Apple's iPhone 7 problem

You could be forgiven if you haven't been all that excited by Apple's new products in 2016. That's because all three of them -- the iPhone SE, the 9.7-inch iPad Pro and the new 12-inch MacBook -- all look exactly like their predecessors.

To be clear, they're all excellent products that CNET scored 4 stars and above. But they all suffer from Apple's "S" phone factor: this year's tech wrapped up in last year's design.

That shouldn't be a problem for the iPhone 7. Apple's presumed next-generation iPhone should follow in the footsteps of previous even-year iPhone releases, offering big design changes and (maybe) larger screen sizes.

But that iPhone will be debuting in the uncharted waters of the "peak smartphone" market. It's the new world where every manufacturer of premium phones -- the likes of Apple, Samsung, LG and HTC -- is dealing with the fact that most customers (at least in mature markets, like North America and Europe) have already made the transition from an old-fashioned flip phone to a do-it-all smartphone.

What's fraying nerves, both in Cupertino and on Wall Street, is Apple's outsize reliance on its monster iPhone sales volume -- almost two out of every three dollars of the company's revenue comes from sales of its handset. And those numbers just went negative (in terms of year-over-year units sold) for the first time ever: While still raking in billions in profits, Apple sold fewer iPhone in the first quarter of 2016 than it did a year earlier. And the company forecast weakness for the current quarter as well.

With that in mind, the stakes for its next flagship phone couldn't be higher. The iPhone 7 can't just be "the best iPhone ever." It needs to be the "drop everything and upgrade to the iPhone 7 NOW" phone, even if you already have the iPhone 6 or 6S.

For you, the potential buyer, that means a can't-miss combination of must-have new features wrapped up in a killer design.

The problem? It's possible that Apple just won't be able to deliver that one-two punch in 2016.

iPhone 7's feature challenge

Every time a new iPhone is introduced, a parade of Apple executives take the stage, trumpeting what's special about the new model. For last year's iPhone 6S, we got the requisite specs bump -- faster processor, better camera -- along with a smattering of 6S-specific features: a pressure-sensitive 3D Touch screen, Live Photos (which sorta kinda turn every picture you take into an animated GIF) and always-on Siri.

So what will Apple add for iPhone 7? (Don't count any nifty new iOS 10 bells and whistles -- some of which we could see as early as Apple's Worldwide Developers Conference in June -- since most of them will undoubtedly be grandfathered into most recent iPhone models.) Maybe a higher-resolution screen, a faster processor and a better camera -- the same sorts of upgrades, in other words, that Apple conjures up nearly every year. But I've rarely, if ever, heard anyone complain about the screen quality or speed of the current iPhone models.

That leaves the camera as the potential to hook buyers. But what's left to add? Rumors point to Apple adopting a second rear camera -- one for close-ups, one for wide-angle shots, but that's nothing new: Both the LG G5 and Huawei P9 already offer dual-camera phones, the new "it" feature for smartphones.

How about a camera with actual optical zoom, not the blur-prone pinch-and-zoom digital alternative we have today? The aptly named Asus ZenFone Zoom already offers a phone with a 3x optical zoom, but it wasn't terribly well implemented or useful. If Apple could crack the code and offer even a 5x or 8x zoom, it could mean dSLRs are on the same shaky footing that crumbled beneath their point-and-shoot brethren years ago. But it may be too early for that.

What's worse is that early rumors point to the upgraded camera technology -- whatever it may be -- being exclusive to the bigger, more expensive iPhone 7 Plus model. Indeed, on the past two generations of iPhones, optical image stabilization -- which can make for less shaky photos and especially videos -- is exclusive to the Plus models.

How about the upgrade you actually want: longer battery life! It may be somewhat mundane, but it's the one on top of every phone user's wishlist. But pair the lack of breakthroughs in battery technology with Apple's weird obsession to keep going thinner, and a big leap here seems unlikely.

Ditto shatterproof screens: Motorola pulled this off with its Verizon-exclusive Droid Turbo 2 (aka the Moto X Force), but it had to go with a plastic casing. I don't see Apple departing from glass this year.

iPhone 7: Most-wanted features

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One thing we probably will get this year? The disappearance of the standard 3.5mm headphone jack. But most users seem to look at that as a bug, not a feature -- a cynical way to get you to buy some shiny new wireless Beats headphones.

So what else could Apple tout to rope in iPhone 7 buyers? Let's exclude fantasy never-gonna-happen things like, say, expandable storage. And we can probably take a baseline storage capacity of 32GB instead of the current paltry 16GB off the table, too.

So maybe we'll get upgrades like a water-resistant body or wireless charging. Nice, but you can already get those features on the current king of the smartphone hill, the Samsung Galaxy S7. And Apple needs the iPhone 7 to be a leapfrog product, not a parity product.

That's exactly what analyst Ming-Chi Kuo of KGI Securities means when he says -- as quoted by 9to5Mac -- that he doesn't see "many attractive selling points for the iPhone 7."

