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Apple's iPhone 7 is a familiar phone for unfamiliar challenges

With so many technologies "fighting for space" within the tight confines of Apple's most important product, the big loser is big-time change.

James Martin/CNET
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No, you're not experiencing deja vu. Those are Apple's newest iPhones.

The Cupertino, California, company on Wednesday showed off the iPhone 7 and iPhone 7 Plus, the two newest editions to its hugely popular phone franchise. Aside from a series of tweaks, they look virtually identical to the prior two generations of iPhones.

"We are so excited about iPhone 7. It makes all the things you do every day so much better," CEO Tim Cook said on stage at the Bill Graham Civic Auditorium in San Francisco.

The iPhone 7 starts at $649, and the 7 Plus starts at $769. Preorders for the new devices begin Friday, and the phone will be available September 16. At Wednesday's event, Apple also revealed a new Apple Watch, said it will finally bring a Nintendo Super Mario game to the iPhone.

Now may not have been the best time for Apple to stay conservative with its changes. The tech heavyweight is facing an especially challenging time, with this year predicted to be the first that Apple ships fewer iPhones than the year before. Sales of iPhones have already dropped in the past two quarters.

The new iPhones may also point to a broader problem in the maturing phone market. Phone innovation has slowed since the iPhone first launched in 2007, giving people fewer reasons to upgrade to the newest version. Additionally, US phone carriers have been abandoning two-year phone contracts, removing a strong incentive to regularly switch phones.

Both situations have resulted in more people holding onto their phones longer, threatening the growth of Apple, Samsung and their competitors. Smartphone shipment growth is expected to reach 1.6 percent this year, down sharply from nearly 28 percent just two years ago, according to researcher IDC.

"I think if you look at that from a perspective of a slowing smartphone market and slowing iPhone growth, it does bring a little bit of nervousness to Apple watchers," said Wayne Lam, a smartphone analyst for IHS Markit.

Showing off the new water- and dust-resistant body of the iPhone 7.

James Martin/CNET

The iPhone 7 and 7 Plus may not change this slowdown much. One of the most notable alterations in the new phone was the removal of the headphone jack, to make the device slimmer and more water-resistant. The company revealed new earbuds that connect to the Lightning jack instead (as well as an adapter for traditional headphones), and $159 wireless AirPod earbuds.

Phil Schiller, senior vice president of worldwide marketing, onstage Wednesday defended the decision to kill off the headphone jack, saying Apple's engineers had the "courage" to make the change.

"Our smartphones are packed with technologies and we always want more," he said. "It's all fighting for space within that same enclosure. Maintaining an ancient connector doesn't make sense."

Schiller ticked off a series of other changes, including a water- and dust-resistant body, faster processor, a re-engineered home button, new stereo speakers, longer battery life and a brighter display with richer color.

On top of that, the phone's camera was significantly improved, with a dual-lens, zoomable camera added to the 7 Plus.

"This is the best camera we've ever made for any iPhone," Schiller said.

Apple doubled the storage space for the iPhone 7 and 7 Plus, with the base models starting at 32 gigabytes instead of 16GB in last year's model. The higher-priced models will offer 128GB and 256GB. The iPhone 6S and 6S Plus, which were released last year, will also get storage boosts for the versions still available.

The iPhone 7 and 7 Plus will come in more colors: silver, gold, rose gold and the new black and jet black. (The color space gray was dropped for the new phones.)

The lack of a major physical overhaul breaks Apple's pattern of a big iPhone upgrade every other year. Waning enthusiasm for the iPhone could spell major trouble for Apple, since it rode the iPhone's success to become the most-valued company in the world and now rakes in two out of every three dollars in revenue from iPhone sales.

This situation shows just how quickly circumstances can change in the tech world. Apple's stock hit its all-time high last April on brisk sales of its iPhone 6 and 6 Plus, two larger-screened iPhones that were introduced in late 2014.

Still, Apple could capitalize on Samsung's Galaxy Note 7 problems. Helped along by its new Galaxy S7 phone, the South Korean tech giant looked to be gaining momentum after two years of lackluster sales. But the company this month recalled 2.5 million Galaxy Note 7 phones because of overheating and exploding devices. The timing couldn't have been worse -- the recall came a mere two weeks after the phone went on sale and just days before the new iPhone was announced.

Apple is working on a much bigger overhaul of the iPhone's design for next year to mark the device's 10th anniversary, The Wall Street Journal reported in June. Some of those changes could include an edge-to-edge organic light-emitting diode, or OLED, screen, and the removal of the home button, instead putting the fingerprint sensor in the screen, to make room for a bigger display, the publication said.

"A part of me thinks this is Apple keeping their powder dry for their 10th anniversary device," Lam, of IHS Markit, said, "but it is worrisome that they haven't significantly changed the design" given the slower iPhone growth.

The iPhone's sales are expected to rebound in 2017, thanks in part to its early trade-in program and the cheaper 4-inch-display iPhone SE, which went on sale in March, IDC reported. Overall, the device should average 1.5 percent growth over the next five years, lagging faster growth for phones running on Google's Android software, IDC said this month.