Is This Crazy Apple Inc. iPhone 8 Rumor Likely to Be True?

By Ashraf Eassa Markets Fool.com

AsMacRumorsreports,analysts with J.P. Morgan recently suggested that Apple (NASDAQ: AAPL) might choose to include a pair of AirPods with the iPhone 8 rather than force interested customers to shell out the $159 required to buy them.

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MacRumors' Joe Rossignol called this prediction "outlandish." However, it's worth spinning this idea around to see if it makes sense or if it is, indeed, "outlandish."

Image source: Apple.

Let's weigh the pros and cons of such a move.

The argument for in-box AirPods

Apple's AirPods are clearly proving to be successful; these things have been available for months, yet, as Apple CEO Tim Cook indicated on the company's most recent earnings call, the company has yet to reach supply-demand balance for these products.

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Part of that may very well be due to manufacturing constraints, but given that Apple released the AirPods for sale all the way back in December, I'd imagine Apple has been able to ramp up supply of these products significantly.

Yet if I wanted to buy a pair of AirPods today from Apple's online store, my order wouldn't ship for six weeks.

Since Apple clearly has a product that customers want, the company could conceivably aim to improve the value proposition of its upcoming premium iPhone models even further by throwing the AirPods in.

The argument against in-box AirPods

Though there's clearly an argument to be made for throwing in those AirPods to try to boost customer demand, there are plenty of reasons that such a move wouldn't make sense.

First, if Apple does throw the AirPods in with the premium iPhone, then that will necessarily drive the cost of the iPhone "package" that Apple sells to its customers with the iPhone 8. That increase in cost structure would either manifest itself as an increase in the price of the device, probably hurting demand, or as a gross-margin reduction for Apple.

Beyond that, there's the common-sense notion that the upcoming premium iPhone 8 is expected to be a radical redesign of the iPhone packed with all sorts of interesting, whiz-bang features. Although customer demand is hard to forecast, especially considering we don't know that much about the device's features, capabilities, or pricing, I'd bet that demand for this product will be quite robust on its own merits.

In other words, Apple probably doesn't need to toss in a "sweetener" like that to move a product like the iPhone 8; indeed, there have been numerous reports that Apple is facing production bottlenecks and will be significantly supply constrained on these devices as it is.

And, finally, if -- come the iPhone 8 launch -- Apple is still struggling to build enough of these AirPods to meet demand, then including them in a mass-market product like the iPhone 8 could add yet another production bottleneck that would further constrain supply and limit sales.

Assessing the likelihood

I'd say that the argument is overwhelmingly in favor of not seeing Apple include the AirPods, especially if they're substantially more expensive to manufacture than the traditional wired earbuds that Apple already tosses into the box today.

It seems both unnecessary and risky for Apple to include AirPods in its upcoming premium iPhone 8, especially as the device should be compelling enough to sell on its own merits.

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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 a disclosure policy.