An iPhone for Everyone

Two product families were on stage at the Steve Jobs’ Theater. A lot had been revealed in spoilers over the weeks preceding the event, but while we might have known names and sizes, we knew very little about what really makes up the essence of these new devices. By the time Phil Schiller finished introducing the new iPhone Xr, it was clear that the silicon inside these devices is what makes the iPhone X family unique and what Apple is betting on, to continue to differentiate going forward. Of course, hardware improvements will continue, but the A12 Bionic and the Neural Engine genuinely are the cornerstones of these products.

Reading into the iPhone Xr

The iPhone Xr is Apple’s third attempt to deliver a more affordable iPhone, and their approach is entirely different from the past. With the iPhone 5c and the iPhone SE, Apple produced a new shell around an existing iPhone “gut” for lack of a better word. The final result was somewhat more affordable but also felt like a buyer was compromising on his or her experience to hit the price point that was right for them. With the iPhone Xr, it feels like buyers will make little to no compromise because Apple redesigned some of the features to contain costs but left the experience intact.

Nobody knows what the r in iPhone Xr stands for, but I like to think that it just signifies that it is a close experience to the iPhone Xs. Apple made sure that the engine powering the iPhone Xr was the same as the other two X models: the A12 Bionic chip. Apple also included the TrueDepth Camera at the front that enables FaceID, Animojis, and AR. Basically, Apple made sure that buyers would have no compromise on security, a more modern, cleaner while richer UI, and a new class of apps designed around AR. For other features that would have driven up cost, like a dual camera system at the back and the OLED screen, Apple delivered something different. For the camera, Apple is using a single camera and takes advantage of the new Neural Engine in the A12 Bionic to enable portrait mode, the most significant driver around the dual camera uptake. There is a small compromise here as portrait mode is supposed to work on humans only, at least for now. For the screen, Apple improved its LCD resolution to deliver a Liquid Retina Display at 326 pixels per inch, which is the same as on the iPhone 8.

The size of the iPhone Xr is also interesting, as it sits in between the iPhone Xs and the iPhone Xs Max. This might be a big jump for users upgrading from an iPhone 5c and SE, but if this is their primary computing device, I think they would quickly find that the larger display is well worth getting past the initial awkwardness of holding a bigger phone. This also allows Apple to deliver two products supporting dual-SIM in China, where both SIMs have to be physical.

Lastly the colors. The iPhone 5c was not very successful, but the colors were certainly something that people appreciated. Maybe the mistake Apple made back then was the material, which resulted in making the phone look cheap. This is not the case with the iPhone Xr and its glass back that merges fun, modern color with elegance. Apple refrains from naming specific target audiences, but I would think GenZ and younger Millennials are a pretty good audience for the iPhone Xr.

A Clean Portfolio

Some people after the keynote seemed concerned that the iPhone portfolio was now confusing. I actually think sizes and pricing will guide buyers quite easily.

With the launch of the iPhone Xs, production of the iPhone X was halted, which means that buyers might be able to still find a few around until units in the channels run out. After that, however, they will have to turn to the iPhone Xs or the larger Xs Max. Eliminating the iPhone X, helped Apple keep the same price point for the iPhone Xs, as well as only increase the iPhone Xs Max by $100. Leaving the iPhone X in the lineup, as in previous years, would have complicated the pricing of both the iPhone Xs and the Xr, which would have likely lead to confusing as well as cannibalization.

To get some perspective of what this portfolio means, it is worth knowing that roughly 40% of the iPhone user base in the US is on an iPhone model older than an iPhone 7. Some people might be disappointed that the iPhone SE and the iPhone 6S are no longer available, but even though iOS12 has been designed to be kind to older iPhone versions, I think this is the right time to get users to step up. Apple is prepping the installed base to benefit from as many services as possible and to do that users must upgrade.

With an iPhone 7 running on iOS12 priced at $449, it is hard to say that Apple does not have a good option for users who are more financially constraint. As a comparison, today on Amazon.com, you can find an unlocked Samsung Galaxy S7 for around $290 to $450. More likely than not those devices are running Android 6.0 and are upgradable, with some speed degradation, to Android 8.0. There are brand new flagship phones from up-and-coming names like OnePlus that are priced around $500, but more pragmatic buyers tend to rely more on brands they are familiar with, meaning that we might see churn from Android to iOS pick up a little.

Apple Watch Has Grown Up

There is so much to say about Apple Watch that I will be writing a separate column. Here I want to point out that I firmly believe the combination of the new Series 4 with its redesign and focus on health combined with the reduced price of Series 3 will cement Apple’s leadership in the smartwatch market. Series 4 will drive the first big replacement cycle, while Series 3 might attract users who are still a little hesitant, and therefore might want to limit their investment.

In many ways, Apple Watch was even more exciting than the iPhone for me, because, like the iPhone X last year, we see the promise of the future of the segment materialize.

You Cannot Dismiss the Power of Silicon

Of course, some said that what we saw on Wednesday was incremental and not exciting. After all, this is “an s year.” True, the iPhone Xs looks the same as its predecessor. But this year it is not just about being faster. Maybe this year the “s” in the iPhone name should stand for silicon and the neural network that makes these devices not just faster but much smarter. It is hard to explain to a layperson what processing 5 trillion operations per second means. But as new apps taking advantage of the improved machine learning platform will start to come out, when the quality of the pictures taken will be compared to that of other models, dismissing this year’s models as just “an s year” will seem highly inaccurate.