You have to pay eternal attention to developments that could become a 10X factor in your business - Andy Grove - Only the Paranoid Survive
THE LAUNCH of an iPhone is always a major event, with the weeks and months leading up to the date fraught with anticipation and speculation over what Apple will unveil this time around.
When Apple CEO Tim Cook took to the stage on Tuesday, we should have enjoyed twice the excitement, as he revealed not one but two new handsets. The iPhone 5S is the new premium Apple smartphone that is priced from £549, while the iPhone 5C is the widely anticipated lower cost handset.
Almost everything Apple had planned for its two new handsets had been leaked ahead of the event, so the only detail that we all still really cared about was the price of this new so-called affordable iPhone. Some were speculating that Apple would go as low as £200, while most industry observers, including myself, seemed to set it around the £350 to £400 mark. This would have priced the device low enough to extend iPhones to markets in new territories and age brackets and enable Apple to compete with the popular Galaxy S4 Mini mid-range handset from rival Samsung, but remain expensive enough to retain the premium Apple brand.
Perhaps in a bid to prove that it still has the power to shock during its closely watched launch events, Apple managed to surprise just about everybody when it finally revealed the price of the iPhone 5C. At £469 for the lowest priced 16GB model, the iPhone 5C is actually the iPhone 5 downgraded into a plastic casing and with a slightly reduced price compared to the £529 cost of the iPhone 5.
So while Apple deserves credit for offering buyers iPhone 5 quality hardware and software - aside from the aluminium casing - in a cut-priced budget model, and with a choice of new colours, it's failed to take the bolder step of reworking the iPhone 5 to compete with mid-range smartphones like the Samsung Galaxy S4 Mini and HTC One Mini, which are both priced below the £400 mark.
This could prove detrimental to Apple's future in the mobile market. According to second quarter 2013 smartphone user statistics, Apple now has about 13 percent of the global smartphone market, down from 17 percent for the same quarter in 2012. Meanwhile its rival Android mobile ecosystem, which offers mobile phones priced all the way from £100 up to £600, has totally dwarfed iPhone sales, accounting for an overwhelming 80 percent of the worldwide smartphone market.
Of course, this 80 percent is divided among a range of Android handset makers - although Samsung gets the lion's share - while Apple has its 13 percent all to itself. But Android's rapid rise reflects a major thirst for cheaper smartphone models that are affordable across non-Western markets like Asia and Latin America and more accessible to younger buyers. Offering iPhones in blues and yellows might make them must-haves for fashion following kids, but what's the point of that marketing strategy if only first world kids with rich parents can afford them?
I don't expect the iPhone 5C to be a failure; Apple still has its hardcore fans who will rush to upgrade, and the £60 savings compared to the iPhone 5 could be enough to attract a small group of new customers. But pricing the two new handsets at only £80 apart means that the firm will mostly be competing with itself for sales in its own traditional customer base, rather than enticing its core iPhone user base with the iPhone 5S and competing with the Samsung Galaxy S4 Mini and HT One Mini with the iPhone 5C.
If it wants to retain investor faith for the long term, Apple needs to show that it can grow its market share and start making a dent in the Android numbers, especially before Microsoft has a chance to catch up now that it's bought Nokia's devices business.
Apple's next iPhone launch needs to bring something truly new to the table to achieve this, with a handset that's affordable by anyone's definition and that is designed from the ground up, rather than a slight remodeling of the existing version. µ
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