Quick Thoughts on iPhone 5 - Even as some geeks mildly disappointed, this is killer hit smartphone of 2012 Christmas

So it didn't have NFC.. Yeah, we've seen the iPhone 5 now and there is a mild sense of disappointment. We had hoped for more (and there was no split in the iPhone product line to give us an iPhone Nano.. shame). But what did we get?

WHAT IS NEW

iPhone 5 finally breaks with the 3.5 inch screen size, and grows the screen to 4 inches. That is a big change but is nowhere near the biggest screen out there. When the iPhone originally was introduced, against most rivals it was the biggest screen (except some uberphones like the Nokia Communicator E90 which did have a 4 inch screen - back in year 2006 haha). The screen dimensions change to 16:9 format so the iPhone keeps the same width but is noticeably longer and helps make viewing movies and modern TV shows better. This is all good but is more of a catch-up to the rivals and is nowhere near the leadership where we see 5 inch jumboscreens on some smartphones already.

The camera stays at 8mp in nominal size but adds plenty of clever gimmicks and tricks and software, including a panorama photo feature that allows taking super-wide pictures running 28mp. Neat trick, kind of Apple-ish. I had hoped Apple would jump the mainstream and go for 12mp but no, they rather made the iPhone even thinner. Do we really want a thinner iPhone, is this as good a selling point as now in late 2012, a larger camera sensor would have been? But yeah, the inward camera adds its resolution to HD and there are lotsa nice little advances here, but nothing radical beyond the panorama feature.

LTE is the new top speed in terms of cellular connectivity. It is important in some markets especially the US market and brings the iPhone 5 to be on par with top-end smartphones, this is also good. What else do we get? Not really much. Yes, obviously, the new Apple iOS software version, and a faster processor and some technical tweaks here and there, but there was no NFC, no wireless charging etc. There is a new smaller connector meaning all old iPhone accessories are now useless and switching to this iPhone 5 means also buying new accessories, but that is life in high tech and Apple is no more guilty of this than other tech makers over time.

Its a bit thinner, a bit lighter, its battery runs longer.. Yeah, these are improvements that mostly make it seem like an iPhone 4S+. But because the screen is bigger for the first time ever, and the physical outside dimensions are clearly changed, this is legitimately a true new number for the iPhone series, its fair to call it the iPhone 5. What will likely happen, like always before, the first edition (base number iPhone) is a bit of a disappointment, but the S version a year later will be the far better model. So thats my review.. How will it do?

WHAT KIND OF SALES TO EXPECT

This iPhone 5 will sell like hot cakes. It will set the iPhone fanbase on fire, they will stand in line to get the iPhone with the biggest screen ever, and will love every tiny change in the maps or Siri or other parts in the whole package. If you are an iPhone owner - they have by far the best customer loyalty - of course if its time to upgrade to a new iPhone, you'll be wanting this iPhone 5. It will help turn the Q3 (calendar Quarter, not Apple fiscal quarter ie July-September quarter) sales into solid growth with long lines of iPhonistas stayhing overnight to be among the first to own the iFive. And then the masses will consider what to buy for Christmas and this iPhone 5 will show up in lots of stockings and propel Apple to its best quarter ever, in fact the best quarter of any company in any industry, ever, for the Q4 Christmas quarter (October-December quarter) in 2012. And then, don't expect any after-Christmas blues, as we get the Chinese New Year gift-giving season of the biggest smartphone market in the world, in Q1 of 2013, the iPhone 5 will be loved in China too and help bring a 'surprisingly' good Q1 January-March quarter for Apple the superb tech darling and Wall Street miracle company of the next nine months.

What kind of numbers? I'd say on VERY rough terms, expect iPhone Christmas sales Q4 to be about 58 million iPhones of all models, vs 37 million last Christmas, ie a growth of a whopping 57% in one year and exceeding the growth rate of the industry. For Q4 the iPhone would have about 25% market share of all smartphones and the Apple branded mobile phone handset will have roughly 11% global market share of all phones sold that quarter. Truly impressive statistics for this company that only 5 years ago entered the fiercely competitive mobile phone market with a peculiar unconventional touch-screen 2G featurephone called the iPhone that didn't even do apps at the time..

Obviously the iPhone 5 hysteria will also help push the whole Mac, iPod, iPad and iOS ecosystem along and keep Apple solidly in the mindset of all developers (700,000 total iOS apps, 450,000 of those for the iPhone itself). 

