Now that the excitement has died down regarding Apple’s amazing financial results and the nearly 75 million iPhone shipments it achieved last quarter, it’s time to start looking ahead. From where I sit, I think there are some legitimate questions about how the iPhone can evolve.
Don’t get me wrong; there’s still plenty of juice left to the iPhone 6/6 Plus story, and I expect Apple will have strong seasonally adjusted shipments for the next several quarters. But what comes after that? Apple clearly has no interest (nor any need) to develop low-end iPhones. It also seems clear that they’re counting on existing iPhone customer upgrades as well as high-end Android switchers to drive their business for the next few quarters. The problem is, many industry watchers believe that the high-end market is getting saturated and that most of the action is going to be in mid or even lower-tier smartphones in developing countries.
Of course, a lot of people said that before the 6 and 6 Plus launch, and Apple’s ability to not only ship a staggering number of units, but raise the ASP by over $50 this past quarter shows how wrong that kind of thinking can be. Still, those kinds of trends are very difficult to maintain forever.
The biggest challenge I see is in the product roadmap. In the near term, it probably won’t be a big issue. If they follow the traditional patterns they’ve developed, we’ll likely see the launch of the 6s and 6s Plus (or 6 Plus s, though that’s a very awkward name) later this year. As with previous “s” iterations, these will be modest upgrades with faster processors, better cameras, a slight increase in battery life and maybe a bit of industrial design tweaking. (C’mon, let’s be honest…there’s still a lot of blank bezel space at the bottom of the iPhone 6). It’s going to be very difficult to decrease the thickness of the device by anything really noticeable, however, because they need that depth for battery. It’s also going to be hard to improve the screen resolution—you really can’t see much beyond what they offer—but they could offer modest improvements in color gamut or saturation.
They may also be able to integrate a few more sensors. Bosch Sensortec, for example, recently debuted new sensors that can be used to measure barometric pressure, temperature and other atmospheric elements—essentially turning your iPhone into a portable weather station, among many other intriguing possibilities.
While several of these are interesting, I’m not sure they’re really compelling enough to drive major upgrades—especially for existing iPhone 6 owners. Yes, if you’re sitting on an iPhone 5 or 5s in the middle of your contract, it’s not unreasonable to assume you’ll jump to whatever generation iPhone 6 is the latest and greatest when you’re free to do so. But, that’s different than the kind of wholesale market lunging and grasping we’ve seen for the large screen iPhone 6 models.
The challenges get that much harder for the iPhone 7. Yes, I realize it’s early, but there are no clear signs for what Apple can do to make the next generation iPhone so compelling that they’ll be able to drive the kind of success they’ve had with the iPhone 6. They could add any of the things I mentioned above that don’t get into the 6s (and maybe they’ll finally support higher-resolution audio output), but I see no component technology on the horizon that portends a dramatic shift. Foldable screens would be nice, but they are a long way off….[pullquote]There are no clear signs for what Apple can do to make the next generation iPhone so compelling that they’ll be able to drive the kind of success they’ve had with the iPhone 6.”[/pullquote]
The fact is, adding big screens to iPhones was a slam-dunk opportunity that Apple walked into perfectly. People were dying to have them because competitive phones had shown consumers how much better an experience larger screen smartphones could offer. In fact, in many ways, Apple was late to the party on phablets, but obviously not so late to have missed it.
Now, however, in the same way that we’ve seen Samsung and lots of other vendors start to run short on innovative new hardware ideas, I think the same thing could challenge Apple when it comes time to debut an iPhone 7. Of course, Apple has the clear advantage of owning and controlling the OS and ecosystem, and lots of services built around it. That’s something that really only Microsoft could truly compete with them on, and the likelihood of that happening in the phone space in the near-term is exactly nil. So, Apple is still very well positioned to maintain a position of strength in smartphones.
