Last week I discussed the new Apple Watch. Now lets do the iPhone 6 models. Once the iPhone was exceptional and magical. In the first three years of its life, the iPhone gobbled up market share globally and ran from nowhere to 16% market share of all smartphones sold globally for full year 2010. That was the most amazing launch of any smartphone brand ever before or since (did you notice how Amazon's Fire is not on fire at all). But then it stalled. Apple's individual quarterly market share might jump even over 20% but where is Apple now? Its market share has stalled. Apple's market share was down to 15.5% last year and this year is on track to be down to around 14%. Yes as the global smartphone market keeps growing at massive rates (25% growth this year) Apple also can keep reporting growing unit sales and growing revenues, but the iPhone market share has been falling and at some point the relevance of that issue will come home. Apple is growing unit sales yes but Apple cannot even close enough sales to keep up with the global growth rate. Apple is losing the war while winning some meaningless battles and celebrating those while ignoring the big picture.
Now that being said, Apple doesn't need to be market share winner. When it last tried that (in the PC/Mac wars of the 1990s) Apple went to the brink of bankruptcy. After Steve Jobs came back, Apple learned that they must abandon market share focus and rather serve high-end niche markets. Apple cannot win the global hardware races competiting against low-cost providers. And as I've been saying ever since the original iPhone appeared in 2007, as the low game plays out, Apple will end up with high single-digit market share out of the smartphone market when all phones sold are smartphones (this will happen by 2019 and possibly even earlier). Apple's market share of all phones sold today? 8%. I rest my case.
Some analysts look at the US market, see that the iPhone is the bestselling phone and iOS has market share well into the 30 percent range, and think this is the future. Those are clueless analysts who don't understand mobile. China alone as a market for smartphones is now twice the size of the USA. The US market is literally the laggard market out of the Industrialized World (rich world, 'first world' or 'Western World'). So you are excited about mobile payments on NFC now that Apple finally has bothered to give us. Whoop-te-doo. When did Nokia offer us NFC on its flagships? Four years ago! And that was on Nokia's OS platforms including that supposedly obsolete Symbian! Apple's wonderful money/wallet system? Yeah, Nokia had Nokia Money not announced but in commercial production in India for example (the world's second largest country and the country with the largest unbanked population) where Nokia Money had 13% market share (before idiot Elop killed the project because his favorite Windows Phone could not support NFC at the time). The old joke still holds true to this day, even after Nokia's handset business has ended, that to see what will be in the next iPhone, look at an old Nokia flagship from some years ago. True. Absolutely factually true. And yet obviously those old Nokias were 'not worthwhile smartphones' and 'only Apple invents anything in this industry' haha. American 'analysts' haha.
Incidentially NFC and mobile wallets was not of course a Nokia invention. It was, as is just about everything in our industry, first done in... Japan. When? NTT DoCoMo (a reference customer of mine by the way) introduced FeliCa into limited use in Japan in 2004 !!! Yes ten years ago. Ten YEARS ago. Don't tell me the USA knows anything about leadership in 'mobile'. South Korea has had for example Hana SK mobile payments on NFC for this whole decade (SK Telecom is also a reference customer of mine). And for Americans really to weep, we don't need NFC to do mobile payments. Look at Starbucks (15% of its total USA revenues come from mobile payments in less than 2 years from launch, powered primarily by a simpler technology called QR code). Or look at another US tech darling, Square. They added SMS payments just now a couple of weeks ago. Yes, SMS payments. Where have I heard that before? Coca Cola (another US giant) launched mobile paymenets on SMS when and where? 17 YEARS ago in Finland enabling some vending machines to accept SMS payments. How is that doing today? Latest stats by BookIt say 69% of total Finnish population use mobile payments in anything from paying for yes vending machines to train tickets to fast food restaurant bills. The USA leads, hahahaha. Look at Kenya. Kenya as in 'Obama born in Kenya that Kenya. Literally in middle of Africa, the poorest continent. M-Pesa launched in Kenya six years ago by Safaricom (ie Vodacom Group, another reference customer of mine) and today 51% fo the total Kenya GDP runs through a mobile phone. The rest of Africa is following in close synch based on when they did their first mobile payments launch. Zimbabwe is at 43% of its total GDP already transiting a moblie payment system. Apple. You are 10 years behind Japan and 6 years behind Kenya! Thanks for finally bothering to give us mobile payments finally!
