The smartphone market is poised for a remarkable transformation as Apple prepares to launch its first true AI-driven phone next yearThis innovative device is not only set to shake up the global smartphone landscape but will also trigger significant shifts within Apple’s supply chainA recent report released by Nomura’s Asia Technology team, led by research analyst Anne Leet, has indicated a historic turning point in Apple's iPhone roadmap expected in 2025.

The groundwork for this major change has been laid by a series of anticipated product releasesNotably, the iPhone 17 series, projected for release in the latter half of next year, will likely be Apple's first phone incorporating AI hardware in a substantive wayThis aligns with the evolving demands of a tech-savvy consumer base eager for enhanced functionalitiesFurthermore, Apple is expected to unveil the iPhone SE 4 around March to April, which could position itself as the company’s entry-level model aimed at capturing the budget segment of the market.

To adapt to these new dynamics, Nomura suggests that Apple might revamp its product strategy

Rather than maintaining the existing model of introducing two low-end and two high-end Pro versions annually, the company may pivot to offering a more balanced mixFor instance, we could see three traditional models such as the iPhone 17, 17 Pro, and 17 Pro Max alongside a special version, potentially labelled as iPhone 17 Air or SlimMoreover, there are whispers of a foldable device possibly making its debut by the end of 2026 or early 2027.

The anticipation surrounding the iPhone 17 series has been building ever since Apple’s unveiling of AI-powered devices during the 2024 Worldwide Developers Conference (WWDC) in JuneThis suggests a tantalizing glimpse into how Apple is planning to intertwine AI within its product ecosystemHowever, Nomura cautions that the design timeline for Apple products generally spans 1.5 to 2 yearsAs such, the iPhone 16 series, which launched earlier this year, may not fully harness the capabilities of AI applications, leaving the iPhone 17 to be the brand's inaugural AI-centric offering

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Consequently, consumers can expect enhanced processing performance, larger memory capacities, a bigger battery, and superior thermal management in the upcoming release.

There are several key hardware enhancements anticipated for both the iPhone 17 series and the iPhone SE 4. For starters, the display size of the iPhone 17 series is expected to increase from the current 6.1 inches to 6.3 inches, providing users with a more extensive viewing experienceOn the processing side, Apple is likely to employ TSMC's N3P process technology to manufacture the A19 and A19 Pro chips, designated specifically for use in the iPhone 17 and iPhone 17 Air, as well as the 17 Pro and 17 Pro Max variants.

In terms of memory, while the iPhone 16 already features an upgrade to 8GB to support emerging AI functionalities, the iPhone 17 series is set to maintain this capacity, with Pro models potentially boosting memory to a remarkable 12GB

This will place Apple in a competitive position, as users increasingly expect more capable devices that can support demanding applications.

Thermal management is a critical consideration, especially with the anticipated rise in computational demands from AI processesTo this end, Apple might incorporate more sophisticated cooling solutions, such as vapor chambers, particularly in the more advanced Pro and Pro Max modelsAdditionally, the materials used for these devices could shift from titanium to aluminum in order to enhance thermal conductivity while also reducing production costsThis change may involve a new design where the back glass cover shrinks in size merely to accommodate the wireless charging area, thereby exposing more of the aluminum chassis which would facilitate better heat dissipation.

Another significant shift could be seen in the materials used for the iPhone 17 Air, which may feature a titanium frame to maintain a light and sturdy design, aligning with Apple's pursuit of sleek, durable devices.

The modem technology is also primed for an upgrade, with a possibility of Apple rolling out its own in-house developed modem in the iPhone SE 4 and iPhone 17 Air, while the WiFi chip in the main series may go proprietary, diverging from Broadcom’s offerings.

Camera improvements are another area of focus, with the iPhone 17 Pro expected to enhance its periscope lens capabilities from a 12-megapixel sensor with 5x zoom to a commendable 48-megapixel sensor supporting up to 8x zoom

Furthermore, the front-facing camera might see a significant boost from 12 megapixels to 24 megapixels, while creative innovations could see Apple being the first to integrate metal optics over diffraction optics in Face ID applications, heralding a new era in facial recognition technology.

The battery life, a perennial concern for smartphone users, should see enhancements through the adoption of advanced flexible printed circuit board (FPCB) designs, utilizing finer wires and layers to bolster efficiencyApple’s ongoing research into ultra-thin, low-loss motherboards might lead to the introduction of thinner glass fiber materials, which would reduce thickness and transmission losses, optimally balancing performance and usability, although it remains to be confirmed whether these new designs will be adopted in the iPhone 17 series.

While the iPhone 17 series represents a beacon of innovation, its impact on the supply chain is noteworthy

The reduced reliance on titanium in certain models could dilute the value proposition for manufacturers specializing in premium metal casingsThis is compounded by the shrinking size of back glass covers in the Pro models, potentially diminishing value for associated producers.

On the imaging front, while the expected shift in camera components might not be significant for the supply chain, firms like Sony that specialize in CMOS image sensors could witness a positive upliftThe comprehensive manufacturing of DOE and MOE components by TSMC and its subsidiaries suggests stability, with the anticipated transition from DOE to MOE paving the way for transformative innovations possibly hallmarking future releases around 2027.

In terms of battery technology, the upward trend for multilayered FPCB demands could lead to recognized supply constraintsApple’s strategic transition of SMT tasks from FPCB manufacturers to specialized firms is aimed at cost efficiency and reduced geopolitical risks, suggesting a potential realignment within manufacturing focuses that might see FPCB manufacturers concentrating on producing bare FPCB boards, which present lower average selling prices yet higher profit margins.