Apple iPhone 5 and why my next smartphone may be…an iPod

There’s lots of alarm at disappointing iPhone sales during the just gone Apple [AAPL] quarter — expectation of a new model has impacted sales. How will Apple protect itself against this in future? That’s simple: it will diversify its iPhone range.

[ABOVE: Some like it small.]

Diversification works

The company has done this before.

• Recall the iPod? That device was joined by the iPod mini, iPod nano, iPod touch and iPod shuffle. Each of these appealed to a slightly different crowd.
• Remember the iMac? This was made available in numerous colors for a while. It was joined by the PowerMac (later MacPro), iBook, and the Mac range was later boosted by the Mac mini and MacBook Pro.
• Even the iPad will reportedly soon be joined by a 7.85-inch variant.

If you think about it, the iPhone’s one-size-fits-all status makes it unique: except Apple’s already diversified the range — it still offers the iPhone 4 and iPhone 3GS as well as the most recent configuration.

Understandably, analysts and investors are spooked by the iPhone. After all, iPhone and iPad sales together comprise 72 percent of Apple’s revenues. The company’s seeming determination to upgrade its best-selling product every year leaves it exposed to strong devices from other manufacturers and a historically recurring pattern of purchase behaviors.

Pressure is on

As North Shore Asset Management’s Michael Obuchowski points out: “Pressure is mounting … Because everybody else has a much faster design cycle, Apple has to come up with a new phone that’s competitive not just when it comes out, but will stay competitive for a long period of time. That’s going to be increasingly difficult.“

He’s right, of course. The dance between Apple’s iPhone and Samsung’s Galaxy range exemplifies this. Apple ships a better iPhone one month, and Samsung ships a competitive Galaxy device a few months later. This symbiosis is so overt the two firms are locked in legal struggles worldwide while Apple tries to argue Samsung is copying its ideas. That’s not a discussion I want to enter into today.

It remains an unavoidable truth that the minute Apple reveals the full details of its product, competitors begin attempts to create compelling alternatives with which to woo customers away.

Clearly Apple cannot continue to rely on a device that’s upgraded once a year. It leaves the firm too vulnerable to changes in consumer purchasing patterns as they leave off hitting the ‘Buy It Now’ button pending a new model. That’s what’s got analysts spooked.

But Apple’s a little smarter than this. It already offers three iPhone models, so perhaps it can introduce new devices to populate the three tiers: low-cost; mid-cost and premium iPhones.

In other words, rather than simply replace the iPhone 3GS with the iPhone 4 on release of version 5, the company could introduce a new model iPhone that’s custom-built to deliver a package of interesting features within a completely different design.

Is the iPod getting a SIM?

I’m pretty certain that’s something Apple management are thinking about. Diversification works for Apple. The iPod mini and the iPod nano that replaced it both became the biggest-selling iPods very rapidly. The iPhone has been made available predominantly as one annually-upgraded system since 2007.

The thinking has to be that if low-cost devices are going to cannibalize Apple’s hard-won position in a market, it might as well ensure Apple makes the devices that do that cannibalization.

There’s been years of rumor speculating about an iPhone nano. This hasn’t happened yet, but perhaps the story has moved on for Apple to dust off its plan for a uniquely-designed, cheaper device equipped with many (but not all) of the features of the iPhone.

In June the Wall Street Journal published an interesting observation from analyst Nobuo Kurahashi, who said: “The smartphone market has become diverse, but the iPhone still sets the agenda.” That remains true with competitors looking to match the features of each generation of Apple device, but the meat’s at the end, when Kurahashi added:

“If Apple ever released a lower-priced iPhone, that would be more of a sign that the changing market environment is beginning to affect the company.“

Apple’s most recent financial results prove that the changing market environment is beginning to affect the company.

You’d have to be a dummy not to respond to changing market conditions when you’re in business, and whatever competitors and critics might be praying for when they mourn the loss of co-founder and visionary Steve Jobs from the company, dummies do not run Apple.

Developing the ecosystem

In February, CEO Tim Cook let slip a few hopes on Apple’s future within the smartphone market. He noted the billions of phones that are expected to be sold by 2015 and called this an “opportunity“. He also discussed plans to “develop the ecosystem around the iPhone“.