No, what happens in mobile in the USA is not about to be copied in the rest of the world. It is totally consistently true, that everything that happens in Japan, will be copied in the rest of the world. Once again, we see it with Apple and the latest iPhone. So what Americans should prepare for, is that the US market will become more like the rest of the world where 96% of the planet's population lives. And even that last vestige of the argument 'but our economy is the biggest therefore USA rules' is now coming to an end, as the Economist said, by the end of this year 2014, China's economy will become larger than that of the USA. Why did Apple released phablet-sized phone screens? Americans are not driving that shift. It was China. Kantar reported that in March 2014, already 40% of smartphones sold in China had screen sizes of 5 inches or larger, ie 'phablet' size. No my dear American readers, Apple is not reacting to US market needs. USA market is not a leader by any definition in the mobile industry. Apple is reacting to what is happening in China, the world's largest smartphone market, and righthly so.
iPHONE 6 MODELS
So yes, its large screen models this time. Lets see whats now and how. Two new models still released in unison (this is again a stupid idea that Apple keeps doing, why? It would be better served splitting the release times, release one of the year's new iPhone models in the Spring, the other in the Autumn. That way Apple would catch more of the customers in the wild whose contracts end at any of the 12 months. As we know, Apple's current iPhone sales pattern is highly cyclical, a big peak in September-October and then dwindling down to very low levels by August). But now its beyond any doubt, that I was correct when I said that Apple had to split its product line. There were so many Apple fanatics here on this blog who argued that one model per year was enough and Apple would never split its product line. Whose still blogging today haha?
So lets see what the iPhone 6 models look like. These are the main specs:
MAIN FEATURES . . . iPHONE 6 . . . . . . iPHONE 6 PLUS
Screen size . . . . . . . . 4.7 inch . . . . . . . 5.5 inch
Resolution . . . . . . . . . 1334 x 740 . . . . . 1920 x 1080
Main camera . . . . . . . 8 megapixel . . . . 8 megapixel
Image stabilization . . . no . . . . . . . . . . . yes
Flash . . . . . . . . . . . .. LED . . . . . . . . . . LED
Selfie camera . . . . . . . 1.2 megapixel . . .1.2 megapixel
NFC . . . . . . . . . . . . . yes . . . . . . . . . . yes
Waterproof . . . . . . . . . no . . . . . . . . .. . no
MicroSD support . . . . no . . . . . . . . . . . no
Removable battery . . . no . . . . . . . . . . . no
Fingerprint ID . . . . . . . yes . . . . . . . . . . yes
Wireless charging . . . . no . . . . . . . . . . no
Dual SIM slots . . . . . . no . . . . . . . . . . . no
Price without contract . $649 . . . . . . . . . $749
Those are quite expensive smartphones with no spectacular specs. Even the iPhone 6 Plus screen size is barely larger than the original Samsung Galaxy Note from three years ago (which had a 5.3 inch screen size). And it is already at design worse than the current screen-boss, Galaxy Note 3, which has a 5.7 inch screen and Samsung is just scheduled to give us the next edition the Galaxy Note 4. Apple enters the screen races with two 'large screen iPhones' where its biggest screen cannot match the top dog of the industry. This is Apple's best moment in the screen races and it starts off this badly. In the next 12 months it will only fall further behind as every rival is eager to prove they can give a bigger screen than the iPhone.
Yes, obviously Apple fans have been dying for larger screens than the past iPhones, so of course the early sales are very strong - those are existing iPhone buyers who would buy the next iPhone almost whatever it was. But on its 'party piece' the screen size, even the 6 Plus fails to match the competition. And it will only get wose from here in the coming months as each next flagship from LG, HTC, Lenovo, Xiaomi etc can easily do a 'larger than 5.5 inch' screen and put the iPhone to shame.
