Did Apple Fail Us? Maybe. Did Apple Just Stab Microsoft In The Heart? Definitely.

Brian S Hall / September 16th, 2013

Ambition is the last refuge of failure.
– Oscar Wilde

Apple held its much-anticipated iPhone launch event last week. The company offered up iOS 7, iPhone 5c, 5s, iTunes Radio, a “motion” chip, a 64-bit processor and several more goodies. The “one more thing,” however, turned out to be the reaction of the world. Neither awe, nor disappointment, really. Rather, a collective shrug of the shoulders.

It was plainly clear that the company missed the mark.

Except, this is not really true — at least, it’s not the full truth. The full truth is thus: we misread Apple at least as much as they misread us.

The Undiscovered Country

Anyone who labels the iPhone 5c as a “mid-tier” device does not understand the meaning of the term. The baseline version costs an incredulous $549 — not counting criminally high-margin bumpers. And this is the “low cost” iPhone we were all expecting?

Apple followers, Apple bloggers, and industry analysts were nearly universal in expecting a budget-priced iPhone. We were all wrong. Why?

Few companies plant and manage leaks as craftily as Apple. It was not “leaks” that caused us to expect a low-cost device. Indeed, that a few of the most well-connected Apple insiders started backtracking from this sentiment a week or so before launch was the leak.

The reason everyone was expecting a low-cost iPhone was because the entire world understands that now is the time for such a device. Great smartphones can be had for $200 – $400 all over the world. Apple’s competitors — Android, essentially —  offer a slew of great devices with good hardware, great apps, great camera and great screen for under $400.

There is no excuse for Apple to not offer us a similarly priced similarly great device. It’s not about margins or greed. The company literally has more money than it knows what to do with.

The reason the bloggers, followers and analysts were all wrong, however, stems from a rather profound misunderstanding of Apple.

Apple cannot go down-market.

Asking Apple to go down market is like asking Microsoft to no longer charge for software. It runs counter to their history, their strategy, their culture and skill set, their strengths, their leadership and how they recruit, reward and incentivize their staff.

To go down market would likely require Apple to alter device specs — which would badly upset much-needed developers. To go down market would require Apple to outsource more of its production. It would require more deals with more carriers and retail outlets, offering them more leeway on pricing. It might require using other’s processors, other’s batteries, ramping up global manufacturing and sales capacity. Apple has close to zero experience with these. You can’t simply magically alter who you are. It’s hard enough just to try and buy your way into transformation.

Think Mercedes’ disastrous acquisition of Chrysler.

The faithful may argue that Apple refuses to chase market share. Or that Apple refuses to make lesser-quality products. Fine. But the fact is now plainer than ever before. There are companies in this world that can — right now — make awesome smartphones for under $400. Apple is not one of them.

Apple failed to deliver the low-cost iPhone we all were certain was coming. Yes, they failed us. But, it was our failure to expect from them something they simply cannot do.

The Next Generation

What Apple can do, of course, is make amazing mobile computing devices — the very best in the world. The iPhone 5s may be the best smartphone anyone can buy at any price. Not that you should.

A week after launch and I simply cannot get over the fact that the iPhone 5s is, uncharacteristically for Apple, less than the sum of its parts.

Apple had the perfect opportunity to offer the world an iPhone that featured radical improvements in camera specs, radical improvements in Siri, radical improvements in iCloud, and at least significant improvements in battery life. Instead, Apple tossed in a 64-bit (A7) chip, a “motion co-processor,” and a fingerprint scanner. How does any of this help you, the paying customer, here and now?

While the A7 chip will almost certainly improve device responsiveness and should enhance operation of the camera, the full value of the iPhone 5s may not be realized for possibly a year or more, as developers and industry partners catch up. Why pay for the privilege of being a beta user?

By the time you have wearable devices that make the M7 relevant to you, and by the time most games and apps take full advantage of the A7, will you even own your iPhone 5s? Possibly not. For most users, a 1-2 year lifespan is all their smartphone ever achieves. Then it’s on to the newest device. This was a missed opportunity.

The Wrath of Jobs

Apple may not have given us what we wanted, not really, not now, but they have nonetheless created a device that puts Microsoft on notice. This cannot be overstated. Indeed, I contend the biggest story to come out of last week’s Apple launch, and which almost no one is discussing, is the breadth of the assault Apple is readying for the enterprise, Microsoft’s final stronghold.

