17 July 2019
The iPhone X is believed to have a nearly all-screen front with no home button. Photo: Reuters
The iPhone X is believed to have a nearly all-screen front with no home button. Photo: Reuters

iPhone X: Can Apple regain its mojo?

Apple will unveil the much-anticipated 10th installment in the iPhone franchise on Wednesday. Expectations are high for the 10th-anniversary edition of the iconic smartphone, which is believed to have a nearly all-screen front with no home button.

With that, Apple is expected to retrieve the quantum-leap innovations that once defined the brand.

After Apple lost its legendary co-founder Steve Jobs in 2011, his successor Tim Cook was unable to create game-changing products the way his predecessor did. After the launch of the iPhone 6 and the first Apple Watch in 2014, Apple experienced a slump in sales for most of 2015 and 2016.

Apple shares have been driven by the biggest share buyback program in history, rather than by the company’s sales performance. Till the end of this year, Apple should have spent US$300 billion on stock buybacks. South Korean tech giant Samsung Electronics surpassed Apple in earnings in the second quarter of this year. It should be a bold wake-up call to investors.

According to reports, Apple is poised to release a new generation of iPhones, possibly three new models, namely, iPhone 7S, 7S Plus and iPhone X. The first two won’t be the stars of the show, but for the iPhone X, leaks suggest we should expect Face ID, all-screen design, an OLED display, representing the biggest change to the design of iPhone in years.

The iPhone X is likely to deliver strong sales. Owing to a more robust upgrade in terms of features and functions, iPhone X sales will benefit from a significant pent-up demand from the iPhone installed base of users on an iPhone that’s at least two years old.

But would the iPhone X to become a smash hit? That hinges on two factors. The first one is sales in China.

Apple has experienced six consecutive quarters of year-on-year declines in its China revenue. The company has been losing ground to local brands such as Huawei, Oppo, Vivo and Xiaomi, etc.

I personally believe Apple’s brand power in China has been eroded, but my friends in the mainland seem to be keen about it, as there is not any exciting new device to be launched in the second half of 2017. Also, the sky-high price tag (rumored to be US$1,000) could prop up demand from the very wealthy, who like to flaunt their luxury gadgets.

Morgan Stanley’s Katy Huberty, one of the top technology analysts on Wall Street, is bullish on the new devices’ sales in China, with expectations of a 23 percent growth rate in iPhone units in the fiscal year 2018.

The second factor is whether the 3D sensing technology, which Apple heralded as a marquee feature in the new device, can become a market hit.

Rumors suggest that there are 3D sensors on the new flagship iPhone that could power features such as 3D facial recognition and augmented reality. I believe Apple has a significant two-year lead ahead of its Android rivals in 3D sensing technology.

The new iPhone will have a front camera and an infrared module for 3D facial recognition. It was reported that “technological issues” in the finger print and 3D sensors arose in Apple’s supply chain. If there are still technology flaws when it goes on sale (rumors suggest that the infrared light can get drowned out by bright sunlight, and the facial recognition wouldn’t work if you wore glasses or a hat), it would be a huge blow to the iPhone sales.

Facial recognition is one of the fastest-evolving technologies in the field of artificial intelligence. As it is quickly integrated into China’s extensive surveillance apparatus, it can be an effective tool for national safety and security. That’s why I am super bullish on the outlook for the China-based Hikvision, the global leader in video surveillance.

Facial recognition technology also has major applications in e-commerce and the service industry. Ant Financial, the financial arm of Alibaba, rolled out a service with KFC that lets customer pay for orders with a facial scan. Several banks in China allow customers to scan their faces instead of using bank cards to withdraw money from ATMs.

Ironically, the West is further behind. Among those who are actively making use of it, Facebook plans to use facial recognition technology to exploit the enormous database of image data it possesses, looking to improve its ad business. Amazon’s new home speaker, Echo Look, also has a camera, which could presumably be made to recognise faces.

I believe facial recognition technology may not come out as a “killer function” to the mass market, but it will be widely endorsed by enterprises and governments. With better algorithms and many more cameras, we are heading to a world where everyone can be tracked by their face wherever they go.

This article appeared in the Hong Kong Economic Journal on Sept. 12.

Translation by Ben Ng

[Chinese version 中文版]

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The new generation of iPhones represents the biggest change to the design of the iconic smartphone in years. Photo: Reuters

The new iPhone has a front camera and an infrared module for 3D facial recognition. Photo: Reuters

Eddie Tam is the founder and CEO of Central Asset Investments.

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