Informa Telecoms Media principal analyst Malik Saadi last year told me: “I believe Apple could leverage their brand and create a new family of connected devices.”

These connected devices don’t need to be called iPhones. They just need to run iOS. Every Android phone isn’t called Android, after all.

Saadi said: “Apple needs to protect the iPhone brand. I believe Apple should develop a new family of connected devices to target the mass market but I don’t agree the category should belong to the iPhone brand. That’s because there’s a risk of low-end devices in the brand damaging the prestige of the flagship devices.”

Bloomberg last year claimed Apple to be working on a smaller, cheaper version of the iPhone for sale off contract. The prototype was alleged to be around one-third smaller than the iPhone 4 with a processor, display and other components similar to that model.

This device was going to be sold off-contract and to cost around $200. I believe Apple has held this skunk-works plan since launch of the original iPhone.

I suspect the deep competition between Apple and its present processor manufacturer, Samsung, may have delayed the firm’s execution of this. It is interesting then to note the increasingly close relationship between ARM and Apple’s favored alternate processor supplier, TSMC.

Pure speculation, but perhaps TSMC just needed time to create production lines for new families of low-cost chip for Apple’s devices. (So Samsung couldn’t easily learn about the tech inside driving them, a paranoid competitor might note.) TSMC was rumored to be in the frame for iPhone processor production last year.

Interesting too that the company is expected to move to a smaller, thinner Dock Connector and to field the smaller nano-SIM within the next-gen iPhone. These dinky solutions could therefore be adopted within smaller devices, surely? Interesting too that Apple has reportedly been meeting with carriers in all its existing markets in recent months, ostensibly focusing on the iPhone 5.

Like an iPhone, but tiny…

Also interesting, given the Bloomberg description of the so-called ‘iPhone nano’ from last year are the current descriptions of the forthcoming iPod nano.

AppleInsider tells us this new device may (to paraphrase): “Resemble a tiny iPhone, with dedicated iTunes services and a small touchscreen.”

I’ll admit we’re in the realms of speculation here, but looking at what the analysts are saying it surely makes sense for Apple to maintain two or even three iPhone-style devices as part of its response to its seasonal sales patterns.

If it did it could stagger upgrades for each product across the year. This would boost its competitiveness, widen its market and enable it to control its vulnerability to those seasonal sales patterns.

Is it going to happen? I think it should. What do you think?

Got a story? Drop me a line via Twitter or in comments below and let me know. I’d like it if you chose to follow me on Twitter so I can let you know when these items are published here first on Computerworld.

Also read:

• WSJ: Apple iPhone 5 production has begun, thinner than ever with in-cell display
• iPhone 5 may decide the Apple versus Samsung war
• Apple iPhone 5 will be the NFC ‘iWallet’ rumor claims
• Apple partner Foxconn says Fall iPhone 5 will be the ‘Samsung-killer’

• WWDC 2012: Apple iPhone 5 details, Retina Display Macs

• iPhone 5 release: Apple’s September launch, what to expect

Article source: http://blogs.computerworld.com/smartphones/20747/apple-iphone-5-and-why-my-next-smartphone-may-bean-ipod

Survey: iPhone 5 Should See Monster Release

ChangeWave Research recently released a June survey of 4,042 consumers (primarily located in North America) that took the pulse of the smartphone buying public.

The results are good news for Apple (NASDAQ:AAPL) and rival Samsung. For everyone else, it’s pretty much business as usual.

Prepare for the Coming Tablet War

First, let’s look at what the data says about Apple. Yesterday’s earnings report of $35 billion for the quarter missed analyst expectations, and a big part of that miss was a 26% drop in iPhone sales compared to the previous quarter. Apple CFO Peter Oppenheimer was quoted by Cult of Mac as saying:

“We’re reading the same rumors and speculation about a new iPhone as you are, and we think this has affected sales.”

ChangeWave’s report supports this theory that the 4G iPhone 5 — expected, although not officially confirmed for this fall — hurt iPhone sales last quarter as consumers held out for the newer, faster model.

In fact, as shown by the above results, demand for the iPhone 5 is at record levels — significantly higher than in similar surveys conducted for the iPhone 4S just prior to its release. And we all know how that ended: 4 million units sold on its launch weekend alone.

