Source: Wall Street See

$Apple (AAPL.US)$ The first true AI phone will be launched next year, bringing change not only to the global smart phone market but also to apple's supply chain.

On December 3rd, Nomura researcher Anne Leet's asia technology team released a research report stating that the iPhone roadmap is expected to experience a historic turning point in 2025.

Nomura stated that this conclusion is based on multiple prospects. First, the iPhone 17 series expected to be released in the second half of next year is expected to become the first iPhone built on AI hardware, carrying significant contemporary meaning. Secondly, the iPhone SE 4 is expected to be launched in March to April next year, likely to become apple's 'entry-level' model, integrating low-end demand.

Based on this, Nomura believes that apple may readjust its product line, for example, changing the annual new product combination from 'two low-end iPhones + two high-end iPhone Pros' to 'three regular iPhones + one special iPhone', such as the three regular models 17, 17 Pro, and 17 Pro Max, plus the special model iPhone 17 Air/Slim, or the foldable phone that may be launched at the end of 2026-2027.

How should the iPhone 17 series be anticipated?

Since apple launched Apple Intelligence at the WWDC conference in June 2024, a new chapter of AI-driven apple devices has been opened.

However, Nomura believes that due to the long design cycle of apple products (usually at least 1.5-2 years), the iPhone 16 series launched this year is not fully adapted to AI applications in terms of hardware, and the iPhone 17 series, which will be released in the second half of next year, may be the first true apple AI phone, which means that the iPhone 17 series will feature a more powerful processor, larger memory, larger battery, and better thermal management.

Specifically, Nomura believes that the iPhone 17 series and iPhone SE 4 may have the following key hardware changes:

Display: The iPhone 17 series screen size is upgraded from 6.1 inches to 6.3 inches.

Chip Processor: Apple may use taiwan semiconductor's N3P process to produce the A19 and A19 Pro application processors, which will be used in the iPhone 17/17 Air and 17 Pro/17 Pro Max respectively.

Memory: The iPhone 16 series has been upgraded to 8GB to meet the minimum requirements for AI functionality, and the iPhone 17 series is expected to continue this memory capacity, with the Pro models further increasing to 12GB.

Thermal Management: With the enhancement of AI computing power, thermal management has become more important. In addition to using graphene heat sinks regularly, Apple may add a Vapor Chamber (VC) for the 17 Pro and Pro Max to enhance thermal management and may also reduce the use of packaging materials (such as glass and titanium).

Housing and Back Panel Glass: It is expected that the 17 Pro and Pro Max may change the body material from titanium alloy to aluminum alloy, as the latter has better thermal conductivity and lower costs. Apple will also reduce the size of the back panel glass to only cover the wireless charging area and expose the upper and lower areas of the aluminum body for thermal dissipation.

For the iPhone 17 Air, apple may utilize a titanium alloy frame/shell to achieve a lighter weight and a stronger structure to accommodate a thin and light design.

Modem: Apple may use its self-developed modem in the iPhone SE 4 and iPhone 17 Air, and a self-developed WiFi chip in the iPhone 17 series (the SE 4 may still use broadcom WiFi chips).

Camera: The periscope camera of the 17 Pro is expected to upgrade from the current 12 million pixels, supporting 5x zoom, to 48 million pixels, supporting 8x zoom, while the front camera is expected to be upgraded from the current 12 million pixels to 24 million pixels.

In addition, it is expected that apple will first replace the diffraction optical elements (DOE) with metal lens optical elements (MOE) in Face ID in the second half of next year.

Battery: The iPhone 17 series, especially the iPhone 17 Air, will use more fine lines, more layers, and larger areas of FPCB (flexible printed circuit board).

Main board: Apple has been developing thinner and lower loss main board technology for the past 2-3 years, one of which involves using thinner fiberglass cloth in the CCL (substrate) to reduce the thickness and transmission loss of the main board, but it is uncertain whether this will be applied in the iPhone 17 series.

What does this mean for the apple supply chain?

What impact will the potential hardware changes in the aforementioned iPhone 17 series models have on the supply chain?

Nomura believes that the reduced use of titanium alloy models in the casing will dilute the value of metal casing manufacturers, while the smaller size of the back glass in the Pro series will weaken the value of relevant manufacturers.

In terms of cameras, Nomura believes that the impact on the supply chain is not significant, but it is bullish for manufacturers like Sony that produce CMOS image sensors (CIS).

Since both DOE and MOE are manufactured by Taiwan Semiconductor and its affiliates, it is expected that there will be no impact on the supply chain. The report adds that replacing DOE with MOE is likely to pave the way for more transformative innovations by 2027.

In terms of batteries, the higher demand for fine-line multi-layer FPCB may lead to supply shortages. Additionally, since Apple has suggested that EMS (global electrical components services) manufacturers and specialized SMT (surface mount technology) manufacturers gradually take over the SMT work of FPCB manufacturers to reduce costs and geopolitical risks, Nomura believes this may lead FPCB manufacturers to focus on FPCB bare board manufacturing, which has a lower ASP but higher profit margins.

Editor / jayden