Written by: Rita

Apple's September 9th launch event will reveal its first foldable screen iPhone, with the Pro series experiencing the largest price increase in years. On September 1st, Morgan Stanley released a pre-release report on the iPhone 18, maintaining an overweight rating with a target price of $360. Morgan Stanley believes this is the most significant hardware transformation since the iPhone X. Foldable screens are expected to have a shipment of 7 to 8 million units in the second half of 2026, with the first product cycle reaching up to 20 million units, contributing approximately $14 billion in revenue just in the December quarter.

This launch event also has another layer of significance, as Tim Cook will not be the main speaker, with new CEO John Ternus taking the stage for the first time. Morgan Stanley believes that Ternus's performance, the user experience of the foldable screen, and how Apple balances price increases with market demand will determine the direction of Apple's stock price before the end of the year.

The Foldable Screen is the Largest Hardware Change Since the iPhone X

Apple is entering the foldable smartphone market 7 years later than Samsung. Morgan Stanley believes this is the largest hardware form factor change since the iPhone X and is also the greatest test of Apple's pricing power. The market expects the starting price for foldable screens to be between $2300 and $2500, with Morgan Stanley's baseline prediction at $2399 (for the 512GB version). Every 1% increase in the share of foldable screens in overall iPhone shipments will lead to approximately a 1.5 percentage point increase in average selling price.

The foldable screen has made compromises on hardware, eliminating Face ID in favor of a fingerprint sensor, with the rear camera featuring only wide-angle and ultra-wide-angle lenses, lacking a telephoto lens. The thickness when folded is thinner than the iPhone Air, and advanced hinge and screen technology nearly eliminate creases.

Morgan Stanley's consumer survey shows that iPhone users have a significant interest in foldable screens, especially in the Chinese market. The market feedback for the Samsung Galaxy Z Fold 8 (starting price $1899) also indicates a real demand for the book-style foldable form factor. Morgan Stanley expects foldable screens to sell out quickly, with strong demand but limited initial supply.

The 2nm Chip is the Real Upgrade for the Pro Series

The hardware changes in the iPhone 18 Pro series are relatively conservative. The largest upgrade comes from the chip, with the A20 Pro application processor adopting TSMC's 2nm process for the first time. TSMC data shows that 2nm offers a performance improvement of 10% to 15% at the same power consumption, and a power reduction of 25% to 30% at the same performance levels.

The recently released M6 chip (also using 2nm) provides a reference point. Compared to the 3nm M5, the M6 adds 2 "super CPU cores" for the first time, and the GPU core count also increases by 2, achieving a peak performance enhancement of up to 100% for the neural engine. The A20 Pro has been confirmed to use WMCM packaging technology, offering greater design flexibility, speed, and thermal management compared to the InFO packaging used over the last decade.

Morgan Stanley believes that the computing power improvement brought by the 2nm chip will support two of Apple's narratives: stronger edge AI capabilities (Siri AI) and higher product pricing.

The Largest Price Increase, Memory Costs are the Core Variable

The Pro series will see the largest price increase in years. Morgan Stanley expects the starting price of the iPhone 18 Pro (256GB) to be $1299, an increase of $200 from the $1099 of the iPhone 17 Pro, representing an 18% rise. The Pro Max (256GB) will have a starting price of $1399, a $200 increase from the previous generation's $1199, representing a 17% rise. The increases are even greater for the 1TB and 2TB versions, with the Pro Max 2TB seeing a 25% increase.

The main driver of the price increase comes from rising memory costs. Apple’s use of DRAM for iPhone production is expected to grow nearly 50% year-over-year in the first half of 2026, with NAND increasing over 30% year-over-year. Morgan Stanley estimates that a $200 price increase is sufficient to cover the rising memory costs while maintaining a gross margin of about 40%.

Morgan Stanley believes that price increases are not without risk. Consumer sensitivity to price, changes in trade-in values, and the prevalence of installment payments will all affect demand elasticity. Apple's supply chain plans indicate that the company is currently more concerned about securing enough components than finding enough buyers.

Supply is a Bottleneck, Memory May Limit Production

Apple's total components stock for iPhones in 2026 is projected to be between 265 million and 270 million units, representing a year-over-year growth of 5% to 7%. Among these, the combined stock for the iPhone 18 Pro, Pro Max, and foldable screens is approximately 81 million units in the second half of the year. In the past week, TSMC's 2nm wafer orders saw a slight increase and were ahead of schedule, equivalent to an additional production increase of about 2 to 3 million iPhones. It is uncommon to raise supply chain forecasts before a product launch, especially when existing plans already reflect an internal "bull market scenario."

Memory supply remains the largest uncertainty. If Apple fully executes its current stocking plan, DRAM consumption in the second half of 2026 will be expected to grow by about 15% year-over-year, while NAND is expected to grow about 25%. Given the tight consumer memory market, this is an aggressive target. Morgan Stanley has not yet included the recent increase in wafer orders in its iPhone shipment forecasts and will wait for sales data post-launch for confirmation.

Configuration Suggestions and Risks

Morgan Stanley has given Apple an overweight rating with a target price of $360, based on an earnings per share of $10.30 for fiscal year 2027 at an approximately 35 times price-to-earnings ratio. The lengthening iPhone upgrade cycle, the global rollout of AI features, and new hardware form factors will jointly drive accelerated iPhone growth.

Upside risks include better-than-expected performance of the iPhone 18, higher-than-expected adoption rates for Apple Intelligence, the introduction of new product lines, and accelerated service growth. Downside risks include weak consumer spending limiting upgrade rates, rising memory costs, slow progress on AI features, geopolitical tensions, and increased regulation of the App Store.

The September 9th launch event carries narrative significance beyond hardware, as it marks the debut of the Ternus era. Morgan Stanley will closely monitor three variables: Ternus's performance under the spotlight, whether the soft and hardware experience of the foldable screen can catalyze demand, and how Apple balances price increases, profit margins, and demand for new and old models.

Disclaimer

This article is a compilation and interpretation of third-party brokerage research reports (Morgan Stanley, September 1, 2026) by Chao Xiang Research, combined with publicly available market information. The ratings, target prices, earnings forecasts, and related judgments quoted in the text are the views of the brokerage analysts and represent the positions of their respective institutions, not the views of Chao Xiang Research, and do not constitute any investment advice.

The market has risks, and decisions should be made independently. This article should not be used as the basis for buying or selling any securities.