Mon, May 06, 2013 - Page 14 News List

Next iPhone ‘to be cheaper, not bigger,’ analysts say

The Guardian

Apple Inc will not release a large-screened “phablet” phone to compete with arch-rival Samsung this year, according to analysts, as the odds narrow that the technology group will release a cheaper iPhone to capture the pay-as-you-go market.

Speculation over Apple’s next big move is rife as a number of potential candidates — such as Apple TV or the iWatch — have fallen by the wayside.

Last month, the company announced a US$55 billion share buyback, which bought it breathing space from investors. It is now expected to take a less radical development route by focusing on a cheaper, rather than larger iPhone.

“The odds this year of a larger iPhone are zero,” Strategy Analytics executive director Neil Mawston said.

Describing the new product as the iPhone 5S, he added: “That’s what we’re hearing from our supply chain sources in the Far East. It seems the iPhone 5S will be pretty similar to the iPhone 5.”

About 25 million “phablets” — defined as smartphones with screens of more than 5 inch diagonal length — were sold last year, according to IHS iSuppli, which forecasts that sales will hit 60 million this year amid strong demand for Samsung’s Galaxy Note. That compares to forecasts of total smartphone sales of 908 million this year.

However, there is growing expectation that Apple will offer a cheaper iPhone to attract new buyers unable to afford the top-end devices.

Canalys chief executive Steve Brazier says Apple would benefit by offering phones in different designs and colors — as it did with the second generation of its best-selling iMac desktop computers in 1999.

“Why should business people carry the same phone as teenagers?” Brazier asks. “Kids don’t want the same phone as their dads.”

With the smartphone market growing less rapidly than it was, analysts also question whether there is enough demand for a high-end Apple phone as prices are driven down by cheaper models using Google’s Android operating system — Samsung’s main platform.

The Chinese market has taken over from the US as the world’s largest and is the main growth area.

However, most of its buyers are opting for cheaper phones, and the iPhone’s data system is not yet compatible with China Mobile, which has more than 700 million subscribers.

Yet even a fast-selling “cheap iPhone” would not have a dramatic effect on Apple’s gigantic revenues and profits, according to estimates by Benedict Evans, a telecoms specialist at Enders Analysis.

In a note to clients seen by the Guardian, he calculates that a phone priced at US$200 which sold 40 million in a quarter — in effect doubling Apple’s phone sales — would generate US$8 billion of revenue and US$2.4 billion in profit.

That though would only raise first quarter revenues by 8 percent, and profits by 4.5 percent.

“In other words, a blockbuster new Apple phone that almost doubles unit sales and blows a hole in the middle of the Android market might only add 5 percent to Apple’s gross profits,” he said.

While Apple has stayed silent on its plans, and declined to comment for this article, analysts see change to its product line as inevitable.

“They have been slow to react to the fact that the market has changed. It gives them a huge advantage in economies of scale to build just one model, but they could have four or five. Look at the Mac [computer range] — they have those in all sorts of different sizes and shapes and configurations,” Brazier said.

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