When Apple unveiled the iPhone 5s and 5c early this month, admittedly we hoped for something more than just a pimped out iPhone 5. No surprises, no new products (iWatch, anyone?) Apple has been using the same strategy for years. Every iPhone and iPad released is just a tweaked version of the old one, few features making the newest generation stand out from a completely saturated smartphone market. The only shocker from Apple’s iPhone launch event was the fact that the Cupertino company is finally broadening the price points for its flagship device, making it all the more accessible to the fastest-growing smartphone markets, namely China. But Apple’s chief has put his own spin on things, holding steady to Apple’s identity as a high-end retailer.
In a much publicized interview with Bloomberg, Apple CEO Tim Cook stated that “We never had an objective to sell a low-cost phone. Our primary objective is to sell a great phone and provide a great experience, and we figured out a way to do it at a lower cost.”
Cook out of touch with consumers?
People hoped that, since Apple hasn’t really delivered a fresh device in three years, it would slash the price of the iPhone, or at least offer something more affordable. But they didn’t. The iPhone 5c isn’t really much cheaper when you buy it off contract. I think Cook and his team have a very different perspective of what “lower cost” means from what consumers deem as “lower cost.”
The iPhone 5c is said to be directed at emerging markets such as China, where there is a significant growth in smartphone adoption. Now that sales have softened in the US and Europe, Apple’s extending its current marketing strategy to emerging markets instead of releasing a redesigned or completely new device.
China is the new US
As Apple initially teamed with AT&T to sell iPhones in the US market, Cook’s company has signed deals with China Unicom and China Telecom, and is pursuing China Mobile with its 700 million subscribers. It was reported that reserved orders for the two iPhones on Unicom has already surpassed 100,000, a strong indicator of how well iPhone sales could do overseas. The surging interest in emerging markets, now met with slightly lower price points and color options, is coupling the supply and demand that could revive Apple’s dropping stock.
Though this may appear to be a positive turn around for Apple in the Chinese market, the iPhone maker may not have it as easy as expected. China Telecom was reported to have cut back on subsidies, which means it is offering the two new iPhones at a higher price. Since the announcement of the two new iPhones, Apple’s shares have fallen 10 percent as investors start to doubt if the devices will be able to compete with the more innovative and reasonably priced local smartphones, particularly in China where rivals have had a head start.
Apple faces long-standing competition in China
Earlier this year, it was reported that Lenovo has a greater market share in China that Apple, and is just a bit behind Samsung. Lenovo has captured 14.8 percent of the smartphone market in China, which was 1.9 percent less than Samsung, but 6.9 percent more than Apple. Gartner stated that Lenovo has the potential to be the largest smartphone producer in China by the end of the year.
“It raises the question: Is Apple truly a mass-market provider?” says Benedict Evans of Enders Analysis. “Or do they wind up with 40 percent of the U.S. market, a third of Europe, and nothing anywhere else?”
The biggest thing Apple has got it going for its devices right now could be its aversion to fragmentation. As long as your device is compatible for an update, you can get the latest iOS version. But if your device is incompatible you have no choice but to buy the one of the most recent models. But Apple may not be able to depend on this strategy for much longer. Even if developers currently prefer developing apps for iOS, with higher returns and engagement, the fact that Android continues to grow means developers may soon shift primary efforts to Google’s OS.
“The truth about the mobile marketplace is that trends rise and fall far more violently than anyone ever expects,” says Tero Kuittinen, an analyst at Alekstra, a research firm. “At a certain point, growth becomes more important than absolute levels, so even if Apple is currently sending more money to developers than Android, if Android’s growth is faster than Apple’s, developers will bail and go to Google Play.”