Citi believes the iPhone 17 series will struggle to drive a robust upgrade cycle, suggesting the market should focus on three major product launches next year: advanced Siri, foldable phone, and Vision Pro 2.

On September 3rd, Citi stated in its latest research report that while iPhones have historically benefited from new design aesthetics, the upcoming Air model and iPhone 17 series overall still represent incremental product update cycles.

Citi's Asia supply chain research indicates the iPhone 17 series is expected to ship 82 million units in 2025, representing only modest growth compared to the iPhone 16's 81 million units.

Despite nearly half of iPhone users still using iPhone 14 or earlier models, providing upgrade opportunities, Citi notes that iPhone 17's incremental upgrades will struggle to stimulate large-scale device replacement.

The firm believes true growth catalysts will come from next year's "three pillars": advanced Siri, foldable phones, and Vision Pro 2. Citi maintains a "Buy" rating on Apple with a $245 target price, based on 28x price-to-earnings ratio on 2027 earnings per share expectations.

**Air Model Emerges as Biggest Highlight**

Apple is expected to unveil the iPhone 17 series at its "Awe dropping" product launch event on September 9th. The most significant change is the all-new iPhone 17 Air model, which will be Apple's thinnest and lightest iPhone to date while replacing the Plus model. Other notable upgrades include:

New 3nm chip, finally upgrading to 12GB RAM to support more AI features, camera improvements particularly for the front-facing camera, proprietary Wi-Fi chip, camera module and bezel design changes, and Pro models potentially increasing in price by $50 with larger storage capacity options.

Beyond iPhone upgrades, Apple is also expected to release new Apple Watch Series 11, Ultra 3, and SE3, along with other product updates including AirPods, HomePod mini, and Apple TV.

**Supply Chain Research Shows Flat Shipment Expectations, Consumer Research Indicates Moderate Replacement Demand**

According to supply chain research by Citi smartphone analyst Kyna Wong, iPhone 17 series unit shipments in 2025 are projected at 82 million units, showing only marginal growth compared to iPhone 16's 81 million units.

Citi maintains iPhone unit shipment expectations at flat/3% growth for 2025/2026 respectively, at 227 million/234 million units.

The research indicates Q4 2025 production plans are essentially flat (down 1% year-over-year), suggesting full-year 2025 production plans will grow 9% year-over-year, which while better than baseline stable expectations, shows limited growth magnitude.

IDC recently raised its 2025 global smartphone shipment expectations from 0.6% to 1%, primarily driven by iPhone's 3.9% growth (previously expected at 1.6%). However, amid weak unit growth, IDC expects average selling prices to increase 6% year-over-year.

Citi's latest U.S. consumer electronics research shows smartphone replacement cycle expectations similar to last year's results, but purchase intentions have declined compared to last year and past 12 months' purchasing behavior. Key research findings:

- Nearly 50% of iPhone users still use iPhone 14 or earlier models, providing good upgrade opportunities for upcoming new models - iPhone expected to gain nearly 5% market share growth (primarily from smaller brands, not Google Pixel or Samsung) - While AI features attract attention, they remain non-primary considerations, giving Apple time to catch up in AI - Interest in foldable phones slightly increased to 60%

Regarding services, approximately 55% of iPhone users utilize Apple services, with 39% paying for third-party apps, essentially flat compared to last year, indicating Apple still has penetration opportunities. For other products, iPad remains the most popular tablet in terms of purchase intentions.

**2026 "Three Pillars" Become Key Growth Drivers**

Citi believes real growth will come from three major product launches next year: advanced Siri, foldable phones, and Vision Pro 2, which will drive stronger upgrade cycles.

Regarding AI strategy, beyond considering Anthropic and OpenAI, Apple is also in early discussions with Google about potentially using Gemini to power the new Siri.

Citi views this as reflecting Apple's willingness to collaborate with other large language model providers, while Apple continues developing its own Apple Foundation Models and is expected to significantly increase AI investment and capital expenditure.

For foldable phones, while iPhones have historically benefited from new design aesthetics, Citi believes true form factor innovation will be embodied in foldable phones.

In the AR/VR headset space, Citi notes that Apple Vision Pro has captured approximately 30% share among users owning AR/VR devices, with over 30% of users planning to purchase new headsets considering Vision Pro.

Therefore, Citi expects Apple's advanced Siri, foldable phones, and Vision Pro 2 "three pillars" launching next year will serve as key catalysts driving stronger upgrade cycles.