  • Free iWork — with secure cloud included.
  • The very best smartphone (and tablet).
  • A secure ecosystem that welcomes enterprise-class apps.
  • Working fingerprint identification.
  • An M7 motion chip can both support and foster the healthcare, logistics and wearable computer industries.
  • “Desktop class architecture” inside mobile devices. Yes, Apple gleefully reiterated the world “desktop.”
  • True end-to-end ownership of the hardware and software, delivering the best reliability, customer support and security.
  • The premier software developer community and the very best, most accessible, most secure software distribution platform. Yes, these all belong to Apple.

The PC is a relic of the 20th century. The smartphone is the computer. No one, still, is even close to Apple in this regard.

The Final Frontier

Techpinions analyst, John Kirk, noted that “Apple is quietly putting together the foundation for the next five to ten years. People seldom pay attention when foundations are being laid.”

I agree. Despite periodic missteps, Apple is relentlessly marching forward. Sadly, most of the world will never know.

I’ve long contended that Apple’s end game is thus: Siri (voice) + TouchID (fingerprint) + iCloud makes every Apple screen everywhere instantly available to you and fully personalized for you. That is as awesome as it is audacious. I’ve long hoped, however, that Apple could make this a reality for every screen, every user. This is a pipe dream, I’m afraid, and that’s never been more obvious.

Apple is designed to create amazing computing devices — just not for the vast majority of the world. That’s not really a failure, but it is unfortunate.

Brian S Hall

Brian S Hall writes about mobile devices, crowdsourced entertainment, and the integration of cars and computers. His work has been published with Macworld, CNBC, Wall Street Journal, ReadWrite and numerous others. Multiple columns have been cited as "must reads" by AllThingsD and Re/Code and he has been blacklisted by some of the top editors in the industry. Brian has been a guest on several radio programs and podcasts.
  • jfutral

    I remember hearing a report once about the cultural engineering differences between Chrysler and Mercedez-Benz shortly after they merged. This is what in large part (according to the report) contributed to the failure of that merger. Chrysler’s engineers were driven by developing systems from parts that were good enough and cheap. Mercedez’ engineers didn’t care about price, it had to work and be the best at what it offered for the purpose. If they could find an inexpensive part or material that worked beyond spec, that was one thing. But “good enough” when there is more reliable or safer was not a compromise they culturally were used to making. I am sure this culture existed up and down the management line as well. The engineering side was likely illustrative of larger cultural issues.

    Apple won’t go down market because it requires too many compromises. When it can go inexpensive, it will. Take the iPad for example. Pundits expected it to _start_ closer to $1000. Apple blew them away. Apple’s offering is value. You can’t find better for the money. But this is where Apple is losing its grip. Apple is offering at a price people expect now. Here is what I mean:

    When I go to a big theatre and see a major musical, with all the bells and whistles, it may be cool and well produced, but I wouldn’t expect anything else. If I saw less, I would complain. If I go to a small black box theatre and see a major musical and they pull it off with similar pizazz, _that_ blows me away, _that_ is theatre magic, when I can walk away saying “I can’t believe they just pulled that off in that space”. _This_ is what Apple (it seems) is missing. This is why the stock is being pummeled, and by extension, why the iPhone event, even though it falls completely in line with Apple’s product cycle methodology, leaves the critics unimpressed.

    It is funny now how all the critics remember Jobs’ “One more thing” so fondly, yet they were just as critical then as they are now.

    Joe

  • Jean-Daniel

    “radical improvements in Siri, radical improvements in iCloud”

    You are mixing up hardware and software update. Siri, iCloud and many other iPhone features improvements are already planned with the iOS 7 release and don’t need new hardware to exists.

    “For most users, a 1-2 year lifespan is all their smartphone ever achieves”

    I would be curious to know where this information come from. Most people I know have a 2 or 3 year old iOS device.

    • I have read market studies that peg the ‘lifespan’ of a smartphone at 11-18 months. I chose not to link to anyone in particular as the markets are so varied.

      • Bart

        RIdiculous. They would not be worth a full $200 for a 3 year old iPhone 4 if that were even close to true. They last 11 months if you drop them in the toilet in 11 months, yes. That has nothing whatsoever to do with the quality of the phone or how long it will reasonably last.