Maintaining strength and being able to repeat the kind of blockbuster growth that Apple just displayed are two very different things, however. Rightly or wrongly, expectations around Apple are incredibly high because the company keeps surpassing the bar that others have set for them. It’s both an incredibly inspiring and incredibly challenging spot to be in.
Ultimately, I have to wonder what kind of magic Apple will be able to conger up for the iPhone 7, because it is that product that will have an enormous impact on the company and its future. Will they knock it out of the park again and keep their incredible growth rate going? Or, will they make some nice, but not truly compelling changes that end up stalling their growth. As an avid iPhone user, I hope they can do the former, but I wouldn’t be shocked if it ends up being the latter.
Apple success with the iPhone is amazing. What I find intriguing is the diverging path of the iPad.
– is it hurt by lack of subsidies ? What %age of iPhone sales are subsidized ?
– is it hurt by being essentially an enlarged iPhone, with both a high price and none of the extras that others’ premium tablets offer (desktop apps, lap or desk docking; pen; multiwindowing; larger size…) ?
– are tablets less of a conspicuous consumption item ?
– is it being out-segmented ? If you want to play, Android offers superior specialized tablets; for work, Windows offers Desktrop apps, and, along with Android, pens, lapdocks, mouse support… if you want a media consumption tablet, Android does it just as well for about half the price ?
2 other possibilities:
– Smartphones are becoming bigger and more powerful.
– The replacement rate for iPads is much lower than for smartphones and probably much closer to that of a laptop.
Part of the problem with iPad and tablets overall is that not everyone really knows what to do with them. For many people, they’re a nice to have, not a need to have. That also leads to slower upgrade cycles.
with the rumored 12″ iPad and whatever improvements iOS gains over time, I wonder if that will be enough for the iPad to be a laptop replacement for a lot of mainstream users?
I think it’ll definitely help in enterprise and key niche verticals.
I think the 12″ iPad (if it happens) will be more of a niche product to be honest. Interesting, but not a game changer for most people.
agree.
I suspect that is more a problem in selling them to new customers.
Existing customers like their iPads (see the high satisfaction rate Apple reports). However, what contributes to their long replacement cycle:
1) many iPads tend to live between the sofa, coffee table and TV corner they do not get dropped, stolen or lost nearly as much as phones.
2) the design of the iPad 2 got many things right, contributing to a long life
3) iPads are virtually nobody’s primary device, so as you say nice to have meaning that replacement is easily postponed
I think that only this year we are going understand the length of the iPad replacement cycle.
Yes, we’ve seen already that iPad replacement cycles are long, or frankly, non-existent yet. And to point 2, I completely agree and I think we can say the same thing about the iPhone 6. Now that they have a big screen, not clear that other changes they make will be that compelling.
For the iPhone 6S, the changes don’t have to be that compelling because there’s still another 200 million iPhone 5S/5C/laggard owners who are in line to upgrade to big screens and an improved Apple Pay.
Plus, Apple Watch only works with iPhone. There will probably be myriad reasons why iPhone 6S or 7 is much better with Watch than a 6 or 5S. And we’ll soon see how tempting Watch is.
http://venturebeat.com/2015/01/29/i-spotted-an-apple-watch-on-the-train-this-morning-and-now-im-a-believer/
A big reason behind the iPhone’s success over the past year is that each new model added hardware that enabled new uses and improved experiences: the 4 added retina display, the 4S added processing power to handle Siri, the 5 added LTE, the 5S added fingerprint reading and the 6 added NFC. Some of those not only made upgrading more compelling but also closed obvious feature gaps with the competition.
I think the low hanging fruit is all gone as I can not think of a single major hardware feature available that the iPhone 6 does not have. Yes, they can add some new sensors, improve the camera, increase battery life, etc. But those are all incremental improvements and are unlikely to open up new uses that will have broad appeal. As time goes on, hardware improvements will benefit/entice fewer and fewer users.
Exactly my point….
I know what you mean, but I suspect that we might just lack imagination; maybe we just need to think a bit harder. As noted earlier, rather than taking the electrical component approach, a jobs to be done approach might shed more light on what’s next.
