"At an unsubsidized cost of $549, the iPhone 5c remains at the same price point as the existing mid-range model in Apple’s smartphone line, the iPhone 4S"
El Segundo, Calif. (Sept. 10, 2013)—This is a News Flash from leading global source for critical information and insight IHS (NYSE: IHS) covering today’s iPhone announcements from Apple Inc.
Apple today unveiled two new iPhone models, the new flagship iPhone 5s and the lower-priced iPhone 5c, along with the improved iOS 7 mobile operating system.
“At an unsubsidized cost of $549, the iPhone 5c remains at the same price point as the existing mid-range model in Apple’s smartphone line, the iPhone 4S,” said Francis Sideco, director for consumer electronics and communications technologies at IHS. “In light of this pricing, the 5c appears to be a midrange product that cannot significantly expand the available market for the iPhone line to lower-income buyers. As a result, the arrival of the 5c will not spur a major increase in iPhone sales in the second half of 2013 compared to previous expectations.”
Based on an analysis of today’s announcement, IHS has chosen not to upgrade its forecast of overall Apple iPhone shipments in the second half. IHS at this time is maintaining its prediction of 86.1 million iPhone shipments in the second half, up 25 percent from 68.7 million in the first half and a 15 percent increase from 61.1 million in the first half of 2012.
“If Apple had hit a $350 to $400 unsubsidized price range for the iPhone 5c, as some had speculated, the company might have had a chance to expand its smartphone shipments beyond what we originally expected in the second half. Even at a subsidized price of $99 with a two-year contract, the 5c will not spur sales because it does not materially expand Apple’s addressable market past the level we had already taken into account.”
The attached figure presents the IHS history and forecast of global iPhone shipments.
Apple will ship 158.9 million iPhones for the entire year of 2013, compared to a forecast total for the smartphone market of 1.1 billion units.
One factor that could cause IHS to boost its 2013 iPhone forecast is if China Mobile decides to offer the iPhone 5c and iPhone 5s, both of which support the TD-LTE standard used by the Chinese state-run carrier. China Mobile has a vast mobile base of 710 million subscriptions, offering a massive growth opportunity for Apple.
While Apple did not address the low end of the market with its announcement today, the 5c represents a major departure from its previous product strategy, which could improve the company’s competitiveness.
“With the new models, Apple is taking steps to bolster its share of the global smartphone market in the face of rising competition,” said Ian Fogg, director for mobile and telecoms at IHS. “Alongside innovation with the iPhone design and features with iOS7, Apple is now also innovating at lower price points, too. The iPhone 5c is the first time Apple has built a fresh handset design for the midrange smartphone market segment. By using a visibly different design for the iPhone 5c, rather than repurposing an old flagship, Apple is minimizing the risk of cannibalization of its more expensive iPhone models.”
These new models and the improvements in the iOS7 software are critical for Apple because the iPhone is facing increased competition with Samsung, Sony, HTC and LG, which are all releasing strong smartphone flagships in 2013. Notably, Apple's portfolio lacks large-screen smartphone models with 5-inch 1080p displays.
But while other smartphone makers may have stereotyped Apple as a competitor only in the premium segment, Apple is choosing to take the battle to their home turf by expanding the aspirations of the new iPhone model. Now, new iPhone models will compete head-to-head with many more smartphone models from these rivals. Previously, competitors only encountered new iPhone opposition at the premium end of the market and competed with an older former flagship model in this segment.
The new security measures Apple is adding into iOS7 and the 5s will make the iPhone an even better platform for monetization. The fingerprint sensor on the new 5s helps make the iPhone a safer device for users to entrust with financial details as well as helping users to safely buy App Store apps. Apple is also making it harder for thieves to bypass “Find my iPhone” and “Remote wipe” because users now need an Apple ID and password to turn them off.
The iPhone 5c and Apple's new operator deal in Japan with market leader NTT DoCoMo slightly increases the addressable market for the iPhone. The iPhone 5c’s improved 4G LTE band support will also make it more attractive to European operators than the older iPhone 5, which supported only one European LTE band: 1800Mhz.
Alongside new iPhone models, Apple is also reimagining the experience for existing iPhone owners with iOS7. The new iPhone operating system significantly strengthens the appeal of the iPhone with many new features alongside the visual transformation. Most notable is improved location support with better local recommendations and a new highly organized notifications tray, better background app multitasking and sophisticated photo functionality. Importantly, iOS 7's new variable font size setting prepares the ground for future larger-screen iPhone models.
“The updates that Apple makes to its iPhone line are necessary for Apple's success in the mobile handset market in 2013, but they are not sufficient for the longer term,” Fogg warned. “Apple will need to innovate significantly in 2014 with both improved software and new iPhone hardware to counter the growing threat from Android smartphones and ensure that Apple's mobile success continues.”
IHS (NYSE: IHS) is the leading source of information, insight and analytics in critical areas that shape today's business landscape. Businesses and governments in more than 165 countries around the globe rely on the comprehensive content, expert independent analysis and flexible delivery methods of IHS to make high-impact decisions and develop strategies with speed and confidence. IHS has been in business since 1959 and became a publicly traded company on the New York Stock Exchange in 2005. Headquartered in Englewood, Colorado, USA, IHS is committed to sustainable, profitable growth and employs approximately 8,000 people in 31 countries around the world.