While Apple’s earnings have been nothing short of stellar (yesterday’s miss on analyst expectations not withstanding), Samsung has also been on a tear. It shipped 93.5 million smartphones in the first quarter of 2012, taking the global lead as the world’s largest mobile phone seller. The Galaxy S III, Samsung’s newly released flagship smartphone — which runs Google’s (NASDAQ:GOOG) Android operating system — is available in 147 countries and only has been available since mid-June, yet it already has hit the 10-million-unit sales mark.

Looking at the above graph, the popularity gains Samsung has made are clear, particularly this year. Only last year, a mere 4% of consumers were planning on buying a Samsung smartphone, but last month, that had risen to 19%.

The gotcha for Samsung is that the big boost this year coincides with the release of its Galaxy S III. Apple’s iPhone 4S is nearly a year old and lacks the Galaxy’s 4G/LTE capability, so the increase in demand for Samsung should be taken with a grain of salt.

As part of the survey, when respondents were asked whether they were likely to buy an iPhone 5, 14% said they were “very likely” to pony up for Apple’s latest smartphone once it becomes available. Only 2% felt the same way about a Galaxy S III. While Samsung has made advances with consumers, the data suggests the latest Galaxy’s popularity reign is likely to be short-lived.

And how did other smartphone vendors make out in this survey? Nokia (NYSE:NOK), HTC, Motorola and the rest? Hardly a blip, aside from Nokia’s 1-percentage-point popularity bump (likely from its Lumia Windows phones) and HTC’s 2-percentage-point slide. Research In Motion (NASDAQ:RIMM) is unchanged, which might be the best news the company has had in a while. RIMM might be out of the race, but treading water beats drowning.

The smartphone market remains a two-player game — Apple and Samsung — and while Samsung is enjoying some time in the 4G-compatible spotlight at the moment, when the iPhone 5 drops, expect Apple to have a blowout holiday season.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.

Article source: http://www.investorplace.com/2012/07/survey-iphone-5-should-see-monster-release/

Apple iPhone 5 delay, chip worries surface (again)

Worries about whether Apple’s iPhone 5 will be delayed due to a shortage of 28 nanometer processors are surfacing again. The semiconductor supply issue is no small matter given Apple missed Wall Street’s fiscal third quarter earnings and revenue estimates and has a slower product cycle than rivals like Samsung.

A report out of China’s First Financial Daily indicates that Apple will delay the iPhone 5 because of a shortage of 28 nanometer chips. These rumors have surfaced before and it’s a bit unclear how much weight to put on them. 

After all, Qualcomm executives on its most recent quarterly earnings conference call indicated that the company was getting a handle on the 28nm manufacturing issue. Qualcomm is the only processor player with integrated 4G, application and modem technology.

Also: Apple’s Q3 disappoints; iPhone shipments light

Specifically, Qualcomm CEO Paul Jacobs said:

Although our outlook for semiconductor volumes in the fiscal fourth quarter has been reduced from our prior expectations, we are ramping our supply of 28 nanometer chipsets. We accept expect this ramp, along with new devices launched for the holiday season, to result in a strong December quarter for our semiconductor business.

That supply is most likely to go into the iPhone 5.

Jacobs did add:

We are continuing to see strong demand for our new Snapdragon S4 and other 28 nanometer chipsets, and that demand continues to exceed our available supply. We will continue to ramp capacity in the upcoming quarters consistent with our prior expectations; however, the constraints on 28 nanometer supply by continuing to limit our potential revenue upside this fiscal year.

Qualcomm said it has contracted with multiple foundries for the September and December quarters. Jacobs added that it will be able to closely match supply and demand as it exits 2012.

Most analysts expect the iPhone 5 to launch in October. Apple isn’t saying much and won’t.

It’s also worth noting that Apple is the largest semiconductor buyer, according to IHS iSuppli. Apple in 2012 will buy $28 billion worth of chips, up from $24 billion in 2011. In other words, if someone is gobbling up all the 28nm chips in the supply chain it’s likely to be Apple, which has the clout to ensure it has components for the iPhone 5.

The most likely outcome: The iPhone 5 will launch in October, but supplies will be tight for a few months.

Article source: http://www.zdnet.com/apple-iphone-5-delay-chip-worries-surface-again-7000001648/