Fair enough; will be interesting to see…..
Since iPhone 4, people have been asking what more can Apple add to entice people to upgrade their iPhones. Although there were some obvious elements to add such as LTE, digital wallets, and larger/sharper displays, each was downplayed before and during launch by most pundits and analysts as not being a really big deal. And yet iPhone 4S, 5, 5S/5C, and 6/6+ each set new sales records. So here we are again.
You are looking for some great component technology to add and finding little. Before it was added to iPhone, did anyone consider LTE, NFC, fingerprint sensors, larger displays, or voice input to be great iPhone component technologies? I don’t think so since all of them already existed at varying quality levels before iPhone.
Apple is focused on addressing the numerous iPhone jobs – a better photographing experience, better shopping experience, better traveling/navigating experience, better social experience, better health management experience, better entertaining/gaming experience, better homelife experience. Some need small improvements, some could still use huge leaps. A few need better/more sensors/hardware in iPhone; all could use more capable software and faster processing.
For example, Cook said Apple Pay is in the first inning. There is much more that can be done for shopping. For brick-and-mortar, it may involve modified/added sensors for more accurate location, but not necessarily anything that would be considered spectacular or leading edge. But on the software/services side, there is much to add. In any case, many of the basic pieces are in place, but have to be evolved much further and become far more integrated, especially with back-end services.
I think the most likely improvement in the 6S/6S+ is the photographing experience. Many will say not a big deal because other smartphones already have better components, but Apple will add new components, tie it all together and show how iPhones will provide a far better photographing experience in any environment.
It’s about the experience, not the components. Yes, the experience depends on components, but the hardware is just one piece of the system experience.
Agreed that experience is important, but many people do buy on capabilities. Plus, many of the experiences you describe could happen in iOS9, which will undoubtedly run on an iPhone 6.
Yes, there will be some capabilities enabled just with software. But it’s more likely Apple will add something to the iPhone 6S to enable a new or better experience, just like they did by adding NFC to iPhone 6 when they already had the fingerprint sensor, secure enclave, and beacons in iPhone 5S.
Many people who buy on capabilities will go or have already gone Android because hey, they had those components before iPhone – 3G, LTE, NFC, fingerprint sensor, etc. They have the components but relatively poorer experiences.
I suggest that there is plenty of room for exciting updates to drive buyer upgrade excitement in upcoming years and with respect, there may be a failure of imagination here on your part. Of course I don’t know what Apple is working on, BUT, we know there is strong interest in exciting new materials and methods, we know Siri is receiving a lot of internal resources, we know Apple is finally getting serious with the cloud by starting a cloud group “off campus”, we know Apple puts lots of resources into chip design, we know iPhones integration into areas as diverse health, home, TV, Music, car, shopping and watch are only just beginning. We know that iOS has been empowered in new ways with iOS. We know the Chinese market is nowhere near saturated and India has hardly begun to be taken seriously.
And that’s what we know…
My Take: Apple does not seem like a company which has run out ideas, Apple is not a company to telegraph what big things it’s working on that will drive future sticky sales, Apple has not run out of large international sales growth opportunities and can continue to chip away at Android in the US and Europe. It’s not like the competition is full of innovation with iPhone lagging.
“The problem is, many industry watchers believe that the high-end market
is getting saturated and that most of the action is going to be in mid
or even lower-tier smartphones in developing countries.”
That’s a key assumption to test. And it’s not easy to test, what with Apple just barely getting started with the China Mobile partnership.
One also needs to be rooted in where Apple is, where it’s going, and “where it has to end up”. Possible answers in order: #1 technology company in the world, on a course for $200B+ revenue for fiscal 2015 (see first answer), and while Wall Street may not like Apple growth “stalling”, slowing growth is both not inherently bad and rather understandable at these ridiculous levels. No one thinks $480B+ Wal-Mart’s going away anytime soon.