Sunday, August 19, 2012

iPhone 5 Must Have a Huge Launch to Stay Ahead of Rivals

By: Wayne Rash

NEWS ANALYSIS: Market Analysts are predicting vast numbers of iPhone 5 handsets will be in Apple’s inventory for its product launch. Apple is going to need a big launch of an iPhone that has been significantly updated to fend off the rising competition.

The latest predictions are that Apple’s September 12 launch of the iPhone 5 will be the biggest in history, at least according to Peter Misek from Jefferies research. The firm is predicting that Apple will have about 15 million iPhone 5 devices in inventory by mid-September, enough to satisfy at least the initial demand.

The company also noted that more than 600 million smartphone users will be coming out of their contracts by the end of 2013 and that a generous share of those will want iPhones.

There is almost certainly pent-up demand for the new iPhone. In fact, the advent of the iPhone is being blamed for a fall in smartphone sales in the second quarter of 2012. According to a Gartner study, smartphone sales globally were off 2.3 percent during that quarter. While the weak European and Asian economy likely played a part in that slump, Gartner said that users were also postponing upgrades so they could buy the new iPhone 5 when it comes out.

In fact, Apple badly needs the iPhone 5 to sell like hotcakes. Right now the Samsung Galaxy S 3 is eating Apple’s lunch and that’s become a significant problem for Apple as iPhone sales slow. Samsung is using the lull to push its Android phones.

But the only way for Apple to sell as many iPhone 5 devices as it hopes to is to make it really compelling, and that means really refreshing the iPhone, not just coming out with yet another minor update as has been the case in the past. Let’s face it, all that Apple has done so far during the life of the iPhone is release small incremental upgrades. Last year’s iPhone 4S wasn’t all that different from the previous iPhone 4, for example.

The lack of a major step forward is going to be a problem for Apple unless the iPhone 5 has the technology and ease of use of its Android and Windows competitors. The screen size is a good example. The iPhone 4S has a screen that has a very high resolution display, but it’s smaller than the Android phones with which it competes. It’s smaller than the screen on the latest Nokia Windows Phone devices.

Fortunately, it appears that Apple has tried to remedy this problem by adopting a screen with a 16:9 aspect ratio, which is the same shape as the screen on your HDTV or on your widescreen laptop. But will it be larger in any dimension other than width? That’s not clear.

Larger screens are a fact of life. As phones are designed to consume more and more Web content, display videos, act as e-readers and otherwise perform more screen-intensive tasks, most people need (or at least want) a larger screen. So far, Apple hasn’t delivered.

Likewise, Apple needs to support current communications technology. That means supporting HSPA+ at high speeds, having WiFi connectivity at least as good as phones from Samsung and most of all, supporting LTE. As carriers abandon 2G, the iPhone needs to be fully functional on 3G and 4G, with 4G rapidly becoming a must.

Of course, the necessity to support LTE helps explain why the iPhone 5 will be a larger device than the iPhone 4S. It needs room for the LTE radios and for the additional antennas. Of course, there needs to be a way to provide enough power to run a larger Retina display as well as the LTE radios through a typical work day. That means larger batteries.

So that’s what to expect when Tim Cook rolls out the iPhone 5 (assuming they call it that, and not something dumb like the “New iPhone.”) You’ll see a larger phone with a bigger, clearer screen, support for LTE and some other new features. It’s possible, for example that the new iPhone will have a fingerprint reader built into the Home button, something that will help secure the new Passbook app where security would be a must. Such a feature would also help combat a rising form of crime in which people are being killed for their iPhones.

Yes, that’s correct. People have been brutally murdered by crooks who want their iPhones in New York, Los Angeles, Washington, DC and London. Perhaps if the crooks knew that the phone couldn’t be used afterwards, the temptation to steal iPhones would be reduced.

You may also find that when the iPhone 5 is released that Apple abandons its carrier-specific deals. Right now this keeping many carries, such as T-Mobile in the U.S., from selling iPhones to their customers. The only way around this is to buy an unlocked iPhone that works on GSM networks. If your CDMA carrier doesn’t sell iPhones, you’re out of luck.

But while all of these features and market practices may make sense, will we see any of them? The larger form factor is a pretty safe bet. The LTE support is likely and the larger battery is also likely. But otherwise it depends on just how badly Apple wants to innovate and that’s up to Tim Cook.

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