Which brings us toe the biggest disappointment of the new iPhone 6 models. The camera! Come on! Nokia gave us an 8 megapixel smartphone five YEARS ago. Top 'normal' flagship smartphones run 20 mp cameras today like the Xperia Z3. Thats before we consider the monster cameras like Microsoft-Nokia Lumia 1020 with its 41mp camera. Even Apple itself upgraded its camera to 8mp three YEARS ago. Come on, selling an 8mp camera in 2015 on a 'flagship' is pretty pathetic. And thats before we look at the Selfie Cam. The inward-facing second camera (again something Apple resisted in early iPhones and only gave us from 2010. And yes, haha, Nokia smartphones had second cameras from 2005. I argued on this blog for years that Apple had to do it and Apple fanboys said it would never happen and called me a fool. What do I know about this industry? Whose blogging now). Apple should have taken the opportunity here to up the camera to at least something like 16mp if not 20mp. And the seflie cam by now on a flagship should be 2mp at least. Again, before you argue - what is the point of the seflie? Not my own face in a picture. Its the context of the selfie - where was it, who was also in it. That is why you want a good resolution seflie cam, so we can see where that picture was taken. It needs to be better than this! On a flaghip! On a smartphone sold in 2015!
NFC is another me-too that others have done years ago. The iPhone 6 models did not give us wireless charging of waterproofing or any other leading edge tech. So this becomes a very pedestrian flagship already at launch, well before the rivals react. And Apple continues to annoy its users refusing to give common features like microSD storage cards or removable batteries or built-in FM radio etc. (BTW as you American readers laugh, because your homes and cars are all inundated by FM radios and you couldn't care less to have that on a phone, that is not the same for the rest of the world. I just saw fresh South Africa mobile users stats by the MMA and AMPS 2013 survey, that 42% of South African mobile phone owners listen to FM radio on their phones (and South African mobile phone penetration passed 100% per capita two years before the USA, so before you start to laugh). That may explain why Apple only has 0.7% market share out of South Africa. And it was these kind of bad design decisions that doomed the Nokia Lumia launch under Stephen Elop when he designed the Lumia series to appeal to US consumers (haha, see how that went) but going against the needs of where most phones were sold. Ask Chinese consumers if they listen to FM radio on their phones. Wanna go check out specs for Lenovo's flagships? They have FM radio. As does Huawei. As does ZTE. As does Coolpad. And as does the latest tech darling out of China, Xiaomi. This is a no-brainer but Apple again leaves out vital parts that are necessary to the rest of the world, while fixating only on what the cool kids in Cupertino think their phone should have. The iPhone 6 was designed only for those few who live on that trivial slab of land in Siliconia while spitting in the face of most mobile phone buyers globally.
In 2009 Apple sold more than three times as many smartphones as Samsung. Today Samsung sells twice the number of smartphones as Apple. What happened? Samsung diversified and spread its product range to cover all major segments out there. Did you know there is a Galaxy serving the Blackberry style QWERTY segment? Yes they sell the Galaxy M Pro which looks like a Blackberry. Samsung has the Galaxy Note 4 if you want a large screen. If you want the best camera ever in a phone, the Galaxy K Zoom is now the top dog on the phoneshooters (20mp camera and 10x optical zoom ie real zoom rather than pixelation magic, plus Xenon ie real flash). If you like the metal frame of the iPhone, now there is a Galaxy in that style, the Alpha (with specs and size matching almost perfectly the iPhone 6). The flagship Galaxy S5 is waterproof. Then there are the low-cost Galaxies all the way down to Samsung Galaxy Y a smartphone roughly with specs similar to original iPhone 2G (2mp camera etc). You can buy one for 81 US dollars without contract - new model - in India today (at INR 4,995). This is how the market leader works, they expand their product line and reach more customers, with products targeted at different segments.
