Apple Alert: All-Glass iPhone Reportedly Scrapped Due to Yield Issues, Jefferies Downgrades to 'Underperform'

Wall Street's view of Apple has turned more cautious. Jefferies recently downgraded Apple (AAPL-US) from 'Hold' to 'Underperform' and cut its price target from $285.56 to $263.66, a reduction of about 7.7%. Based on Apple's closing price on August 10, the new target implies roughly 14% downside. Analyst Edison Lee noted that supply chain investigations indicate Apple's much-anticipated all-glass iPhone, expected to launch in 2027 for the iPhone's 20th anniversary, may be canceled due to mass production yield issues. This would weaken Apple's ability to boost average selling prices and gross margins through a new product form factor.

However, there are conflicting reports. Apple has not officially announced the cancellation of the product, and other sources indicate Apple still plans to launch an iPhone Pro model in 2027 with significantly increased glass usage. Codenamed V73 and V74, these models are expected to use glass on the front and back, extending it to the sides, while retaining a metal frame in the middle. In contrast, the more radical design that would have nearly replaced the metal structure with glass is reportedly being abandoned due to structural and manufacturing challenges during mass production.

Jefferies' downgrade is not just about one product's fate, but reflects broader concerns about Apple's ability to continuously raise iPhone average selling prices. Lee argues that Apple needs new product forms to drive higher average prices, but if the all-glass design fails to achieve sufficient production yields, it cannot form a sustainable business model. Jefferies previously estimated that if the all-glass iPhone launched as planned, its average retail price could reach about $2,060, making it one of the most expensive iPhones in Apple's history.

Market interest in this product is directly tied to Apple's current cost pressures. Rising memory prices are increasing smartphone manufacturing costs, and if Apple wants to maintain high hardware gross margins on premium iPhones, it must absorb these costs through higher prices, product mix adjustments, or increasing the share of high-end models. The all-glass model was seen as one potential solution, but if the most ambitious design cannot be mass-produced, Apple's room to raise average prices may be limited.

This has also prompted the market to reassess Apple's product innovation capabilities over the next few years. Apple has previously pushed users toward higher-priced models through OLED displays, stainless steel bodies, titanium materials, and the Pro series. However, as the smartphone industry matures, it is becoming increasingly difficult to drive upgrades through changes in appearance, materials, or hardware form alone.

Current market concerns about Apple extend beyond iPhone hardware. Analysts are also watching Apple's progress in artificial intelligence and how the company will catch up with tech giants like Microsoft, Alphabet, Amazon, and Meta in the generative AI race. Recent market skepticism about the pace of Apple's AI rollout has become a key factor in some analysts adjusting their investment ratings.

Stock performance reflects this shift in market sentiment. Apple's shares fell about 1.5% to 2% after news of Jefferies' downgrade, indicating rising investor sensitivity to the premium iPhone product cycle and future profit growth. Apple's stock was similarly re-evaluated after its earnings report, as concerns over its outlook and growth pace emerged.

However, Jefferies' view does not represent a full bearish turn across Wall Street. Reports indicate that most analysts still maintain a 'Buy' rating on Apple. Thus, this downgrade reflects a widening divergence in market views on Apple's future product innovation and pricing power, rather than a broad rejection of the company's fundamentals.

Notably, details about the 2027 iPhone 20th-anniversary model remain unclear. On one hand, Jefferies claims, based on supply chain checks, that the most radical all-glass design has been scrapped due to poor yields. On the other, other sources suggest Apple is still advancing iPhone Pro designs with significantly increased glass elements. In other words, what is more certain is that the 'extreme all-glass version' has hit manufacturing bottlenecks—not necessarily that the entire 20th-anniversary design overhaul has been canceled.

From an investment perspective, the key question is not whether a phone uses all glass, but whether Apple can continue converting technological and design innovation into higher average selling prices, margins, and upgrade demand. If high-cost new form factors fail to meet mass production requirements, and consumer willingness to pay for premium iPhones is limited, Apple's future growth model may rely more heavily on services, product mix adjustments, and monetizing its existing ecosystem.

Jefferies' decision to cut the price target to $263.66 serves as a market warning: Apple's next challenge has shifted from 'Can it build a cooler iPhone?' to 'Can it build an iPhone that supports higher prices and margins at a reasonable cost?' If the 2027 major product refresh fails to become a new upgrade cycle, Apple's long-standing model of maintaining valuation premiums through premium hardware innovation could face greater re-evaluation pressure.