Tuesday, 10 September 2013

iPhone 5S / 5C: Winners and Losers from Apple's announcements today

Apple today announced not one but two new iPhone 5 devices (as pretty much everyone in the blogosphere had been anticipating given recent leaks).  Their basic strategy was to continue to improve on their existing line of high end, premium iPhone devices by introducing notable improvements in the 5S while also fending off low competition in the sub $100 part of the market from the likes of ZTE, Hauweii, Xiaomi and others who have recently been taking a noticeable amount of market share particularly in China.

Did they succeed?  who does this affect?

On the high end part of the market the 5S improvements are mostly on the inside.  The biggest improvement is the new Apple-built ARM A7 chip which they claim is 2x faster than the A6 chip present in the iPhone 5. There's also a 40% improvement in CPU speed but what really matters here is that this chip will allow 64-bit apps to run on the phone.  From a game developers perspective this has the potential to set a new standard in gaming as the live demo of Infinity Blade III showed today.  If you couple this with Apple's announcement of it's motion sensing M7 chip that sits along the A7 then not only are we talking about richer games but also about a whole new range of motion related possibilities that open themselves up for both gaming and fitness apps.

winners:  consumers, game developers, ad networks that help developers promote games
losers: traditional console OEM's (Microsoft, Sony, Nintendo) as these devices loose their performance / graphics edge; Android, Windows Phone, Blackberry (as developers continue to prioritize iOS first for games due to the perception of it being a better gaming platform)

Other improvements included a much better camera with Apple focusing on the "active sensor area" as opposed to the actual number of mega pixels present in each shot.  This is an interesting marketing ploy as they attempt to move the conversation away from the race for more Mega Pixels (which Nokia currently dominates with the Lumia 1020).  The risk though is that apart from camera aficionados, many consumers may simply not understand the jargon.

winners: consumers, possibly OEM's selling printers for consumers interested in printing their photos
losers: Nokia (since the main marketing message around the 1020 is its 41mp camera) if Apple is really able to communicate this in a consumer friendly, compelling way; traditional point-and-shoot cameras from the likes of Canon and others since the difference in resolution is becoming smaller and smaller.

One cool thing Apple introduced today was a Fingerprint ID which is now embedded into the Home button. This had been a bit anticipated since the release of iOS 7 but provides a nice extra level of security for consumers worried about having their phones stolen (my mother in law would really have appreciated this last week!).  The sensor basically scans your finger or thumb to provide heightened levels of security compared to 4 digit passwords or face recognition.  Though this seems like a gimic, it could actually prove pivotal if Apple goes down the route of pushing its own payments platform (it currently is one of the largest holders of credit card information globally through iTunes).

winners:  consumers, app developers, credit card companies (through reduced fraud)
losers: Should Apple couple this with some form of NFC at a later date, companies like Square could be in trouble.

Colors.  More colors!  Apple finally introduced new colors for the the iPhone. The iPhone 5S now comes in Gold, Black and Silver.  Though a minor change, clearly this allows consumers to have a slightly more personal style to their phones aside from cases (though I don't see the diamond-laden or Angry Birds cases going away anytime soon).

winners: consumers
losers:   OEM's offering multi-colored devices.  Nokia and HTC are the main ones that come to mind.  HTC just introduced the HTC One in blue while Nokia has touted its blue, red and yellow Lumias since launch. The shame here is really for Nokia since they were really never able to capitalize on this small design distinction in the US market. Other loosers could be the providers of personalized cases for Apple like Otterbox, Speck and others

Ok what about the "cheap" iPhone?

Yes, Apple introduced the 5C today.  I'm not going to go into the details of what the 5C is or it's specs.  The folks at Techcrunch have already done a great job of that and you can get the details here.  Suffice to say that at $99 on a two year contract (for the 16GB model) it will sway some users that have opted for new, cheaper Android devices in the past. However, sporting an 8mp camera, 16gb of storage, retina display and multiple colors using a plastic case, I'd say that they are targeting a young, sub 25 demographic not only in Asia but in South America and even in the US.  Though $99 Apple devices have existed for a while in the US this is really the latest tech targeting the youth demographic.  The strategy follows the same thinking they used to develop the iPod line of products and makes a lot of sense.  The only concern I see here is margins. If the 5C is a run away success it could cannibalize sales of the 5S or weaken carriers abilities to get rid of iPhone 4S stock (though this device will now be free on a 2 year contract).

winners:  sub 25 year old consumers, consumers in emerging markets, app developers (as this will broaden the IOS base)
losers: Hauwei, ZTE, Xiaomi and other Asian OEM's targeting the low end of the market; Android overall as the 5C may blunt Android's rise in emerging markets; Qualcom, Nvidia and other providers of chips for Android devices as iOS takes more market share.  The other big potential loser here could be Nokia if Apple is able to use the 5C to make inroads into India and South East Asia.  At this price point the 5C will definitively compete with Nokia's Asha line of devices.  Also Apple shareholders could be the losers here if the 5C margins are less than the 5S and end up cannibalizing it.

So that's a wrap for today!  I'm not going to cover Apple's software related announcements in this post. Plenty of other folks covered that.  A last parting note is that I didn't see any mention of NFC coming to Apple's latest devices which spells trouble for NFC in general.  This is a bit suprising to say the least but maybe the folks in Cupertino figure that sharing through Airplay between Apple devices is enough. Consumers really seem to be the losers on this one since sharing between iOS and other devices could be much easier than it currently is.

Mad Mork.