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Bob O’Donnell, President and Chief Analyst TECHnalysis Research LLC, talks what to expect at Apple's big event tomorrow.
- A big day tomorrow for Apple as a lot of different expectations are on the docket of course, there always are but you've got to wait to see what exactly is being unveiled. The expectations right now though, are that we are going to see a new iPhone, as well as potentially updated airpods and a slate of other innovations coming from the big tech company. And for more on what it might mean for the stock, I want to bring on Bob O'Donnell, President and Chief Analyst TECHanalysis Research joins us right now. And Bob, we've been talking about Apple seeing a bit of a rebound here and a lot of enthusiasm coming back into the stock. But what are your expectations for exactly what we're going to see when the big event happens tomorrow?
BOB O'DONNELL: Well, like you said Zac, we're going to see new iPhones. Probably the 13. Who knows, maybe they surprise us because they think 13 is unlucky and it becomes 14. Hard to say, but bottom line is the next generation iPhone, it's not going to be dramatically different from the iPhone 12. We're going to see a few tweaks, of course, there's always a faster chip, there'll be camera improvements, there typically always are. One thing in particular is, a lot of people like the portrait mode for photos, supposedly we're going to see a portrait mode for video as well. Because the additional capabilities of the new chip. So some people will appreciate that.
We're going to see new Apple Watches, as well. That actually, is expected to have a redesign. So it's going to be physically slightly flatter, modestly larger screen. So that's going to be interesting. And then supposedly, a cheaper version of the airpods as well. Which, of course, have been spectacularly successful.
- Yeah, I don't know if it's easy or hard to maybe hone in on which one of those might be most impactful. We know the Apple News in terms of what we saw last week with the Epic Games and Fortnite lawsuit, maybe taking some of the juice out of the App Store and why they might be. So leaning heavily into that. But at the same time, a lot of maybe skeptics out there pointing to the fact that the last iPhone upgrade was pretty big with 5G and getting people to really upgrade to those models. But now, maybe nothing as exciting this time around. So which one of those that you listed there, would you be most bullish on?
BOB O'DONNELL: Well, while I agree with you that I'm not convinced we're going to see a huge set of innovations on the next iPhone, you can't ignore the fact that the iPhone is so dramatically important to so many people that I think ultimately that becomes the biggest thing. Will we see a lot more watch uptake? Sure. I think the watch continues to make nice progress. And airpods have been incredibly successful. And if this is a lower cost version, that's going to extend the audience. But ultimately, I still think it's going to be the iPhone.
The way I think about it, it's Apple's like a pop band that has a huge hit every couple of years but they still crank out albums every year. I'm chewing my aid, sorry. Anyway, not every album is a huge hit but the fans still love every single one of them and they're going to go out and buy them. Because people do replace their phones every couple of years. So people who are sitting on a 9 or a 10 are going to go, yeah, it's probably time. And they don't have a 5G phone yet, so they're going to get it. There have been rumblings of some satellite connectivity, I have my doubts to be honest with you on that.
And by the way, even if it is, it's not really going to be a satellite phone like some people thought. Which would have been big. It's not going to be anything like that. It's going to be more modest. To be honest with you, I think it's going to be more of a set of frequencies that Apple can use to enhance their 5G.
- Yeah, or there's other people leaning into maybe some hope that AR might play a bigger role in this event, or some sort of release there. Doesn't look like you think there will be.
BOB O'DONNELL: I don't think so, I think we're still a ways off there. Look, we saw what Facebook did with those Ray-Ban glasses. And basically, it's a camera on your face, which of course, is a whole separate topic of discussion. But that's nowhere near the ability to see something and you'll be able to tell you what it is. I mentioned to you right before we started, I was on a long road trip. And there were multiple times when I was looking out a window, you're looking at something you're like, gosh, I wish I knew what that was. And so you can see that there's huge opportunities for AR and all kinds of parts of our life. But the compute necessary and the miniaturization necessary to achieve that, we're not there yet. We're going to get there, and I'm sure Apple is going to do something interesting but not here in the fall of 2021.
- Yeah, and the other thing too that we always mention as a headwind, and we saw this last quarter with Apple, was questions around chips and the chip supply there. We continue to hear of issues in the automotive sector tied to that. But as a lot of analysts will point out, Apple does have the strength to flex just the sheer size of what they offer to make sure they're prioritized on that front. With all this innovation expected to be announced tomorrow, how are you looking at maybe that risk around chips as they roll these out?
BOB O'DONNELL: Well, look, there is a huge issue with chip supply and demand. Apple is one of the largest consumers of the chips made by TSMC, which is the world's largest manufacturer of chips. But interestingly, one thing people haven't really talked about, TSMC raised their prices for everybody, including apparently Apple. Which means there's a modest increase to Apple's cost of goods. Apple still makes a pretty hefty margin on iPhones, I don't think we're going to see a significant price increase and realistically probably nothing at all. But they're going to have to absorb a tiny bit more in terms of cost.
In terms of availability, the bigger concerns that I've been hearing, to be honest with you, are around Apple Watch. Some of the issues in terms of the manufacturing of the Apple Watch, may lead it to be a little bit delayed in terms of its release. I think iPhone 13 will probably be fine. Again, part of the reason being it's not expected to be a blockbuster. So they aren't going to have quite as big a hit on the demand as they did last year with the iPhone 12 with the first one with 5G.