Apple has announced the iPhone 5. The device comes with noticeable improvements to the previous iPhone 4S, the most important being the screen size (now 4in.), the air interface (LTE support), and the camera improvements.
Apple continues to capitalize on the ecosystem that it has created and it is clear that it does not need to launch disruptive devices every single year. Apple already understands that the ecosystem and the experience are what consumers value and what drive loyalty.
What Apple has been doing over the last few years is to improve each hardware and software feature of the iPhone to offer the best experience possible, rather than packing the handset with features that consumers don’t use or don’t understand.
If Apple had decided to launch disruptive devices every year, that would create complexity and would annoy consumers, especially those who are less tech savvy — the majority of Apple users — who are not that keen to learn how to use a new device or completely different features all the time.
It is important that the iPhone catches up with its main competitors, however. A bigger screen, a better camera, LTE support, and a faster processor are fundamental improvements to the iPhone. The iPhone 4S and previous versions were losing their “coolness” compared with their main competitors from Samsung, HTC, and the new Windows Phones from Nokia.
Apple users may recognize the quality of the iOS operating system, but they don’t want to be left behind when they see their friends with devices that have better specs than the iPhone. That was the case in the last few quarters and one of the reasons why the Samsung Galaxy S III performed so well.
The improvements to the iPhone 5 give current iPhone users strong reasons to upgrade. For a new smartphone user it also closes the gap to the popular Android devices with bigger screens and high resolution displays. The devices continue to offer a unique premium feeling due to the design and materials, so I foresee a strong Christmas season for Apple.
But Apple still faces some challenges. The iPhone 5 does not come with any unique service or hardware features that are not available on the high-end Android devices. The experience and ecosystem may be better, but those who have moved from an iPhone to a competitor device in the past will not see a major reason to return to Apple because of this new device.
We will continue to see Samsung investing massively at the point of sale, with higher sales commissions, promotions, and campaigns, not to mention the price cut expected on the Galaxy S III and Galaxy S II. This new device will be a major competitor to BlackBerry and Windows Phones devices, but will not be able to surpass Android volumes driven by lower prices and hundreds of devices available on the market today. It will, however, allow Apple to grow market share again, from a declining trend in the last two quarters.