For the full year, Apple's iPhone growth inches up again in market share just a bit. In total sales, expect 2012 calendar year full iPhone sales to end in the range of 145 to 150 million and this would give the iPhone a global market share of about 20% to 21%. What Apple really (REALLY, REALLY) needs to do, if they want to return to the strong growth years of 2007-2008-2009 when they simply gobbled up market share, is to move down in price with spreading the model range and introduce that iPhone Nano model I have been begging for on this blog now for two years.. The iPhone 5 will sell very well in affluent markets, but that is not where the smartphone industry is headed. We heard from Deloitte earlier this year, that 38% of all smartphones sold this year have an unsubsidised price of under 100 dollars. The unsubsidised price of the iPhone 5 is about 650 dollars and the unsubsidised price of the iPhoen 4S is about 600 dollars. These are not viable as mass market smartphones in Africa or India or much of where the global growth is now. The US and European markets are nearing sautration for smartphone migration already, even there the growth is in low-cost smartphones. But who am I to give advice to the most profitable company that ever existed haha, they are happy with the money they make, and don't care if some more profit (or happy new Apple iPhone customers) are left on the table..

A BIT ON COMPETITION

Just to keep it all in context, Samsung sold 50 million smartphones in Q2 vs Apple's 26 million iPhones, and the current Samsung Galaxy S3 and Galaxy Note and other Galaxy devices are very competitive in this space already. Expect some Samsung magic still to be announced before Christmas and Samsung will easily win the full year 2012 smartphone sales as the world's biggest smartphone maker. I also expect Samsung to rather easily beat the iPhone in the Christmas sales period, so if the iPhone does something like 58 million units, Samsung's total smartphone portfolio (which also includes bada and even Windows Phone 8 models) will sell something in the range of 70 million to 75 million smartphones for Christmas clearly exceeding total Apple iPhone sales worldwide. And against these, Nokia total sales on all three of its smartphone platforms might be in the scale of 6 or 7 million and total Windows Phone on all manufacturers (Nokia Lumia,.HTC, Samsung etc) and all Windows platforms (Windows Mobile, Windows Phone 7.x, Windows Phone 8) will do maybe 4 million. That is hardly your third ecosystem there haha. Remember just before Nokia's mad CEO Stephen Elop set his platform on fire just 18 months ago, Nokia sold more than all Apple iPhones and all Samsung smartphones - combined! Nokia did this with a highly profitable smartphone unit that grew sales in the previous year more than Apple or more than Samsung too.. 

For those who need to understand more about the mobile handset market, check out my TomiAhonen Phone Book which is just about to release its 2012 edition. And if you want to understand where this industry is headed, check out the TomiAhonen Mobile Forecast 2012-2015 

 

Comments

[cycnus]

Tomi,

I don't agree with you!!!
I think iphone 5 will sell a lot in number of sales, **BUT** it won't beat iphone 4S record in market percentage...

iphone 5 is way better than iphone 4S, but android pace is very fast and apple start to play catch up with Android.

I think Samsung Galaxy S3 + Samsung Galaxy Note 2, the all new Motorola RAZR, and also the next google nexus would take away some of apple user.

[John Waclawsky]

Microsoft always does astroturfing. It seems to have become part of their brand. I really don't think they know how to compete. WP8 is just a cruel time and money wasting developer joke and will be the end of Nokia. A very sad ending for a once great company!

http://www.cbsnews.com/8301-505124_162-43340158/astroturfing-antitrust-how-microsoft-is-crafting-the-grassroots-case-against-google/

[CN]

China. We seem to have interesting news.

First, Apple.

http://seekingalpha.com/article/864521-qualcomm-s-28nm-supply-woes-may-delay-a-china-mobile-iphone-5-launch

Then, Nokia. The doomed Nokia.

http://wmpoweruser.com/nokia-scores-chinas-largest-carrier-for-the-nokia-lumia-920/

Let me guess. China Mobile has until now been the Greatest of them all. But now, since TD-SCDMA has only a "tiny" amount of subscribers, only 70 Million out of close to 700 M total), this is not such a big deal. Right?

[vladkr]

@Baron : I don't agree with you often, but this time I do

[Henry Sinn]

I'm running a little social experiment about WHY people might buy the new iPhone.

Every new iPhone to date has had some compelling / functional REASON to get it.
[As Tomi has brought to our attention many time, it has being playing functional catch up]

This one, in my opinion, is a game changer..
[no more catch up]

Would appreciate any thoughts at http://henrysinn.com/iphone5

[chithanh]

@Baron95: "That is the innovation. This has never ever happened in any product. We never ever had the low cost producer also have the premium pricing leadership."

This is not entirely correct, the previous example is the MacBook Air, where Apple 1-upped everybody else when it came to sourcing aluminum unibodies[1]. Only heavy development and marketing support from Intel makes Ultrabooks somewhat viable.

