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1/15/2013
09:09 AM
Eric Zeman
Eric Zeman
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Apple Needs More Than One iPhone To Compete

Apple needs to do better than one iPhone a year if it wants to maintain its position in the smartphone market.

Since its June 2007 launch, Apple has released one new iPhone each year. In the six years it has been around, there have been just six iPhones designed and produced by Apple. In the fast-paced and cut-throat smartphone market, this is no longer enough to compete.

By way of comparison, Samsung, Apple's largest rival, released more than 30 phones in the U.S. market during 2012 alone. Among other phone makers, LG released about 15 new phones, HTC released 11, Motorola released 10, Nokia released 9 and Sony released 5. These numbers reflect models only available in the U.S., and don't include what these manufacturers made available to other markets. No matter what market we're talking about, Apple still only has one new iPhone each year.

The iPhone has always been a high-end product. The original iPhone cost $599. It was not subsidized by AT&T. iPhone subsidies didn't arrive until 2008, when Apple dropped the initial cost of the iPhone to $199 thanks to some heavy financing on the part of AT&T. Most leading smartphones cost about $199, so Apple is competing on price. In fact, each year Apple drops the contract price of the previous year's model to just $99, and the two-years prior model to free. This lets Apple remain relevant across retail price points. That's all well and good, but it still isn't enough.

[ Are iPhone sales slowing down? Read Apple Cuts iPhone 5 Part Orders In Half. ]

Apple may still be selling tens of millions of iPhones per year, but its share in the smartphone market has already peaked and is starting to decline. The reason for this doesn't have anything to do with pricing and everything to do with choice.

For example, Apple is losing on screen size alone. The first five iPhones all had screens measuring 3.5 inches. The iPhone 5, released in September of last year, was the first iPhone to change that dimension. Apple enlarged the display to measure 4 inches. This new, larger screen is still well short of what today's leading Android devices offer.

There's one real reason for the iPhone's screen limitations (and Apple's i-device problems in general): Apple is afraid of ticking off app developers.

Every iPhone, iPod Touch and iPad's display has a calculated number of pixels and dimensions in order to make it as easy as possible for developers to adjust their apps for each different device. This is why the iPhone, iPhone 3G and iPhone 3GS had the exact same display. The iPhone 4 doubled the resolution, but kept the dimensions the same, and the iPhone 4S kept the same resolution as the iPhone 4.

While keeping the screens similar in dimensions and resolution makes it an easy sell to developers, it severely limits Apple's ability to compete with Samsung and other smartphone makers that offer screens ranging in size from 2.4 inches to 6.0 inches, with every resolution from VGA to full HD.

Android is inherently more flexible in this respect. Guess what? So is Windows Phone 8. With WP8, Microsoft gave developers at least three options when it comes to resolution (800 x 480, 1280 x 720, or 1280 x 768). What did Apple do to make things easier for developers when it came to the iPhone 5? It kept the width of the display the same (640 pixels) and increased only the height from 960 pixels to 1136 pixels. Developers only have to alter one dimension of their apps to make them work well with the iPhone 5. Again, Apple is afraid to tick off developers.

It's not just the screens.

If Apple truly wants to restore some of its market oomph, it has to start varying its product mix. It doesn't need to go overboard and design 30 new phones in a year, but three significantly different models would go a long way toward helping it compete. There's no reason why Apple can't offer a low-cost (relatively speaking) model, a mid-range model and a high-end model.

Former Apple CEO John Scully thinks this is the way to go, too. "Apple needs to adapt to a very different world," said Sculley in an interview with the Washington Post. "As we go from $500 smartphones to even as low, for some companies, as $100 for a smartphone, you've got to dramatically rethink the supply chain and how you can make these products and do it profitably."

Apple is at a crossroads. It is fully in Tim Cook's hands now. The ghosts of Steve Jobs will linger only so long. The company's stock price has dropped by nearly $200 in the last three months. With its smartphone (and tablet) market share eroding, it has to look at ways to reverse those trends. The writing is on the wall. Will Apple read it? Can it even see the writing?

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Jonathan_Camhi
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Jonathan_Camhi,
User Rank: Apprentice
1/17/2013 | 7:27:00 PM
re: Apple Needs More Than One iPhone To Compete
I was working and traveling in India in 2011 and no one there could afford an iPhone. They were several times the price they were here. Surprisingly everyone there was still using Blackberries and Android hadn't really caught on at all. I don't know how much has changed since then but the iPhone simply had no presence in India anywhere I went.

ThePrisoner6
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ThePrisoner6,
User Rank: Apprentice
1/16/2013 | 5:05:23 PM
re: Apple Needs More Than One iPhone To Compete
Michael, I agree with you. I have family in Brazil. Everyone wants an iPhone there but nobody can afford one. It might behoove Apple to release a slightly updated version of the 3Gs to complete their lineup, especially in emerging markets. The people I know who own iPhones in Brazil purchased them unlocked on Amazon or Ebay and payed for the shipping to Brazil, because the cost of an iPhone in Brazil is 4-5 times the price of one here. A 3Gs still runs ok (a little slow, but not too bad) with iOS6, but no telling for how long. Keeping a low-end version around in the US may dilute sales of the flagship i5, however. It would have to be different enough to merit the price differential.
ePractical
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ePractical,
User Rank: Apprentice
1/16/2013 | 4:52:36 PM
re: Apple Needs More Than One iPhone To Compete
Related - You might also want to consider your supporting a company that has yet to focus it massive wealth on helping our country be more productive (and help people get back to needed work).