      • Tranz Former

        Then you buy a new one and redistribute the old one to your child

        • Yes, I have done this. In other instances, sold as after-market device. I am curious how this pattern will change as Apple enters the ‘buy back’ market.

  • Space Gorilla

    Brian, I think you understand what many do not. Apple isn’t making smartphones, they are making mobile computing devices. When an iPhone can drive desktop class apps on a large screen with a physical keyboard (as accessories to the ‘iPhone engine’), will we think $800 or $900 is expensive for that device?

    Through this lens it seems clear to me that the success of Android has/will have little impact on Apple’s long term plans. Does the small market share of Mercedes have a negative impact on the experience of owning a Mercedes? Of course not. The Mac has long had small market share, and yet the software available for it is great and plentiful. The Church of Market Share would have us believe that Apple’s failure is inevitable. I don’t think that’s even close to the truth. I would argue that what Android does or doesn’t do is not that important to Apple. I don’t think Apple cares, they have other plans.

    • Great comment. I agree that the small market share of the Mercedes does not and should not impact the customer’s experience. I think the iOS platform is now self sustaining and will be for many years — even if Apple does everything wrong, which is highly doubtful.

      • jameskatt

        Apple’s current move to more colorful iPhones is a direct grab at Chinese and other Asians. These are very attractive to the China and Japan markets. Even Docomo – Japan’s largest wireless provider – predicts that the iPhone will take over 40% of its sales. Wow!

    • tesla3090

      I’m not sure I would really say they are making mobile computing devices designed to drive desktop class apps. If that was Apple’s goal, then they’re missing some things that seem critical and obvious, such as file management, interoperability of apps, etc. I doubt their failure is inevitable, and the 5s seems to be a great smartphone, I’m just not sure they really have much of a vision for the future anymore. Honestly they seem to be simply staying the course, but I guess if it isn’t broken there isn’t much need to fix it.

      • HUYA™

        How can anyone, from the outside, know what Apple’s vision for the future is? In fact what seems apparent in their actions (as Brian said) is the laying of foundations for future advancements. Not particularly interesting to watch, and even harder to put the multiple pieces together to see the big picture. Apple is clearly misunderstood, especially by Wall Street, they suffer for it, but they also don’t seem overly excited about it either. They just quietly go about skating to where the puck will be.

      • Space Gorilla

        You’re looking at this in the wrong way. When the iPhone delivers desktop class computing it will not work in the way that we are used to. Maybe I can see this more clearly because I already use an iPad 2 in a ZAGGFolio case as a replacement for my MacBook Pro. I love it, and it is obvious to me what a more powerful device running iOS 7 (and beyond) on a large screen could do. Forget about file folders and how your current desktop programs work. Forget about your mouse and pointer. That is the past.

    • Kizedek

      “Brian, I think you understand what many do not. Apple isn’t making smartphones, they are making mobile computing devices.”

      I’d like to think that was the thrust of the article. But that isn’t really what came out of it.

      There was this more promising bit, that could have gone somewhere like that:
      “What Apple can do, of course, is make amazing mobile computing devices — the very best in the world.”

      But that was it. Most of the article went on about things like how the 5S is “less than the sum of its parts”, because it hasn’t really delivered, “not now”. Apple has missed what people want and need right now, something that will give them some wow right now, and not in some two years (according to all the “experts” who are yawning at Apple’s revelations last week).

      And in other comments, Brian just can’t recommend the 5C. In the meantime, anyone who buys a 5C is just throwing their money at Apple in order to be a beta-tester for them, since Apple might as well not have released these phones but carried on with predictable updates.

      Brian says that Apple CAN’T go “down-market” — not because Apple are in the business of making mobile computers instead of mere smartphones like everyone else…. no, because Apple don’t have the “experience” of dealing with the everyday nitty gritty that presumably signals maturity and “forward thinking” in this industry! Apple would have to start relying on others (who presumably know better and deliver more value), instead of relying on themselves so much as they indulge themselves and spend money chasing a fat load of high-falutin stuff that doesn’t deliver.

      And then he complains about “haters”?

      • Space Gorilla

        Meh, I’m not here to pick apart every word. I think Brian does grok the basics, that Apple isn’t really in the smartphone game, they’re building something on a different level, playing a different game altogether. More and more I’m convinced that what Android does or doesn’t do will have very little impact on Apple’s plans.