[1] http://www.wired.com/gadgetlab/2012/07/apple-metal-chassis-domination/

[khim]

It's funny. It only took one year for Apple without Steve to lose the the sight of "puck" (remember the infamous "A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be"). I was kind of of skeptical about OODA loop theory ( http://esr.ibiblio.org/?p=2975 ) because Apple has slowest OODA loop in the industry. But while Stive was alive he was able to compensate with bold moves which can not be easily replicated by rivals. Steve owned observe/orient phase and Tim had the luxiry to drive slowest yet most efficient decide/act phase in the industry.

Now we all clearly see how Apple moves on all cylinders in the directions of where the "puck" is! Today Apple has "premium smartphone price advantage" and "premium smartphone cost advantage". They are well positioned to bring records profits, but there are one tiny wrinkle in this plan : they still have just one phone model and they depend on mobile operators!

Why are these weaknesses are mild today and why they will be crippling tomorrow?

Well, Apple does not obtain these records profits directly from customers. They obtain them from mobile operators - which already have trouble subsidizing iPhone. Enter 2013 with it's credit crunch (which will probably be bigger then credit crunch of 2008). What happens? Mobile operators can not buy iPhones from Apple, that's what. Not as many as they did before, at least. They must either raise prices or delay payments or do something else. Whatever they do they can not continue to bring these "record profits" to Apple. And Apple have nothing to offer to these of them who are in trouble: there are no sun-$100 iPhone (unsibsidized) in sight! Not a pretty sight: both for operators but also - in slightly longer term - for Apple.

The critical question is: when exactly credit will dry up? This will determine the whole story: if it'll happen early in 2013 then Apple will be able to alter it's trajectory easily (and introduce iPhone Nano in September 2013 as if it was planned all along), if it'll happen too late then Apple will be able to suck more money from operators in the next year but will be less prepared WSHTF.

As for China Mobile and DoCoMo… again: it'll be interesting to see. "Young, affluent customers" will quickly become an oxymoron when unemployment among newgrads will go beyond 50% and closer to 100%. It'll be quite ironic if they'll sign up for the Apple's stranglehold right when the people which justify it will disappear.

[Hotcandy]

Hot topic for iPhone 5, iphone 5 is unveiled at china 12th September. Go through the news and exposured picture, it is not much updated based on iPhone 4S. just IOS 6 System , thinest more, more screen. the resolution is a litter change. if let me choose I will choose iPhone4S.

[CN]

@Baron

Thanks for trying to help me to see the point. I'm excited to see how the program kicks off between Apple, DoCoMo and CMCC.

What was the point I missed in regards of Nokia and China Mobile? You ignored this part in your response, but there must be something wrong with this one as well - I do miss he point, again. You must have noticed how bad it was when CMCC said no to previous versions of Lumia.

[kevin]

@khim: If the carriers run into cash-flow challenges due to subsidies, I'm sure Apple can open an Apple Bank to provide credit and fix that. After all, they have over $117B in cash and liquid securities. (GE and many other companies did the same thing a long long time ago.)

In any case, it's still a really big IF. Telecom companies tend to have little trouble getting credit (relative to other companies in other industries).

[Elop is a flop]

I predict that Stephen Elop will be fired once Nokia's share price drops below $1.50.

And that means real, real soon.

I'm sad for Nokia. I had owned many great Nokia phones: 8310, 3310, 3330, 6230i etc. Why won't they learn from history? No partner of Microsoft ever had a happy ending (Sendo, Nortel etc.). Fail to learn from history, and you're doomed to repeat it.

The real fatal blow to Nokia, in my opinion, is not the tanking share price, getting in bed with Microsoft, selling off of patents and assets, or even a dwindling market share. The real fatal blow to Nokia is the EXODUS of talented, experienced people from the company.

That's right, Stephen Elop, go ahead and cut more jobs and hire more inexperienced pro-Microsoft sycophants to surround yourself with. Your fantasy of a 'turd ecosystem' will never materialize. This is a two-horse race between iOS and Android. Enjoy fighting for scraps with RIM and Bada.

[KPOM]

The pre-sales sold out in 1 hour. It is looking like the iPhone 5 rollout will be a smashing success. Now that it has LTE it will be a bit more difficult for others to claim it is "outdated" even a few months from now. Sure, it lacks simultaneous voice and data over Verizon and Sprint, but I'm sure the 5S will take care of that.

[John Waclawsky]

Now here is some perspective of microsoft and Apple and (now Nokia working together against Open Source). A fascinating read and provide more insight into the dark side of microsoft Nokia partnership. Start at the third paragraph: It has to do with the Microsoft-Nokia licensing of some patents to non-practicing entity MOSAID. There is a dirty microsoft game afoot.

http://www.groklaw.net/article.php?story=20120913122706961

The good part is at: B. Firms Should Not Evade Their FRAND Obligations by Transfers to NPEs. There is more to this partnership than just pushing a loser WP8.

[Henry Sinn]

Leebase..

