Why Apple Lacks Big Bang (DESPITE U2, Phablet + Watch)
Launching two iPhone 6’s – 4.7″ and 5.5″ ‘Plus’ phablet style, a new Watch, Apple is trying to stay in the game which has seen the smartphone screen increase in size thanks to HTC, Samsung and Moto designs.
Ian Fogg, analyst at IHS, says the new iPhone 6’s will expand Apple’s reach as it looks to grow its customer base. But it wont be enough to beat Samsung, as the world biggest phone maker.
However, it may shove Microsoft-owned Nokia out of the No. 2 spot, he says.
Apple billed the new devices as “the biggest advancements in iPhone history”. It also unveiled a new mobile wallet, Apple Pay, teaming up with majors including Target, Subway, Nike Stores, Apple Stores, Macy’s, Bloomingdales.
Its even flogging U2’s latest album, Songs of Innocence for free on iTunes, which hints a company no longer sure it has the market to itself.
But it certainly not the biggest advancement in smartphone history, either. Competitors have pipped it to the post in terms of larger phone screens (Samsung, HTC, Sony), NFC payments and smartwatches (released by all of the aforementioned plus a lot more).
Apple shares fell by 0.13% to $97.86 in after hours trading in the Nasdaq, a far cry from the days when shares were worth $500 plus.
Several analysts say Apple is not longer the smartphone leader, so was forced to increase screen size to fight off competition from Samsung Galaxy Note, S5, Sony Xperia and other larger phablet sized smarties on the Android platform.
But in usual Apple style, the new iPhone 6’s are far from cheap.
Outright, it cost s $869 for 4.7′ model and the cheapest iPhone 6 Plus starts at $999 and will go on sale in Australia on September 19. The Watch will be out in 2015.
The new devices will no doubt help Cupertino acquire new customers, raising the competitive threat to rivals with a stronger portfolio. The more new customers Apple can win with iPhone 6, the greater the chance Watch and Pay will have, says Fogg.
However, some analysts believe Apple are running out of ideas and the launch lacked the big bang, never-been-seen-before product, needed to keep its rep as master innovator.
“Although many millions of customers are anxious to upgrade to the iPhone 6, there are likely many millions of others that believe that their current smartphone remains good enough,” says Brian Colello, analyst at Morningstar told MarketWatch.
“Apple will continually have to not only fend off competition, but add enough new hardware, software and service features to encourage existing customers to upgrade over time.”
There’s no doubt the addressable market for Apple Watch will be tied to the installed base of iPhones.
While Apple has shipped 551 million iPhones cumulatively, the global installed base will be less than 400 million at the end of 2014, notes Fogg.
Only half, or just over 200 million, will have an iPhone 5 or newer. But Apple now has a large enough base to target only iOS users with its new Watch.
IHS forecasts Apple will overtake Microsoft-owner of Nokia devices-will ship the second largest number of mobile handsets in 2014 after Samsung. This includes mobile handsets, not just smartphones.
By continuing to sell both the cheaper iPhone 5C and 5S, the giant is increasing the number of segments it is able to address.
Apple aims to reset the wearable market and make 2014 year zero for wearables, launching a rival product to Samsung Galaxy Gear’s Neo and Neo 2, the best selling smartwatches, to date.
Fitness bands like Jawbone Up have been more popular, but analyst predict this will change. However, moving into a new category is “bold, expensive and risky” for Apple say Fogg.
“Apple rarely invents new markets, despite its reputation. ”
But when it launches a new product, it attempts to redefine the market – just look at iPhone, iPad and iPod.
“Current wearable makers must raise their game to respond to Apple,” he warns although the release may create a ‘halo’ effect around other already available watches.
Analysts Mason anticipates smartwatches will become the dominant wearable device by early 2017, following Apple’s entry.
There’s no doubt Apple will drive this market.
By 2020the smartwatch market may be worth USD12.9 billion, annually for developed markets, with an installed base of 92.6 million devices.