        While Brian often says the smartphone is the computer, I say the screen is the computer, but in some sense we’re saying the same thing. Imagine a couple years from now the kinds of computing tasks and hardware set ups the iPhone will be able to drive. I bet it will be roughly equivalent to the two year old iMac I’m using right now.

        In that context Apple isn’t selling a $600 or $800 phone, they’re selling a computing engine, and that seems like a good price for that.

        • Kizedek

          Sure. And maybe that was what Brian was really trying to say. But did Brian fail to communicate that? Maybe definitely.

          Perhaps Apple merely underplayed communicating that themselves, at the event; maybe because they perhaps learned that anything else is considered hype and arrogance, and they want to shy away from acting like anything is as exciting as maps was supposed to be. That would be a shame.

          But I don’t get all the “we misread Apple” and “Apple misread the world” and Apple can’t deliver value where it matters, in the hands of everyone on the planet, because Apple lacks the experience… etc.

          Any “misreading” can basically be attributed to the misreading of the future of computing by Google and MS, and their OEMs, etc.: how the future is like the past, and mobile is like PCs, and blah, blah. And that needs to be addressed. Because that is what is routinely presented to us as the gospel. “Misread Apple”? I suppose you can “misread” Apple if you remember that almost everything about it is attributed to it by pundits who know as little as anyone else. So, I think Brian missed a bit of a chance there to set some of the record straight, and he merely jumped on a bandwagon while pretending not to.

          • Space Gorilla

            Well, he does have a job to do, page views, etc. But he’s right more often than he’s wrong, in my experience, and he gets the big picture right. What Apple is building, I think that can get to Windows-like numbers (mathematically it is pretty much inevitable at this point), but probably not too far beyond that. Apple cannot possibly serve all customers and all segments of the market. And Apple doesn’t need to. They already have enough great customers. The Church of Market Share completely misses the truth that you don’t need dominant market share to have a vibrant developer community, plentiful software and accessories, a great user experience, and so on. Apple has done this not just once, but twice. It’s also interesting when pundits bring up the whole “Apple lost the PC wars” argument. Really? Well then, I’d like to lose like that. The Mac sucks up an incredible portion of the PC industry’s profits, has tons of great software available, great hardware, it’s a great experience all around. Not much of a loss actually.

          • Kizedek

            I sure agree with you. I just couldn’t tell from the article that Brian might agree with you, too. At least it was a back-handed way to go about it.

          • Space Gorilla

            I’ve been reading Brian for quite a while, since back when he had his own site covering the ‘smartphone wars’. His style is definitely loose, and sometimes he could construct better arguments, but overall I think he’s headed in the right direction.

  • Kenny

    Apple has always been the best when it comes to hardware innovation and sotfware integration, but until they prove they can do the same in the cloud, with good integration and synchronization across all IOS devices, all the foundation that you speak of can easily go up in flames with just a single mistake or bad product launch

    • Scott Sterling

      iCloud integrates and syncs very well across all apple devices. And still getting better/broader.

  • Scott Sterling

    Exactly right. I expect next year iPhone 6 to be about the same external design as this years, but with the emergence of a second, larger version. So “forward thinking” is a strong message that the future is about expanding the computing capabilities of the device, and looking for radical changes to form factor is a thing of the past.

    • Scott Sterling

      Just as, by the way, the form factor of the MacBook Air is essentially unchanged in five years, and will probably remain so for another five. But the capabilities grow every year.

  • Scott Sterling

    If you think this was a stab in Microsoft’s heart, wait until they announce that Mavericks is FREE. 🙂

    • jameskatt

      That is hardly a stab at Microsoft’s heart. Even if Mavericks is free, it can only be used in less than 10% of computers – the Macs.

      • Scott Sterling

        When people are ready to buy a new computer they will consider this: when you buy a Mac you’ll get Pages, Keynote, Numbers et al free, and if I’m right, also OS upgrades.

        Microsoft charges for, and makes most of their money, from Office and Windows. Unless consumers are stupid, this would put a dent in MS’s business.

      • JamesDanielGibson

        Really? I could’ve sworn that the computers that can install Mavericks are the same ones that can install Mountain Lion. Well, you did mention that 10% number, so it must be true.

