Apple Inc. ((AAPL - Analyst Report)) recently announced that it will host an event on Sep 9, 2014 at the Flint Center for the Performing Arts, near its headquarters in Cupertino. Although the company did not provide any details, it is highly anticipated that the iPhone 6 will be launched on that day.
Over the last couple of years, the September event has gained special importance as Apple has historically used it to unveil new iPhone models. In 2013, the company launched iPhone 5S and 5C on the second Tuesday of September. This year, Apple is expected to launch two iPhone models, one with a 4.7-inch screen, and another with a 5.5-inch display.
Reportedly, Apple will use the unbreakable and unscratchable Sapphire glass for the cover of its new iPhone. Currently, Apple uses sapphire in the camera lenses and for the protective disk that serves as the Touch ID home button for iPhone 5S.
Sapphire is a potential substitute for Gorilla Glass produced by Corning (GLW - Analyst Report), which, in turn, is currently used for iPhone screens. However, since sapphire is more costly (approximately 7 times) than gorilla glass, we believe that Apple will be forced to hike iPhone 6 price in order to protect its gross margin. This may lower Apple’s competitive edge against the likes of Samsung, Google and Microsoft (MSFT - Analyst Report).
Reportedly, Apple is also expected to unveil near-field communications (NFC)-based payment system for the iPhone during the event. Dutch chip maker, NXP Semiconductors NV, is supplying the NFC chips that will enable iPhone users to pay by touch.
Apple is also rumored to launch the much-anticipated iWatch at the event. Reportedly, the company has outsourced the production of the device to Taiwan-based Quanta Computer Inc. The iWatch is expected to have a rectangular display measuring nearly 2.5 inches diagonally, which will be supplied by LG Display Co. Ltd.
The wearable device is believed to comprise a sensor (developed by Singapore-based sensor maker Heptagon), which in turn will enable users to monitor their pulse. Moreover, it will be equipped with a touch interface coupled with wireless charging capabilities. However, the device needs to be paired with a smartphone or a tablet in order to carry out functions like texting and voice chat.
Per sources, Apple expects to ship about 50 million iWatch units within the first year from its date of release in the market. We believe that a September launch (originally expected in October) will help Apple to counter the growing competition from Samsung and LG in the wearable market.
Per Gartner, wearable smart electronics will emerge as a $10.0 billion industry by 2016, with the chunk of the revenues coming from athletic shoes and fitness tracking devices. The wearable sector is poised to deliver robust growth with companies like Google (GOOGL - Analyst Report) set to enter the space sometime later in 2014.
Nevertheless, we believe that all eyes will be on the upcoming iPhone launch. A big screen iPhone will help Apple counter the intensifying competition from Samsung as well as low-priced Asian handset makers. A glimpse of iWatch, if not the launch, will also boost Apple’s share price significantly.
Currently, Apple has a Zacks Rank #3 (Hold).