Analysts have predicted that Apple could sell as many as 10 million iPhone… (Tony Avelar, Bloomberg )
The iPhone is a big deal for millions of consumers, but it's even more so for Apple Inc. and perhaps for the U.S. economy.
Gadget lovers are eagerly awaiting news from Apple's media event in San Francisco on Wednesday, when the company is widely expected to introduce the iPhone 5 after months of rumors.
Wall Street analysts — and economists too — will be paying close attention.
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That's because a new iPhone could provide a huge revenue windfall for the world's most valuable company. It could also lift business for related firms such as wireless carriers, suppliers and accessories sellers.
"The iPhone 5 stands to create winners and losers across the technology food chain and in the handset market," JPMorgan analyst Mark Moskowitz said in a note to investors Tuesday.
Indeed, the iPhone has become a modest economic driver for the U.S. economy, a rare feat for a single product.
JPMorgan chief U.S. economist Michael Feroli estimated iPhone 5 sales could boost fourth-quarter gross domestic product by $3.2 billion. That could add one-fourth to one-half of a percentage point to annualized GDP growth in the quarter, he said.
In the current anemic economy, any small gain helps, economists say.
The iPhone has been an overwhelming success for Apple, with more than 244 million sold since its 2007 debut. Sales of iPhones and related products and services accounted for 46% of Apple's revenue in the most recent quarter and 58% in the previous quarter. In its last fiscal year, the company reported revenue of $47.1 billion from iPhones and related products and services, an 87% increase over the previous fiscal year.
"The iPhone has a gross margin somewhere around 50%, so it contributes far more to Apple's bottom line than all the other products combined," said Charlie Wolf, an analyst at Needham & Co. "It's the most crucial product in Apple's portfolio."
There's huge pent-up demand for the latest smartphone, expected to be a big upgrade that is rumored to include a larger screen and 4G LTE connectivity. Sales of current iPhone models dropped off in the last few months as hype grew over the next version.
Analysts have predicted that Apple could sell as many as 10 million iPhones in the first 10 days and as many as 50 million in the holiday quarter. Last year, the Cupertino, Calif., company sold a massive 37 million iPhones in the holiday quarter after the fall release of the iPhone 4S.
With so much of Apple's profit — estimated to be roughly 60% — riding on the iPhone, it's crucial for the company to keep up the frenzied, annual upgrade cycle for the phone to stay competitive, analysts say. That is becoming increasingly important as the Android market continues to grow, said Apple analyst Tim Bajarin, president of Creative Strategies Inc.
In its most recent report on the U.S. mobile phone industry, market research firm ComScore Inc. found that Google Inc.'s Android platform held 51.6% of smartphone market share, compared with 32.4% for Apple.
Despite sky-high sales projections for the iPhone 5, the smartphone — which is also rumored to be thinner and have a better camera, faster processors and a smaller dock connector — will probably not live up to the hype, Wolf said. Apple's stock, he noted, typically falls after new iPhones are announced because of Wall Street disappointment.
"If you trace Apple's history with iPhone upgrades, they upgrade incrementally. There's never a blowout," he said. "When they introduced iPhone 4S, they added Siri, but there was no dramatic change on the iPhone road map, and that's Apple's style. So I am not anticipating dramatic changes in the iPhone 5, and it can't possibly match the hysteria that has preceded it."
Still, that won't stop shoppers from flocking to Apple stores when the new iPhone is released.
Apple Chief Executive Tim Cook is expected to unveil the new iPhone on Wednesday morning, with presales to begin shortly after; the phone is rumored to hit store shelves Sept. 21.
"The quarter when the new iPhone is launched is a spectacular quarter for Apple," Wolf said.
Times staff writer Jessica Guynn contributed to this report.