What are some of the potential consequences of introducing OLED display technology in the iPhone 8?

According to UBS analyst Steven Milunovich an OLED screened iPhone could increase market demand, but drive down profit margins.

The iPhone 8 is expected to come in three models, including the addition of a 5.8-inch screen sized phone to the existing 4.7-inch and 5.5-inch screened phones.

Advanced photo feature Portrait mode is on iPhone 7 Plus. (Photo courtesy of Apple)

The larger iPhone 8 models of the 5.5-inch and 5.8-inch screens would house an OLED display, but the 4.7-inch will mostly stick to the LCDs found in existing iPhone 7.

"We believe OLED enables a step-change in the iPhone form factor and increases functionality, which could strengthen retention rates and drive substantial upgrades," Milunovich said. "A shift up in screen size raises questions regarding pricing and gross margin."

The flexible OLED screen could present form-factor changes in the phone design to accelerate iPhone growth, and larger screens could raise the average selling prices of the phone, added Milunovich. “However, margins might decline if build cost increases outstrip higher prices."

Improved OLED screen quality could pave the way for iPhones to be used in VR headsets, he said.