Again for American readers, you may think 'but my iPhone only costs 199 dollars or 299 dollars'. No it doesn't. That is marketing bullshit. The real price of the iPhone 6 is 649 dollars (iPhone 6 Plus 749 dollars) for the base model (even more if you buy it with more inbuilt memory). What the carriers/operators do in the USA, is force you to sign a 2 year contract and force you to take a 24 month payment plan for that gadget - and they charge you interest on it too. The real price without contract is what most countries have - like for example in Italy and South Korea - and even most of those countries where handset subsidies are still used, will let you pick the option to buy so if you prefer to pay upfront the full price you then get cheaper minutes on you contract (like in the UK). And the subsidies are gradually being phased out globally, the latest country to make a move to reduce the amount of handset subsidies was China earlier this year. I am not talking about fake issues here on this blog, or marketing propaganda. The real price of the iPhone 6 is 649 dollars and the iPhone 6 Plus is 749 dollars. That is for example what they pay in Belgium or in South Africa where I just was. And when the consumer sees the real price they are forced to pay (whether upfront or in a payments-plan 24 month contract), the comparison becomes far more 'real'.
I should again mention that I argued this path for the product split on the new flagship before the model line was split (iPhone 5S and 5C). I said that because of Apple's strong loyalty they should go up-market in price for the top model and pursue far more expensive price points. The iPhoen 6 Plus starting at 750 US dollars is the right step for that. But I also said they have to do their mass-market phone at a lower price point than where they were. That was the fault with the colorful 5C models they were too similar to the flagship 5S and the price was not different enough. Apple haven't learned that marketing lesson yet that every carmaker for example knows. The Mercedes S Class is the flagship and people buy cheaper Benzes. Same for BMW 7 series or Audi S8. But yeah, Apple continues to do it the dumb way, trying every costly alternative before doing what every marketing book says is the logical thing. Sure, go ahead. But if its not with the 6 model range, soon in the next model range there will be lower-cost new iPhones more around 500 US dollars than 650 dollars. (And don't bother to write about last-year's models at discount haha. I mean new phones!) it will happen. EVERYTHING I said Apple HAS to do to its iPhones has happened except for the one wish I have still (QWERTY-slider). So I've correctly anticipated over 30 improvements to the iPhone and iOS line in the past 7 years (mostly just by studying existing Nokia flagships haha)
Look at the price. Consider the Samsung Galaxy W (latest model, model number T255). This is nowhere near Samsung's flagship. But it has a 7 inch screen (far far bigger than either iPhone 6). It has all the usual stuff that Apple now has like of course NFC. The primary camera is 8mp and LED flash but the selfie cam is better at 2mp. Of course it has all the usual things you'd expect Sammy to give us what Apple refuses, like microSD card slot, FM radio and removable battery. What does that cost? US $482 (Korean Won 499,000) gives you matching specs on most areas, is worse literally on nothing, and far better specs on some of the most requested features right now, compared to iPhone 6 Plus. If you buy phones on contract and the difference is slight between models, you won't really care. If you pay full price and 750 dollars gets you 5.5 inch screen but 482 dollars - two thirds the price - gets you also a far larger 7 inch screen.. suddenly the dollars start to matter very much. And this is before we consider Emerging World needs. If you earn so little you cannot afford to buy both a tablet and a smartphone, you buy a phablet and then you get the biggest screen you can. Again this mid-range Galaxy W utterly wipes the floor with the brand new iPhoen 6 Plus (for Emerging World market needs). But if the base iPhone 6 price was 500 dollars (ie 499) rather than 650 then this becomes at least a reasonable race...
VICTIM OF ILLUSION OF FAIRNESS
The iPhone 6 model range is ho-hum 'me too' copycat range now. Nothing spectacular here at all. And look, for the first time in any iPhone launch window, we see a plethora of articles saying that actually a rival smartphone is better. Like this Digital Spy has Galaxy S5 over iPhone 6, Gizmag compares iPhone 6 Plus to Galaxy Note giving most gains to Sammy. PhoneArena compares Sony Xperia X3 to iPhone 6 granting that Xperia is better on most counts. Extreme Tech compares both iPhone 6 models to HTC One M8 and gives verdict to HTC. Digital Trends gives choice between iPhone 6 and LG G3 to the LG. Christian Today compares iPhone 6 to Xiaomi Mi4 and says only reason Xiaomi can't win this fight is because Xiaomi is not yet sold in all the markets Apple is (ie they think Xiaomi is better value). Phone Debate compares Lenovo Vibe Z22 to iPhone 6 and gives it clearly to Lenovo.
