Apple needs to bring innovative iPhone 5 to succeed

Telecom Lead America: Apple launched the original iPhone back in 2007 and redefined the very face of mobility devices. Armed with visionary innovation not only on the hardware front but also in enriching the overall user experience, it single-handedly diminished the growth of corporate giants like Research in Motion and Nokia.

Over the years, competing platforms such as Android and Windows Phone have caught up with the features offered on the iOS platform, and have forged ahead in certain areas such as NFC communications based Google wallet, and wireless charging from Nokia. Currently, Android dominates the global smartphone market and Samsung has overtaken Apple to become the top global smartphone vendor. With the launch of the latest iPhone, Apple intends to reverse the tide and re-emerge as the global smartphone leader.

The new iPhone is expected to have a larger screen, support NFC, faster processor, better camera and a smaller dock connector, which is expected to extend to all the forthcoming iOS devices, amongst many other revolutionary features. Add-ons services that provide a unique value proposition to the Apple ecosystem similar to the Siri launch with the iPhone 4S can also be expected.

Apple’s major product in terms of revenue is still the iPhone. When the iPhone 4S was launched instead of the iPhone 5 the last time around, there was some disappointment in the fan-base. This didn’t however stop the record sales frenzy of the iPhone 4S, and we can expect a higher initial sales launch upwards of 1.5 to 2 million in the first 24 hours, compared to 1 million for the 4S in the same time frame. This is expected due to the anticipation that has built up over the last year by die-hard Apple fans, as well as due to a major shift in the platform and the new features it will tout.

Competitors such as Microsoft, Nokia, Motorola have tried to steal the limelight by launching new products in the weeks before Apple’s launch, but this is expected to be ineffective on the main demographic that are waiting for Apple products.

While some may argue Apple has not really invented anything, it certainly has refined the experience of using mobile hardware and software and learnt from the mistakes of other manufacturers and for this it needs to be applauded.

No one can deny that Apple is the only smartphone vendor whose focus transcends beyond the hardware feature set to creating the overall ecosystem. By creating a formidable ecosystem with an abundance of content, services and applications, Apple has won over millions of end users, who just have to have the next Apple product. However, other vendors are also now building their own ecosystem. Proliferation of android apps and emergence of Google Play app storefront threatens to slow down the growth of Apple.

The market for smartphones has changed from being a device driven market to an application and services driven market, with smartphones being the primary platform to carry proprietary services/applications, with a slightly lesser but increasingly important focus on tablet devices.

Several trends are pointing to this trend, with major platform vendors Microsoft and Google gearing towards gaining more control of their platforms through a strong partnership with Nokia, and the acquisition of Motorola respectively, and launch of similar and competing services on content application services such as music, movies, ebooks, and others.

This points to a market segmentation where we will have two primary types of players – those that are relying mostly on device sales for revenue, and those that are using device sales as a driver for applications and services. While all players in the market will hope to move to the latter category, Apple as well as other competitors such as Google and Amazon are already there, Samsung is still largely relying on hardware sales.

Over the long term, this may reduce profits for Samsung as devices becomes commodities and the value of a pure-play hardware strategy yields lower revenue. The litigation game to increase market share quicker is unfortunately expected to continue, which is a sign of how competitive the market has become. This is not a very positive trend for consumers as it does limit choice.

The larger threat in the long term, besides Google, is Amazon on the applications services side of things. Amazon already has a huge amount of e-content in the form of ebooks, music and movies. The launch of the Kindle Fire catapulted Amazon as the 4th player (besides Apple, Google and Microsoft) as a platform owner, and this has just received a major boost with the launch of the Kindle Fire HD.

Depending on how far Amazon wants to take the platform strategy in its search for platform control and profits, we may even see a smartphone from Amazon in the near future as it is the single largest point of content consumption. Microsoft is expected to ramp up its service portfolio once its Windows 8 platform launches, and may be a very powerful contender in the consumer as well as enterprise side.

In the long term, each competitor is competing for the total user base, and this competition is only expected to increase as revenues from application services become ever important.

A lot is riding on the success of the latest iPhone, and there’s no doubt that the new iPhone will indeed be successful. However, the degree of success depends on the uptake of the product much beyond the realms of Apple fans. The ban of Samsung products might be a shot-in-the-arm for the Cupertino headquartered company but the real success depends on the new iPhone being revolutionary rather than simply evolutionary.

By Frost & Sullivan Asia Pacific
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