Apple Inc.’s (AAPL - Free Report) upcoming iPhone 8 will be grandeur, if rumors and leaks are to be believed. 2017 marks the 10th anniversary of the iconic smartphone and the company is leaving no stone unturned to make it a grand success despite dwindling sales.
The smartphone dubbed as “iPhone 8” is anticipated to feature a glass body, a dual curved edge-to-edge OLED display with a built-in Touch ID sensor and wireless charging. Moreover, Apple is rumoured to launch three iPhones (instead of two) including a new 5.8 inch model.
However, surprises do not end here.
Per Forbes, which quoted DigiTimes as source, Apple will use forged stainless steel chassis from Jabil to build the new iPhone instead from its main supplier Foxconn. The chassis would be used to sandwich together front and rear glass panels using “metal forging” instead of “billet milling”.
According to Forbes, “Milling essentially cuts the chassis from a piece of aluminium, while forging essentially squeezes the metal alloy into the mould using extreme pressure. The benefit of this latter method is the metal is much stronger.” Metal forging will allow the company to build a slimmer and thinner core chassis without sacrificing structural integrity.
Foxconn Suffers from Lower iPhone sales
Meanwhile, Jabil’s prominence as a supplier for the new iPhone does not bode well for Foxconn. The company’s fortunes are largely tied up with sales of iPhone as evident from the recent annual results. Notably, Apple contributes almost half of Foxconn’s sales.
According to Bloomberg, Foxconn also known as Hon Hai Precision Industry, reported first annual revenue decline in 2016 since its listing in 1991. The 2.8% decline in sales was primarily attributed to slowdown in smartphone sales, maturing markets and sluggish economic background in China.
Further, Apple reported annual sales decline in 2016 (since 2001) due to lackluster iPhone sales. In fiscal 2016, Apple iPhone’s unit sales were down 5.3% year over year. As a result, the company recently cut CEO Tim Cook’s compensation to $8.7 million in 2016, as compared with $10.3 million he received in 2015.
iPhone 8 to Improve Fortunes?
Sluggish demand for iPhone is a major concern for Apple as the device alone contributes about 60% to the company’s total revenue. We believe that the rumored features of the new iPhone are attractive enough to win new customers. This will boost its market share against handset makers like Samsung, Alphabet (GOOGL - Free Report) , Lenovo, Oppo and others.
We also believe that an improvement in iPhone sales will help the stock to rebound in 2017. Apple shares gained 19.2%, underperforming the Zacks Computer Mini industry’s return of 20% in the last one year.
Zacks Rank & Key Picks
Currently, Apple carries a Zacks Rank #4 (Sell). Exa Corporation and Microsoft (MSFT - Free Report) are two better-ranked stocks in the broader market. While Exa sports a Zacks Rank #1 , Microsoft has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Current year estimates for Exa has remained steady at a loss of 17 cents per share, while Microsoft’s has increased by a penny to an earnings of $2.94 in the last 30 days.
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