Apple’s iPhone + Wearables Strategy

It is reasonable to believe that Apple has known for at least three years, if not more, that demand for the iPhone, with its current design and available apps, would hit a peak sometime in 2017-2018. Market watchers who look at worldwide demand for smartphones have also seen that the market was close to a saturation point and that its height was near.

Because Apple makes premium smartphones, the company has been able to extend robust demand for these game-changing phones for 11 years. While reports that Apple is seeing some slower requests going into the end of the year and next year as critical vendors have cut their forecasts related to Apple orders, one has to wonder if Apple’s heyday of record-breaking iPhones sales is over. Or, if they have something else up their sleeves that could maintain demand in the future.

One possible new technology that has the potential of delivering an entirely new design to smartphones and drive a high refresh in sales are foldable phones using flexible displays. Samsung recently introduced their version of a flexible smartphone and Huawei, and others have a similar product in the works. I assume Apple may have something like this also in the labs, but I think the jury is out on whether the concept of a foldable or flexible phone could ever get serious traction. Samsung reportedly will only make about one million of the phones with flexible screens, and I see these more as a test run to see what the market interest in these types of folding smartphone will be.

Apple has a history of sitting back and watching a new product come out and if it hits home, then doing their version with better design and tying it to its eco-system of apps and services. A folding phone created by Apple, should the market actually develop for these types of smartphones, could help Apple drive new demand for iPhones, but I am still skeptical that there is a real market case for this type of product.

However, there is something that Apple has been talking about that I do believe has the potential of maintaining iPhone refresh rates and it is focused around Augmented Reality. AR and the role of an iPhone connected to a set of what I call “skinny glasses” could be a key evolution in how Smartphones will be used in the future.

I have written here on numerous occasions that Tim Cook and Apple execs have stressed that AR is one of the most exciting things they are working on now. They have already released AR Kit, and software developers are starting to create some rather innovative AR apps for the iPhone already, and their App Store editorial staff is doing a great job highlighting AR apps on the Today tab regularly.

While the iPhone is a legitimate way to deliver AR apps, I believe that Apple’s real potential for AR lies in using some glasses, tied to a new iPhone, to drive continued demand for iPhones as well as these new innovative glasses as a key accessory. I believe it is this type of device combination that will launch the real era of AR.

At a fundamental level, with AR, Apple is extending their leadership in user interfaces and design. These “skinny” glasses have to look like regular glasses, or mainstream users will never accept them. I expect it to have some viewing screen and voice and gestures will control it. With AR glasses, Apple will popularize gestures as a new addition to their expertise in man-machine interfaces. But in a big picture perspective, an iPhone with great AR glasses would be poised to re-invent the smartphone market again and in turn, drive even higher demand for an iPhone in the future.

If Apple could leverage a new type of iPhone design and software ecosystem that uses AR glasses to boost their ecosystem when could this happen? I believe we are at least two years away from having the technology perfected enough for Apple to deliver the glasses part of this AR equation. Besides optics and a “skinny glasses” design that would be acceptable to consumers, doing the electronics that will be needed to transmit the data and apps and new UI features to make the glasses work correctly with an iPhone is a considerable engineering job.

I believe that Apple’s next “one more thing” that will impact the mobile computing world will be some new iPhone tied to a set of glasses that brings AR to life in innovative ways and will help them drive another round of strong iPhone sales starting in 2020-2021. While many think the next decade will be an AI decade, don’t count out the fact that AR, especially done by Apple and smartphone competitors, could be the other technology that will power a new wave of innovation and growth as businesses and consumers make AR a part of their digital lifestyle.

The short vs. long-term debate will be around how big smartphone screens can get and consumers willing to go bigger with their smartphones. While this will be an interesting debate, and evolution to watch with foldable/flexible designs, what may be most interesting watch is the miniaturizing of tech with things like Apple Watch, AirPods, and how those may eventually become a trilogy of computing when a paired with a glasses solution. The biggest display possible will always be overlaying consumers eyes, and ultimately that is the big display game I feel Apple is playing.

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Tim Bajarin

Tim Bajarin is the President of Creative Strategies, Inc. He is recognized as one of the leading industry consultants, analysts and futurists covering the field of personal computers and consumer technology. Mr. Bajarin has been with Creative Strategies since 1981 and has served as a consultant to most of the leading hardware and software vendors in the industry including IBM, Apple, Xerox, Compaq, Dell, AT&T, Microsoft, Polaroid, Lotus, Epson, Toshiba and numerous others.

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