This Might Be the Worst News Yet for Apple Inc.'s iPhone 8

By Ashraf Eassa Markets Fool.com

A lot has been written about the woes that Apple (NASDAQ: AAPL) is reportedly facing in trying to embed its Touch ID technology directly into the display of its upcoming iPhone 8 smartphone. The company is reportedly facing yield challenges with the technology, and it's not even clear if the issues will get worked out in time to meet Apple's desired launch schedule.

Continue Reading Below

Since Apple's new iPhone model is expected to have a full-screen face, embedding the Touch ID sensor into a home button that sits in the "chin" of the new iPhone isn't possible.

Image source: Apple via AppleInsider.

Two main alternatives to Touch ID embedded in the display have been proposed by analysts. The first is that Apple could put the Touch ID sensor on the back of the device -- something commonly done by Android smartphone manufacturers. Another proposal is that Apple could just ditch Touch ID altogether, instead opting to use alternative forms of biometric identification.

Per a new leak from reputable leaker Sonny Dickson (via MacRumors), it looks as though Apple might have given up on embedding Touch ID into the display and is, instead, going with a backup plan.

Touch ID on the back of the device

Continue Reading Below

The leak from Sonny Dickson clearly shows the Touch ID sensor placed on the back of the device, below the Apple logo.

Image source: Sonny Dickson.

The unwelcome news is that, if this is the final design and not just the schematic for one of many possible prototypes, Apple was unable to get Touch ID embedded into the display to be viable for mass production this time around.

Although it's obviously better for Apple to ship a product with a compromised feature set than to try to sell something that can't be viably manufactured, this would be quite a disappointment.

Not only does this suggest that the user experience that Apple may deliver with its upcoming iPhone 8 will be greatly diminished because of the rear-mounted fingerprint sensor, but this would also reflect poorly on Apple's engineering/research and development organization.

Remember, Apple has substantially increased its research and development spending over the years, and it is now spending at a run rate of over $10 billion per year. That spending is spread across a relatively narrow, focused set of products and technologies, so it's very likely that critical projects and technologies get all the funding that they need.

Given this reality, and given the extreme importance of the iPhone to Apple's business, it's highly disappointing to see that Apple's research and development organization may have failed to get Touch ID embedded into the display.

If Apple fails, competitors will pounce

If it is true that Apple can't get Touch ID embedded into the display for this year's iPhone 8, then the next opportunity it will have to deliver such integration will be the iPhone that it delivers in the fall of 2018 -- a year later.

I believe that in the interim between the iPhone 8 and the 2018 iPhone, there's a solid chance that some of Apple's competitors will release devices with the fingerprint scanner built into the display. Indeed, Samsung (NASDAQOTH: SSNLF) reportedly wanted to ship such a technology with the Galaxy S8, but the technology wasn't ready.

You can bet that Samsung will try again to get this tech integrated into the Galaxy S9, and don't be surprised if the aggressive Chinese smartphone makers like Huawei, Oppo, and Vivo try to do the same on new high-end models, too.

If Apple isn't first (or among the first) to deliver this technology, then it will look like a copy-cat rather than a leader, which, given Apple's unfortunate recent history of being late to big paradigm shifts in smartphones (large screens, full-screen display, etc.), wouldn't be a good look at all.

10 stocks we like better than Apple
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now...and Apple wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of April 3, 2017.

Ashraf Eassa has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool has a disclosure policy.