Source - http://www.nytimes.com/
By - BRIAN X. CHEN
Category - Budget Hotels Santa Clarita
Posted By - Hampton Inn Santa Clarita
By - BRIAN X. CHEN
Category - Budget Hotels Santa Clarita
Posted By - Hampton Inn Santa Clarita
Budget Hotels Santa Clarita |
The handset market is so brutally competitive that Apple, the most
successful smartphone maker, is preparing to step up its game this week
by offering two new iPhones instead of one.
At an event on Tuesday at its Cupertino, Calif., headquarters, the
company is set to unveil for customers worldwide a new iPhone with a
faster processor, along with another model that will be sold at a lower
cost.
The company’s profit growth has slowed in response to a saturated
handset market in America and parts of Europe. Many people already own a
smartphone and are not upgrading to new devices as often as before.
A lower-cost smartphone could allow Apple to expand into overseas
markets — especially China, where the iPhone has been highly desired
among many consumers but is just out of reach because of its price.
“A cheaper model will open up the market significantly for Apple,” said Chetan Sharma, an independent telecom analyst who consults for phone carriers.
Apple declined to comment on the new products. But analysts expect
the higher-priced model to be an improvement over the current iPhone,
including a faster processor and better camera flash, as well as a
fingerprint sensor for security.
The second iPhone is expected to be a cheaper version of the
soon-to-be-outdated iPhone 5, coming in a variety of colors, with a
plastic case instead of aluminum. Analysts expect the full price of the
lower-cost iPhone to be $300 to $400, positioning it as a midtier
product.
Apple has been enormously successful, with the iPhone driving most of
its revenue. In the second quarter, the company took 53 percent of the
profit in the global smartphone market, with Samsung Electronics, which
uses Google Android software to run its smartphones, taking the rest,
according to a survey by Canaccord Genuity, an investment bank.
But both Apple and Samsung face a common enemy: the tide of manufacturers that produce dirt-cheap Android phones.
While they make all the profits, Apple and Samsung have seen their
combined share of the worldwide smartphone market drop to 43 percent in
the second quarter from 49 percent a year earlier. The makers of cheaper
phones — including Huawei, Yulong and ZTE of China, and Micromax and
Karbonn of India — are raking in sales in emerging markets where
high-end smartphones are not popular.
“We’ve had several indications from the handset market that vendors are
in real trouble,” said Tero Kuittinen, an analyst for Alekstra, a mobile
diagnostics firm. “The biggest threat to all the companies seems to be
the low-end Androids.”
In terms of sales, smartphones surpassed traditional flip phones this year. There are a few markets remaining where traditional cellphones are still outselling the smartphone, including India, Brazil and Russia. Data from Qualcomm
suggests that Latin America, China and India are adding substantially
higher numbers of smartphone subscriptions than North America, Japan,
Korea and Europe.
China, with its huge population, is an attractive target for Apple. But Timothy D. Cook, Apple’s chief executive, said recently in a call with investors
that the company was puzzled about why sales of its products were
struggling in China. Sales there fell 4 percent in the second quarter
compared with the same quarter last year. And Apple’s sales in Hong Kong
were down about 20 percent.
A cheaper iPhone could help it gain traction in China, depending on its cost.
Analysts said the introduction of the cheaper iPhone would probably
coincide with an expected partnership deal with China Mobile, which has
about 700 million subscribers — about seven times as many as Verizon
Wireless. Capturing even a small percentage of China Mobile customers
would translate to tens of millions more iPhone sales.
Apple already sells its phones in China through China Telecom, a major
network operator, but it slipped into sixth place among smartphone
makers there in the second quarter, with a share of only 4.8 percent,
according to Canalys, a research firm. Over all, China is the largest
smartphone market in the world, accounting for one-third of worldwide
shipments of smartphones in the second quarter; the United States is in
second place, accounting for about 14 percent of shipments in the same
period, according to Canalys.
Despite Apple’s efforts to keep its plans secret, clues about the new
iPhones leaked out. China Telecom briefly posted a message last week on a
blog platform soliciting early orders for the new devices. It
identified the high-end model as the iPhone 5S, and the lower-cost one
as the iPhone 5C. The post was later removed. A spokesman for China
Telecom declined to comment, citing nondisclosure agreements.
In Japan, where Apple is much stronger but faces a renewed challenge
from domestic smartphone makers like Sony, the company has struck a deal
to sell the iPhone with the country’s biggest mobile phone carrier, NTT
Docomo, two people briefed on the situation said Friday. Docomo has 60
million customers, but it has been losing market share to Japan’s other
two main mobile operators, SoftBank and KDDI, which operates under the
brand name au. Both have been marketing Apple’s phones aggressively,
giving Apple a 40 percent share of smartphone sales in the first
quarter, according to IDC, a research firm.
Historically, so that it can protect the quality of its products as well
as profit margins, Apple has refused to make cheaper products just to
get more customers. Therefore, a lower-cost iPhone would most likely be
positioned as a midtier product, similar to the approach Apple took with
the iPad Mini.
At $330, the iPad Mini is cheaper than the bigger, $500 iPad, but not
as affordable as the smaller Android tablets offered by Google and
Amazon, which cost from $160 to $230.
Realistically, a lower-cost iPhone will be $300 to $400 at full price,
Mr. Kuittinen, the Alekstra analyst, said, significantly less than the
current iPhone, which costs $650. Overseas, many phone carriers charge
full price because they do not subsidize the upfront cost of a
smartphone the way carriers do in the United States. And while a
lower-cost iPhone would drive up Apple’s revenue, it would probably not
be a blockbuster hit in economically disadvantaged markets, Mr.
Kuittinen said.
“Nobody is saying Apple should have a $130 iPhone,” he said, “but if
they price this iPhone 5C at $400 or above, it’s just not going to be
effective in countries like India, China or even Brazil.”
Still, even if the price is fairly high, a cheaper iPhone should appeal
to a subset of people in developing countries who flaunt gadgets as
status symbols, like jewelry. People who were on the fence about buying
an iPhone might pay a little extra just to be able to show off, Mr.
Sharma, the telecom analyst, said. “Consumers are willing to shell out
money to own a brand,” he said. “I think a $300 price gives them a
chance to own it.”