This has never happened! This never happened before to the iPhone that suddenly its new model is not impressing anyone and the current flagship of most rivals is seen as better! I did not have to dig into Google results to find those comparisons. They were the top page result, usually the top result of Google search of a comparison of iPhone 6 vs that given brand. And I think I know why. There is a kind of illusion of fairness in journalism. When a journalist feels obligated to pursue 'both sides' of a story even where one side is ludicrous, like when say Obama says he won't go to war, then the newsmedia go get Dick Cheney to say why Obama is an idiot and of course USA should got to war immediately (or else bring in McCain to say bomb everyone). Sometimes fairness does require both sides of the story but in other cases it should be obvious that the other side need not be heard. We don't need for 'fair' coverage of World War 2 to hear a passionate defense of Hitler's persecution of the Jews. Same thign happens in sports, where if one side gets a number of penalties, the referee suddenly feels 'obligated' to give the other side a penalty next, even on some totally minor infringement (and something that the frequently penalized team may then exploit). So yeah. For six years now we've seen always stories that the iPhone reigns supreme. The journalists have a guitly conscience that they always gave the verdict to the iPhone. Now when its so close, and Apple had so many victories in the past, they will tend to give the 'tie' going to the challenger. Thats why its such a strong chorus on all comparisons.
Will those comparisons sway an existing iPhone users to abandon Apple, of course not. They don't need any convincing anymore. They know what they want, when they walk into the store. But thats return business The new buyers! The first-time potential iPhone clients. They will be reading the reviews. And the sales reps! They will now have potent 'ammunition' to use to sway customers to switch and not buy the iPhone (Apple not known for serving retail channel needs well) to preferring a random Brand X in that market, whose sales promotion offers the best international trip or whatever bonuses for top salesguys. Apple has never felt this level of 'even' competition from rivals before. It will be their roughest year. This does not mean that Apple sales will fall. Apple has the best loyalty in the handset business. But this means three things.
It means the news customer acqusition to iPhone will be weakest its ever been. The growth in absolute unit sales will be worst its been, the iPhone market share for Christmas 2014 and Spring 2015 will be worst its been in years. (when we combine that with declining iPod sales, flat iPad sales and delayed launch of the iWatch to next year, it means very modest Christmas news for Apple). These two smartphones are priced at the top of the price pyramid where competition is rough and rivals are tough. The consumers of smartphones are not now on their first smartphone, they have grown to appreciate certain things and will seek the model they want. These two iPhone 6 models will not set the world on fire in the way that previous new iPhone model upgrades have. Yes the iPhone will set a new sales record of course for Christmas but its market share will be the worst the iPhone has seen for many years and the total annual market share for 2014 will be somewhere down near 14%. As China transitions away from handset subsidies, these two iPhone 6 models will not be very compelling to the Chinese market where local rivals already have competitive offerings and will upgrade their portfolio with even better (more competitive) models for the Chinese gift-giving season (Chinese New Year in early 2015). Thats also where we can expect for example Sony's next Xperia Z4 to arrive and if the current Xperia Z3 seems a better phone (and arguably sexier more cool phone) what will Z4 do in a couple of months' time?
Apple is not doomed. Apple makes the biggest profits in the industry. But these phones serve only the top-price niche while all the growth in smartphones is in the bottom price range. These two models come simultaneously so Apple doesn't gain any 'reaction' model for 12 months while rivals bring new models far faster to the market. The iPhone models now are only 'me-too' copies of what others have, with nothing exciting or eclusive to them but still missing many features considered normal in all phones, especially outside of the USA from microSD slots to removable batteries to FM radios to now increasingly, waterproofing. Samsung has been running a mocking ad campaign about Apple iPhone users and I am no expert no what ad campaigns are good or bad, but that campaign certainly draws attention to the fact that the iPhone model range is always very backwards on its tech. At least the camera should have been upgraded now to something near cutting edge, not that puny 8mp it still carries.