  • David Olson

    Brian, I felt your article zagged and zagged in a way to confuse me concerning your true opinion of how well or poorly Apple has done with its 5s, 5c and iOS7 updates. My take away is that Apple is both laying a strong foundation for the future and presenting best in class phones. And the iPhone 4S does a fine job as free under contract and gets most of the benefits of iOS 7. $400 to 850 spread of phones are covered– there really isn’t a gap from their perspective.

    Most of Apple’s product updates will be evolutionary, they always have been. True innovation is building these “little” changes into a superior advantage. It is okay that this product strategy leaves a lot of room in the lower price ranges for others to flourish with their low margins.

    Those of us who live under the contracts of Verizon or AT&T, will probably update according to our contract rather than some improved feature on new phones. I am glad our 2 year contracts are up this fall.

  • rationalchrist

    Why not buying 5S right now? I am more than happy to pay $200 for subsidy 5S to get rid of unlocking passcode. To me unlocking 5S with fingerprint is worth $200, about a nice steak dinner for 4. I hire 5S to dispose passcode.

  • Jurassic

    We have been through this type of discussion before, and people with very short memories are at it again.

    Fact #1) Apple NEVER said it was creating a low-end (price and quality) product, and it hasn’t positioned the iPhone 5C as a low-end product… because it is NOT. People who feel let down because Apple didn’t deliver what they thought was going to be a low-end product, should realize that they are the cause of their own disappointment.

    Fact #2) Apple has NEVER produced low-end (price and quality) products of any category, and this strategy has taken the company from near bankruptcy in the 1990s, to becoming the largest company in the world.

    As the redundant saying goes: “This is deja-vu all over again!”.

    A few years ago many people thought that Netbooks were going to be the “next big thing”, and many clamored for Apple to quickly produce and sell a low-price, low quality Netbook to compete with everyone else, because Apple was going to “lose market share”.

    Netbook manufacturers were losing money as they reduced their margins to compete in selling cheaper Netbooks than their rivals. But the Netbook fad quickly faded, as consumers found that the cheaply priced Netbooks were also, of course, cheap in quality and were slow and barely useable. The Netbook lines lost money for manufacturers due to the almost non-existent margins, and as Netbook popularity dwindled quickly, the manufacturers also lost the startup and development costs invested in getting those products to market.

    Apple was never going to compete in a race to the bottom in price and quality. And now those people who were originally complaining that Apple was not producing a Netbook like its competitors, realize that Apple was wise NOT to compete in the cheap Netbook market.

    Now we are experiencing the same thing, only this time it is low-price, low quality smartphones. As with Netbooks, those cheap low-quality, low-featured “smartphones” are losing money for manufacturers.

    This is why Apple’s “market share” in the number of all phones sold worldwide may be low, but Apple makes the majority of profits from the sales of ALL mobile phones (smartphones and feature phones) sold worldwide.

    Samsung is the only other mobile phone manufacturer that is making any significant profit. This is because Samsung does sell some high margin, high-end phones, and because the number of low-end cheap phones that they sell worldwide is so huge that the thin margins do bring in some profits for them.

    All of the other mobile phone manufacturers are struggling financially, and some of them are even losing money.

    In smartphone manufacturing, the choices seem to be “large market share” OR “large profit share”… take your pick. And Apple has chosen wisely. ;-))

    • Great comment — entirely filled with suppositions. Again, I lay out why I think Apple *can’t* go down market. No one else is addressing that. Rather, it’s all…well, they can, they just don’t want to. I don’t buy that. They are a for-profit company with a global footprint and a very high-profit ecosystem whose value increases with each new entrant.

      • jameskatt

        Sure. Apple can do down-market. But why would it want to LOSE PROFIT??? That makes entirely no sense.

        Apple will only make an inexpensive product when it knows how to make it profitable. This means it has to maintain Apple’s expected 40+% profit margins.

        Apple = PROFIT. Remember that equation.

        Apple doesn’t compete with bottom of the barrel companies.

        As Steve Jobs said, Apple doesn’t know how to make a cheap computer – like the netbooks pundits were clamoring for. So if it can’t, it won’t.

        Profit is King.

      • Hosni

        “But the fact is now plainer than ever before. There are companies in this world that can — right now — make awesome smartphones for under $400. Apple is not one of them.”

