Bad News for Apple Inc.'s OLED iPhone

By Ashraf Eassa Markets Fool.com

Later this year, Apple (NASDAQ: AAPL) is expected to introduce three new iPhones. The first two will be typical refreshes of its iPhone 7 and iPhone 7 Plus models, respectively, while the third is expected to be an ultra-premium model with a curved OLED display and other features that'll make it a technical tour-de-force.

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The general expectation is that the company plans to release all three models this fall. However, a new report from DigiTimes, citing "industry sources," suggests that the company might not be able to launch -- or, at the very least, begin shipping -- the OLED iPhone until after the standard models launch.

Image source: Apple.

A redesigned fingerprint scanner driving a delay

Per the report, which cites "industry sources," Apple has "decided to use its own Authentec algorithm combined with Privaris glass identification to redesign a new fingerprint ID solution."

What's interesting is that Apple purchased nearly the entirety of Privaris' patent portfolio between December 2012 and October 2014, per CNN. Furthermore, MacRumors reported back in 2015 that Privaris had "essentially shut down" about five years prior to the publication of the report.

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"This certainly appears to be a patent portfolio purchase rather than a full acquisition of Privaris by Apple," MacRumors' Joe Rossignol wrote at the time.

Based on DigiTimes' report and the information from CNN and MacRumors, it really looks like this new fingerprint identification solution is a home-grown effort by Apple, potentially years in the making.

Due to Apple needing to redesign its fingerprint scanning technology for the OLED iPhone, DigiTimes' sources say that the iDevice maker's OLED iPhone might not go into production until September (the other two models, DigiTimes says, will go into production in July).

What does this mean for Apple and the OLED iPhone?

It takes some time to go from volume production to devices in customers' hands. For example, DigiTimes says that the iPhone 7s/7s Plus will go into production in July, so we're looking at about a two-month lag between when mass production starts and when customers can get their new phones.

So, if DigiTimes is right, customers might not be able to get ahold of the new OLED iPhone until November.

Now, there are two courses of action that come to mind here. The first is that Apple can simply announce the new OLED iPhone alongside the other models in the fall, begin to take pre-orders for the OLED model, and then just ship them out as soon as practicable.

Apple could also hold two separate launch events; the first for the refreshed versions of the current iPhones, with the launch of the more expensive OLED iPhone just a few months later.

Personally, I think that the first course of action is more likely for a couple of reasons:

  1. If Apple doesn't launch the hotly anticipated OLED iPhone in the fall, customers who really want phones with curved OLED displays might just give up on Apple and choose devices from competitors (even if they would have preferred an Apple phone all else equal).
  2. The OLED iPhone is likely to be significantly more expensive than the regular models. Apple really shouldn't risk potentially driving a "mix down" in iPhone sales by having some customers opt for the cheaper iPhone 7s/7s Plus for lack of another option when they would have been willing to pay more for the more expensive OLED iPhone (if it were announced/available for pre-order).

Of course, Apple is better off delaying a product a smidgen to make sure it's ready to go and if the redesigned fingerprint scanner meaningfully enhances the user experience, then the delay is probably worth it.

But, if it's true, it'll be a bummer for some Apple customers and could potentially push out when Apple begins to enjoy the financial benefits of the next-generation iPhone cycle.

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Ashraf Eassa has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. The Motley Fool has a disclosure policy.