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Apple fails to excite

Analysts say tech giant Apple - once leading by head and shoulders - is losing its mystique and being left in the dust by emerging competitors.

Bonnie Tubbs
By Bonnie Tubbs, ITWeb telecoms editor.
Johannesburg, 11 Sept 2013
Apple's seventh-generation iPhone, the 5S, features a 64-bit "desktop grade" processor and fingerprint recognition.
Apple's seventh-generation iPhone, the 5S, features a 64-bit "desktop grade" processor and fingerprint recognition.

The long-awaited Apple event, at which the tech giant undraped two new smartphones - the seventh-generation iPhone and, as rumoured, a cheaper version of its iconic smartphone - has come and gone without much of the usual lingering hype.

Analysts and enthusiasts, who have watched the stocks and followed the rumour mill keenly in the build-up to last night's California event, have echoed the industry's earlier sentiment that Apple's iPhone is slowly losing its allure amid a highly competitive and innovative smartphone market.

Tech analyst Liron Segev says this is partly because Apple's security measures have seemingly slacked - leading to leaked pictures that removed the surprise element - and because the new handsets represent much of the same, with a different label.

"The big change is that there is just not that much hype around Apple's new releases anymore. Back in the day, people were sleeping in the streets and eyes were glued to screens watching the announcement, but people are rather unexcited now. Every rumour that was around before last night was confirmed - there is no mystique anymore."

Phone features

The iPhone 5S comes in gold, silver or "space grey" - a first for the traditionally monochrome devices Apple fans have come to know - and also stands out from its predecessors in that it features fingerprint technology and an A7 chip with a 64-bit "desktop class" processor. It will run on Apple's new iOS 7 - due to be released on 18 September.

The phone's "M7 Motion co-processor" chip tracks motion data continuously, without draining the battery too much, and the camera - an eight-megapixel iSight camera with True Tone flash - takes bursts of photos and chooses the best.

The iPhone 5C - positioned by Apple as "everything the iPhone 5 was and more" - comes in blue, green, pink, yellow and white, and will also run on Apple's "significantly improved" iOS 7.

The 5C is powered by an Apple A6 processor and features the iPhone 5's four-inch Retina display and eight-megapixel iSight camera. According to Apple, the 5C delivers very good battery life and comes with more long-term evolution (LTE) bands "than any other smartphone in the world". It also features a new FaceTime HD camera.

While local pricing and availability details have not yet been released, talk is that SA can expect to see the iPhone 5S, and its "cheaper" counterpart, the 5C, in December. The iPhone 5S starts at $199 (about R2 000 on a two-year contract) for the 16GB model, $299 for the 32GB model, and $399 for the 64GB model. The iPhone 5C 16GB model will cost $99, while the 32GB will go for $199, both on contract.

Evolutionary vs revolutionary

MD of World Wide Worx Arthur Goldstuck says, while for an iPhone loyal the latest version of the iPhone will always be the only option, the company will find itself losing out to other smartphone manufacturers who dare to do things differently - like Samsung, Huawei, HTC and, to an extent, Nokia.

"It is a surprise in itself that there were no surprises [with Apple's announcement]. People still expect a Steve Jobs 'one more thing' kind of announcement and that clearly went away with Steve Jobs."

Goldstuck says this highlights the extent to which Apple is no longer revolutionary as it was for the first decade of the century. "It is now in an evolutionary phase and this means companies with a revolutionary mindset will be able to leapfrog Apple."

"In terms of the new iPhone, the doubling of speed - while impressive - is by no means revolutionary."

He notes that what the market was in fact asking for - a bigger screen size - went unheeded. "Apple is sticking to its format despite the clear signal the market is sending, asking for a bigger screen. I suspect the company is happy with the sales they are getting, and convinced it still owns the market segment. Apple doesn't want to be seen to be responding to the rest of the market. The iPad Mini was perceived as Apple succumbing, and I think it is a bit of corporate ego that is holding the company back now."

The fact that the new iPhone was labelled the 5S - and not 6 - he says, was indicative that the format was going to remain the same, but if Apple wants to catch up with Samsung's lead, it may need to consider conceding to market demand.

'C' not for 'cheap'

While Apple lifting the lid on the iPhone 5C - the company's "emerging markets phone" - came as no surprise, analysts say the price positioning of the plastic smartphone did.

Apple's "cheaper" plastic iPhone, the 5C, has failed to impress as an emerging market device, due to its still high price point.
Apple's "cheaper" plastic iPhone, the 5C, has failed to impress as an emerging market device, due to its still high price point.

Segev says: "What was a surprise was that the 'cheap' iPhone isn't so cheap. Apple is trying to reach the mass market and released a phone that is in line with their usual handsets, but they can't make it too cheap otherwise they cheapen their product."

Goldstuck says the market was disappointed by the 5C, which will cost $549 without a contract - a price point that he says will translate into between R6 500 and R7 500 in SA.

"That is not an emerging market phone. Apple is competing with the likes of Nokia and Huawei in this mid-level range and will not be able to compete on price."

Pinned up against the Huawei Ascend P6 - a "high-powered, ultra-slim" smartphone for about R5 000 - Goldstuck says Apple will lose the battle. "Even the Nokia 520, at about R2 000, would be a more popular option."

As far as emerging market options go, he says, Huawei, Samsung and Nokia knock Apple off the podium. "Apple is not showing that it can lead the market anymore."

Having said that, Goldstuck adds the iPhone 5S will remain a "highly desirable" phone and the only option for iPhone loyals.

Segev notes that iOS 7 - the operating system the 5C will run on - is a big step up, with around 200 new improvements having been made.

IDC research analyst Joseph Hlongwane says he believes, despite the iPhone 5C being priced higher than other mid-level smartphones, "they will fly off the shelves in SA".

With the Apple brand being a strong one in SA and the iPhone one of the most aspirational handsets, says Hlongwane, South Africans who have previously been unable to afford the original iPhone will be willing to spend on a slightly cheaper model.

Premium departure

Reuters cites Shannon Cross of Cross Research as saying there may still be opportunity in emerging markets for the iPhone 5C - Apple's first ever departure from purely premium phones.

"It means Apple will hold on to margins but clearly they are not going after the very low end of the market, which will disappoint some investors," she says.

"This is their first foray into multiple colours and the plastic back. Keep in mind, by next year, they would have probably have discounted this down, so I think there's still opportunity."

Reuters adds: "Industry observers said Apple had not turned out a category defining electronic device since late co-founder Steve Jobs made a bet on the iPad in 2010. Speculation revolves around a smart watch along the same lines as Samsung's recently introduced Galaxy Gear, or some sort of TV product."

Jan Dawson of Ovum Research says: "Apple needs to demonstrate in the coming months that it has other product lines, which can start to make up for slowing growth and falling margins in [the] iPhone and iPad."

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