        Nope. Apple can manufacture iPhones at equal or lower cost than Samsung can manufacture Galaxys, HTC can make the One or Moto can manufacture the X. Apple’s materials and assembly cost for a 4s is only a little over $100, and for the 5/5s only a little over $200.

        The issue isn’t productive efficiency or cost, but price: Apple chose not to price the 5c below $400 as part of its strategy to maximize earnings. If it had priced the 5c at $399, let’s say, the 5c would not only have cannibalized the highly profitable iPhone 5s, but it would also have required Apple to lower the price of the 4s and all of the used/reconditioned iPhones Apple plans to sell in developing countries. The 5c would have become Apple’s dominant iPhone, and Apple earnings would fallen off a cliff to the tune of about $150 x 150 million iPhones = -$22 billion.

        Product pricing is all about economics/marketing, not technology. The writer is a technology expert. ‘Nuf said.

        • You speak for Apple, stating Apple *can* go down market, can price lower than Samsung, state that Apple has lower costs than HTC, Moto and Samsung. Any evidence whatsoever to back up even one of these statements?
          Everyone insisting Apple *can* do something but they simply choose not to. I’m calling you out. Prove it.

          • Hosni

            That’s a strange challenge from someone who just wrote an article claiming that iPhone production costs are higher than those of high-end smartphones from other manufacturers.

            You can find the following costs (and more) on DuckDuckGo.com by searching for “BOM” and the particular device you’re interested in researching (e.g., “iPhone 5”):

            When the iPhone 5 was released, the cost of components and assembly was $198: http://www.statista.com/statistics/244561/manufacturing-cost-of-the-iphone-5/

            Moto X ($214): http://finance.yahoo.com/blogs/the-exchange/google-hot-moto-x-phone-could-end-losses-161505738.html

            Samsung Galaxy S4 ($241): http://bgr.com/2013/03/19/samsung-galaxy-s-4-bom-23-dollars-386038/

            Unit cost for each device normally comes down about $40-$50 each year as the components inside become commoditized (and less expensive). Therefore, materials + assembly for the 5c (16 GB) will be about $160. Retail price = $549. If Apple wanted to sell the iPhone 5c for $399, it could easily do that without losing money on the 5c … but as I said earlier, pricing the 5c at $399 would take profits and sales from the 5s, 4s and used/reconditioned iPhones that Apple sells.

          • Hosni

            Happy to help. You can find the cost of manufacturing various smartphones — components plus assembly — by DuckDucking “BOM” (bill of materials) and “smartphone name”: e.g., BOM iPhone 5.

            iPhone 5 (when released): $198-$207.
            Moto X: $214.
            Samsung Galaxy S4: $242.

            With each passing year the components become less expensive, so the cost of manufacturing older-version iPhones drops by about $40. That means the incremental cost of manufacturing the 5c will likely be about $160-$175, and that Apple could easily sell the 5c for $399 and still earn a profit. It simply chooses not to, because it earns even greater profit with the price at $549.

            (I posted an earlier version of this comment with URL’s to articles documenting the BOM’s for the three devices above, but that comment appears to have been flagged/moderated/removed for containing links. Sorry.)

          • TheEternalEmperor

            I don’t know. Does this factor in R&D, support, manufacturing capex, etc. I mean, Samsung and Motorola get the OS for free for pete’s sake and barely upgrades the phone’s OS after purchase.

            Apple supports their devices for years.

          • Hosni

            As I mentioned, the figures reflect materials and assembly costs. Apple has no capex when purchasing components from contract vendors, and they have no costs of upgrading legacy iPhones to the latest iOS release since they were going to write all of the iOS code anyway. Even if the issues/costs you mention come into play, at most they account for about $20 per device, and don’t alter my conclusions (concerning Apple’s ability to earn a profit with the 5c priced at $399).

          • TheEternalEmperor

            From what I’ve read, Apple invests quite a bit in manufacturing equipment. Does it not take time to recoup that? All of that R&D on creating those custom CPUs? Acquiring companies like Authentec…

            Also, “earn a profit” is a wide statement. 1%? 3% 20%?

            My point with iOS is that hey have write it and support it and the other vendors don’t have that costs.

            Ultimately, I don’t think anyone outside of Apple knows what it costs so you can’t just say “+$20” and walk away, so I don’t believe that your profit analysis is valid.

