger, largely than Samsung’s Galaxy Note

With the iPhone XS Max, Apple has launched its largest phone ever with a 6.5-inch screen. That’s bigger than even Samsung’s famously large Galaxy Note phones at 6.4 inches. Previously, Apple’s biggest phones measured only 5.5 inches. There are good reasons for Apple to go bigger. When Apple moved to a larger-sized iPhone with the 6 Plus in 2015, the company experienced a massive spike in demand. People typically use more apps—such as watching videos or playing games— with larger phones. Increased app usage will help drive more App Store and online services revenue for Apple.

Michael Olson, Piper Jaffray:

Biggest iPhone Upgrade This Year = Choice.

We believe a broader spectrum of choices for next gen form factor iPhones will drive unit upside vs. current consensus in FY19 (we are modeling 223M vs. consensus at 219M). Regarding iPhone ASP, based on the new lineup, unit mix assumptions drive our ASP estimate higher, resulting in upwardly revised overall revenue and EPS for Apple in FY19E & ’20E. The launch of a wider array of “X-gen” iPhones is providing an iPhone user base that is on an aging installed base of devices with more choices to upgrade to the new form factor. Based on this, we recommend owning AAPL for the “super-long” cycle involving an ongoing multi-year move to the “X- gen” iPhone lineup. Overweight, $250.

Source: Apple, TechCrunch