And it means that the iPhone 6 is a rare dog in Apple's offering. Its not possible that all rivals suddenly had a big surge forward (LG, Samsung, Sony, Xiaomi, HTC etc). It means that Apple didn't move ahead nearly as much as it needed to. It means that this was a half-hearted effort. Apple's focus was elsewhere (Apple Watch). They took the eye off the ball. The game is smartphones not watches. This is Tim Cook's strategy mistake. The iPhone is the centerpiece of all Apple iGoodness from Macs to iTunes to iPads to whatever level of sales the Apple Watch manages to achieve next year.
Note this means also that the reality starts to emerge to app developers. The iEconomi is a false promise. It is a niche. Niches are not mass market opportunities by definition. That is why there are already so many 'Zombies' in the app stores. The Apps Stores (all of them, including Google Play) are disasters as economic opportunities, akin to lotteries. But the best chances are in the one with the most users, that is ow clearly never going to be the iPhone or iOS. The iPhone App Store will gradually migrate to serve the two segments where Apple is strong -games and advertising/marketing. Those two sectors count for less than one half of one percent of human economic output. The other 99.5% of human effort will now prioritize Android always as the smartphone platform and pretty well ignore the others (except for games or the advertising industry)
Apple made the iPhone 6 again thinner. And why? Who was complaining that the iPhone was too thick? But what do consumer surveys say year after year, we want more battery life! If instead of making the iPhone 2 mm thinner, Apple had made it 2 mm thicker and if not giving us a renovable battery (absolutely vital to those 800 million people living in areas where electrical supply is not reliable) at least give us 50% more battery capacity to the iPhone! That would have been welcomed by everybody. Seriously. If Tim Cook had shown the animation on screen and said 'we listened to your needs and now the iPhone 6 will have user-replacable batteries' - it would have been the longest standing ovation in Apple history. Even if not that, if Cook had shown a closeup of iPhone 5 and 6, and shown the 6 is slightly thicker - then told the audience, the reason we made the iPhone 6 thicker this time, is so we can fit a battery that has 50% more power - they would have cheered him for a long time. But no. Lets make it even thinner than anyone ever requested. Why? Because some nerd showed us a Chinese phone last year that was half a millimeter thinner... Idiots!
So thats my view. Yes, this was needed. I begged for bigger screen iPhones for years on this blog. We finally have them (and to all who mocked me that there will never be big-screen iPhones: whose still blogging?). The camera is now piss-poor for a flagship. Apple will upgrade it next time. NFC finally came to the iPhone (as I've been begging for years, but I was mocked that it was not needed, nobody would use the mobile as a payment device, whose blogging now?). Yes the iPhoen 6 models will sell very well to existing loyal iPhone owners. But they are spectacularly weak compared to all rivals out there now, in terms of winning new customers to Apple. Apple's bleeding market share will continue and I think this year Apple ends with something around 14% market share (full year) and next year powered mostly by this model range, the iPhone market share continues to fall to something near 12%.
A sign to look out for is any price drops. If the iPhoen 6 models see price drops before Christmas sales 2014 or Chinese New Year sales 2015, that would be a very bad sign. Meanwhile we can monitor the performance of the iPhone models in Kantar's monthly numbers.
For all the haters, I am still BY FAR the most accurate forecaster in the mobile industry. I was most accurate to forecast Nokia's fall, Samsung's rise, Apple's inability to capitalize on Nokias fall, etc. I was the only analyst to issue a regional forecast of where the iPhone would sell (and where not) when it originally released. I was the first analyst to alert the industry when Apple's market share growth had ended, calling it before the numbers were out. I make my share of mistakes as does any forecaster but you can't find any other analyst who has more accurately forecasted every stage of the iPhone saga from before the first iPhone was even shown, to where it is now (including the evolution of the iPhone). No wonder I am referenced in 140 books by my peers, and Forbes rated me the most influential expert in mobile. I have over 500 press references by all of the top press from Wall Street Journal, Financial Times and the Economist on down. This blog has no advertising, I have no reason to force you to provide extra clicks to read the story and I don't ask you to register. I won't spam you. This blog is purely my hobby to share my thoughts as the most published author of the moblie industry (12 books and counting). We've been around for 9 years and have had over 5 million visitors to this blog and most of my readers keep coming back. The discussion in the comments section is some of the smartest in the industry. So there, go on and hate me. I will be here years from now to once again tell you 'I told you so'.