Oh I love what Apple does for pushing the stogy PC industry to innovate; the marvelous "i" device that enhance our experience of consuming mostly (watching, reading, etc) content. But Jobs specifically refused to engage Business IT and refused to include pen or fine digitization and therefore Apple has no focus on making devices for productivity. No surprise they have negligible Business marketshare. If they don't fix this I believe it will be their downfall over time.

Lastly, another very concerning focus is Apple's focus on corralling the availability of content and other behavior counter to our interests for an expanding communications networks and innovation in usefulness of technology. Just look into their activity, licensing of IP, unreasonable litigiousness, and corralling content - this IS NOT in your and my interest - see The Master Switch.
ePractical
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ePractical,
User Rank: Apprentice
1/16/2013 | 4:36:23 PM
re: Apple Needs More Than One iPhone To Compete
We are a family with equal distribution of iPhones and Androids. The battery life when using BOTH are terrible. But the iPhones are always running out when needed or forever waiting for a charge. Gd forbid they forget to charge overnight.
The Samsungs each have one extra battery $19 and never run out.

Actually i products are regularly more than twice the price. We just upgraded one 4 to a 5. The 4 WAS twice the price with the same storage. The 5 was $500 WITH the provider discount (the base model was $199). My Galaxy was $199 plus $12 micro SD to match the 5s storage. And I haven't "needed" to upgrade to the Galaxy III so I've saved 3x.
j5thwheel
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j5thwheel,
User Rank: Apprentice
1/16/2013 | 4:17:08 PM
re: Apple Needs More Than One iPhone To Compete
3 months ago, I replaced my Motorola/Android phone with an iPhone5. I love it! I especially like Apple's attention to detail. I also like NOT having to restart it once or twice a day in order to reliably make/receive calls. I can't think of any feature of the iPhone5 that doesn't work better than the Mot. My wife and daughter also have iphone5s now and we message sending pictures usually several times a day. We use facetime. We use Find Friends. We love the iPhones and would not downgrade to Android now. Every night we I put the phone on the charger, it shows around 60% left. The Mot quite often would go dead mid evening. We love our iPhone5s!
Nathan Golia
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Nathan Golia,
User Rank: Apprentice
1/16/2013 | 4:07:09 PM
re: Apple Needs More Than One iPhone To Compete
In my view, it seems there's really only a new phone every two years anyway. The feature upgrades from year-to-year usually don't leave me longing for the new phone.

Nathan Golia
Insurance & Technology
Michael Endler
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Michael Endler,
User Rank: Author
1/16/2013 | 3:19:20 PM
re: Apple Needs More Than One iPhone To Compete
I prefer the iPhone to alternatives but I still think Apple might benefit from a cheaper model aimed at emerging markets, where there's the most potential for growth and where iOS has been relatively less successful. That's not to dismiss the significance of iOS's shrinking domestic market share--but when I think about how cheaper phones could help, I think more about the international scene than I do North America.
Stephane Parent
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Stephane Parent,
User Rank: Strategist
1/16/2013 | 2:05:40 AM
re: Apple Needs More Than One iPhone To Compete
I agree. Scully should stick to soft drinks.
GAProgrammer
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GAProgrammer,
User Rank: Strategist
1/15/2013 | 8:57:50 PM
re: Apple Needs More Than One iPhone To Compete
I'll have to disagree - they will not always have more apps. Who wants to design apps for 14% of the marketplace? There's a reason software developers rarely make OSx ports - the market is too small.

I have some iDevices of my own, but I won't buy any more. They are overpriced and overhyped. iOS had a great usability lead at first, but just like their hardware, they have become outdated. Android is almost as easy to use for novices as iOS is. Once they are close to the same, most people will start to re-evaluate why they are paying 2x for a phone that does half as much.
ThePrisoner6
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ThePrisoner6,
User Rank: Apprentice
1/15/2013 | 8:28:38 PM
re: Apple Needs More Than One iPhone To Compete
It could be argued that all of these new devices coming from other manufacturers are simply attempts to slap a new face on the same product. I grow weary of the ads touting new features that are only incrementally newer than the old ones from 2 months ago. I'm not abandoning a 2-year contract to get an upgrade without a darn good reason. If Apple came out with a new phone every 2 years it would suit me just fine.

I just gave my old 3GS to my brother in-law when I upgraded to the 5. After wiping it clean and re-loading the OS, it was like a new phone. He was happy, a 2-year-old phone got a new lease on life, and I was able to pass it on with a clean conscience, that it didn't end up in a landfill.

I'm not saying Apple is the greatest, or that they do everything perfectly - I know of no company that does. In this particular case, however, Apple doesn't need to compete with anyone else to earn my business. I have been pleased, for the most part, with their product, and I have no interest in jumping from one product to another just because it's "new". Sure, there are things they could do to refine it, such as a removable battery and maybe a memory slot, but even if they came out with 12 different models in a year, I would still only just buy one. Call me old-fashioned, but in this world where everything must be "NEW!", I find the almost-new to be just as good in most cases.

When you consider how much it costs to develop a new product, coupled with the high cost of marketing that product to garner consumer attention, I would guess that Apple is saving millions for every new product they are not bringing to market. The bean counter in me says they would be wise to redirect that money to other, more important things, like R&D for products nobody has ever seen before, and I would personally prefer they did that than waste their time and mine on another copycat product that I'm not going to buy anyway.
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