Certainly, Apple will come up with something, and use its unparalleled marketing muscle to convince everyone the new basket of features are must-have goodies. But the reality distortion field may be reaching its limits, too. Consider 3D Touch, the efficacy and implementation of which has recently been questioned by veteran Apple observers like Jason Snell and John Gruber. After all, no one seemed to lament the fact that the feature was dropped from the iPhone SE.

So, the iPhone 7 will have something of an uphill battle when it comes to cooking up a compelling feature list. But at least it'll all be wrapped up in a fancy new Jony Ive design, right?

Again, there's a problem: The iPhone can't really undergo a radical design change until it figures out how to deal with that pesky home button.

Watch this: iPhone 7 may come with three cameras

01:09

iPhone's design: Stuck between a home button and a hard place

If you were to put a new iPhone -- a 6 or a 6S -- next to the original 2007 model, you'd see a lot of changes: a much bigger higher-resolution screen, a far better camera, and 4G wireless, just for starters. That's not counting Apple Pay, Siri and military-grade encryption with biometric security, to boot. And let's not forget the amazing App Store (which didn't debut until the second-gen iPhone 3G in 2008) or the selfie camera (which didn't show up until iPhone 4, in 2010).

"Quantum leap" doesn't begin to describe how much better the iPhone has gotten. But look again: from another point of view, the designs of the oldest and newest iPhones are shockingly similar: a slab of glass with symmetrical top and bottom bezels. The "forehead" above the screen is the same size as the "chin" below -- and that lower one has to be big enough to encompass the home button.

And until that home button changes, the bezels can't change. And until the bezels change, the iPhone design is pretty much locked in to that 2007 look and feel.

Not only would reducing the bezel size give the iPhone a much-needed makeover, it would also allow for a larger screen to be fitted into the same size body.

The funny thing about the home button is that you don't even need it to navigate the iPhone anymore (as anyone who's ever turned on the accessibility options can tell you). And that aforementioned 3D Touch technology, despite its criticisms, could offer a home button alternative: a long press anywhere on the screen (or, say, on a thinner bottom bezel) could take you back to the home screen.

But the home button currently houses the Touch ID fingerprint sensor, the iPhone's top-notch security fence. It can change -- become a flat oval, as seen on Samsung and HTC phones, or a side-mounted sensor, like the Nextbit Robin; or it can move -- LG phones and the Nexus 6P have them on the back -- but it has to stay.

In fact, there's a lot of evidence to suggest that Apple can put the fingerprint sensor behind the main screen. But, once again, the thought is that doing so is such a daunting engineering challenge that it won't be ready for a year or two. Which means you wouldn't see it less than five months from now.

Why 2017's iPhone could break the S cycle

In some ways, Apple is a victim of its own success. The company's phones are so popular, it has to plan for producing on a scale of tens of millions. So, while I have no doubt there are several whizbang iPhone prototypes sitting on Jony Ive's workbench, they just can't yet be produced in the volume Apple needs to sell them -- this year, at least. (I'm choosing to ignore the rumor from Taiwan's Digitimes, which 9to5Mac correctly calls "sketchy.") Remember, for all those iPhone 7 models to be in Apple Stores around the world in September, they need to start rolling off the production lines in China in August, at the latest -- that's less than 100 days from now.

"When we launch a product, we're already working on the next one. And possibly even the next, next one," CEO Tim Cook told Charlie Rose on "60 Minutes" a few months ago. That means the component suppliers in Apple's supply chain are already planning the manufacturing logistics for iPhone-level demand several quarters out on next-gen screens, cameras, motion sensors, CPUs, flash storage, batteries and other materials. The same goes for the versions after that, too.

To be clear, all of this uncertainty and doubt on the iPhone 7 could be totally misplaced. I could be wrong and I hope I'm wrong -- Apple could well blow everyone away and have its biggest hit of all time.

But maybe it will merely be a "good enough" upgrade. And one problem with an underwhelming iPhone 7 -- besides slack demand -- is that it portends a disappointing iPhone 7S in 2017, too -- same design, with "new stuff under the hood." That would leave anyone looking for an improved design holding out until 2018, an eternity in gadget years.

That is, unless Apple shakes up its long-time strategy and skips an "S" phone next year.

After all, 2017 will be the 10th anniversary of the original iPhone. That seems like the perfect opportunity to tear up the rulebook and debut a truly groundbreaking model -- call it iPhone 8, iPhone X, or maybe just "The New iPhone."

Think: An edge-to-edge "unbreakable" OLED display with behind-the-screen fingerprint reader, a 20-megapixel iSight camera with 5x optical zoom, running iOS 11 on a lightning-fast A11 processor, all wrapped up in a stunning waterproof liquid-metal body.

I'd buy that phone -- and I bet you would, too. I just think we'll need to wait a year or two to do so.

CNET's David Carnoy contributed to this story.

Update (6:21 p.m. PT): This story has been updated with Apple's quarterly financial results.