"It's why 30% of Android owners are looking to upgrade to the iPhone 5 and why 95% of existing iPhone customers will stick with the platform."

Really?

I'm seeing nothing but change the other direction 'downunder'.
People are going from Apple [and others] to Android. Not the other way around.

Did you note the 500m Android connections announcement recently?

[canada goose parka]

number or person you are looking for is one of the many who has opted out of having their phone number listed, you might give up immediately. But do not worry because if there is one thing the information age has given us, it is access to loads of information in mere minutes.

[cycnus]

It seems my previous post didn't get through... :(
Go to http://gs.statcounter.com/#mobile_os-ww-monthly-201108-201208

and change the worldwide into: Japan, China, philipine, uk, france, any other country

and you'll see that Android is gaining a lot.

[kevin]

@cycnus; @Henry Sinn: Surveys consistently show that 90%+ of iPhone owners plan to buy another iPhone, while being much lower for Android owners. That said, the smartphone market is still expanding at the lower cost end - where additional people are switching from featurephones to smartphones, and Android is taking almost all of them. This can be seen in the growth of ZTE, Huawei, and even Samsung (who has a full gamut of phones), and in the decline of the higher-end HTC, Motorola, Sony, and RIM.

Right or wrong, Apple may be willing to cede that market for the next couple of years, in the expectation that many of the smartphone newcomers will eventually want more (i.e., better ease-of-use, timely software upgrades, smooth ecosystem integration with tablet and PC devices) and switch to iPhones later.

[cycnus]

@Kevin,

My first, original post got stuck in the system because it's contain too many link. I was hoping that Tomi will 'approve' that post.

in that link, i post the link to some interesting fact. from statcounter. a quick note, a statcounter is not a sales number, but it's a commulative user.

First, go to http://gs.statcounter.com/#mobile_os-ww-monthly-201108-201208
and let see how android stealing the thunder from apple.

let's change the country to Japan, you could see that android and iphone were neck to neck.

let's change the country to china, you could see that symbian were CRASH big time, and replaced by android. Where's iphone, second best. so, we heard a lot of news that iphone is a big hit in china, but not number one.

let's go to HK, total cumulative user of Android in HK surpass total cumulative user of iphone as of Feb 2012, and the gap widening very big as of now.

Let's see malaysia, symbian CRASH, Android gain a lot from symbian user, iOS doing fine.

Now, let see the iOS leading country....

Let's see Great Britain, BB is starting their death spiral, iOS LEADING, but android gaining more than iOS.

Australia, iOS leading, but android is start to gain more too.

Singapore, same as GB and Australia, iOS is leading and peaked (starting to fall from cliff??), but android is gaining a lot, it seems to me that almost 90% all of the new phone sold might be android (thus android % going up big time).

France, iOS is leading, but android raise big time.

United Emirate Arab.... this is interesting, Symbian still ON TOP. iOS was second, but android manage to kick iOS just last month.

Saudi arabia, Symbian still leading too, BB on their death spiral, android on the rise, big time, and iOS still on the rise, but not a lot.

mexico, symbian CRASH, android gainning from symbian crash, iOS doing great, but not good enough.

India, android is on the rise too, iOS, somewhere on the middle

Germany, android start to beat iOS too

..
my point is....
apple love to bluff. they try to create a trend to make their device worth more than it should.....

and if you see the stat, you could see that apple starting to lost the war. YES, iphone 5 will sell a lot, but not as much as apple wanted. If they follow tomi advice to create the 'cheap' version, their market share could go up a lot. My take on this is they would only create the cheap version until the fat lady finish singing (apple see the cliff).

[cycnus]

another fun fact...
(i was wondering if this data valid.... ???)

I think we could use the statcounter data to see how well iphone retina display (iphone 4 & 4S) against other...

let start with United state
http://gs.statcounter.com/#mobile_resolution-US-monthly-201109-201208
the retina display resolution (640x960) only manage at 3% total user. is apple 4 and 4S really sell well???

Change the country into singapore in the graph (i won't include the link, because if i post too many link, my post will be marked junk), this is interesting...
iphone is leading in mobileOS stats, but the retina display resolution is not on the graph, it's on 'other'. which mean most of the iphone sales were from the pre-iphone4 era.... another interesting data from singapore were 800x1280 manage to get almost 4%, which mean samsung galaxy note sale well.

Australia, 960x640 also on the 'other' in the stat

GB, also the same

so,
based on this stats i think with the introduction of iphone 5, iphone 4 might sell well (because of the reduced price).

[Henry Sinn]

Kevin, others,

Agree re lower end being swallowed up by Android. Will make the shift to iPhone even less likely by most of those people / users.

and

No-one has yet given me a solid read TO switch. There NO significant or real advantage over what you have NOW.

See comparison / more at http://henrysinn.com/iphone5