          • Hosni

            “From what I’ve read, Apple invests quite a bit in manufacturing equipment. Does it not take time to recoup that? All of that R&D on creating those custom CPUs? Acquiring companies like Authentec…”

            When the analysts tear down an iPhone (or Moto X, etc), they estimate production cost by pricing components on the open market from various vendors who pay their own overhead costs. If a chip (let’s say) can be purchased for $10, but Apple buys capital equipment for a component supplier and then strikes a deal where it pays only $7 for the part, then $10 includes both the $7 part plus the cost to Apple of providing the equipment.

            Apple did NOT incur R&D costs for creating custom CPU’s for the iPhone 5c, because the 5c is an iPhone 5 with a different case, and its CPU development cost was already justified/paid for a year ago, when the iPhone 5 was launched (also iPad 4). Nor did Apple acquire AuthenTec to produce the 5c, because the 5c has no fingerprint reader. I suggested that Apple may incur up to $20 (per unit) in one-time cost (about $1.5 billion) to account for R&D on the plastic case and other costs of launching the 5c.

            Your point with iOS is a non-point. If Apple develops iOS 7 for iPhone 5s and iPad 5, then loading iOS 7 onto older devices (including the 5/5c) adds approximately zero to Apple’s cost of doing business. I wouldn’t be surprised if Apple spent $1 billion or more developing iOS 7, but it would not have saved that expense if it had retired the 5 without launching the 5c.

            The $20/unit figure I mentioned was a generous (high) estimate of the development costs for the 5c. That’s about $1.5 billion. I doubt if Apple spent more than $1.5 billion developing the 5c’s plastic case … which is the only new part in the 5c.

            Economists and business managers focus on incremental cost (and revenue) when computing profit, not historical figures or averages or gut instinct.

          • TheEternalEmperor

            “Apple did NOT incur R&D costs for creating custom CPU’s for the iPhone 5c, because the 5c is an iPhone 5 with a different case, and its CPU development cost was already justified/paid for a year ago,”

            See, here is my point. YOU don’t know that. Just saying it doesn’t make it a fact. Unless you can point us to something that says “Apple paid this much to develop the A6.” you don’t know if it was paid for or not.

            You don’t know how much it costs to R&D the new case.
            You don’t know how much it costs to manufacture it.
            You don’t know if the CPU is exactly the same or has been refined.

            As I said, you can’t just say “X”, and walk away.

            This is all speculation on your part, unsupported, so you don’t get to declare what how Apple should price its products.

          • Kizedek

            Apple has tight control of its costs (no dumping 12 billion down the drain here and there). Sure, components get cheaper as time goes on… but how do you think margins go up on older products and Apple can cut price by $100. It’s not all in the component costs — it’s because fixed price has been amortized over so many units. Say, Apple aims to sell 100 Million units, and hopes to do so in a year. Only, people love the product and Apple can actually sell it successfully for a further two years!

            Who wouldn’t want that business? That is what makes margins — NOT a new model every other week with a run of 200,000 to see what sticks to the wall. Planning for and covering your costs — including, nay, especially R&D and fixed operating costs — is what it means to be profitable. Sheesh!

            But, no, don’t ask me for an internal Apple document on that to support my statement.

          • TheEternalEmperor

            I don’t disagree. My point may now be lost. Hosni thinks that Apple could decrease their prices and still profit.

            My point is that the situation is more complex than that and that you can’t just trudge out some BOM, subtract that from the price the carrier pays and say “BAM! Apple can lower the price even more and still make out!”

            We haven’t even gotten into the Wall Street propensity to degrade Apple just to keep them honest. Perhaps that affects pricing too.

          • Kizedek

            It appears that Hosni was talking about components being re-used in subsequent products. Thus, if the R&D and tooling for the A4 or A5 was covered by amortizing it in first 100 million units of iPhone X, then it was covered, once and for all, and doesn’t impact the iPhone XS or iPad X in which it was also used.

          • Hosni

            Pretty much as I told you a week ago, manufacturing cost for the 5c is approximately $173, cost for the 5s is about $199.
            allthingsd . com/ 20130924/ teardown-analysis-shows-iphone-5s-costs-at-least-199-to-build-173-for-the-5c

            I do understand that the world is complex, but as a professional economist I don’t find that complexity as worrisome as you do.

          • Hosni

            One element of your argument seems to be that I don’t know what I’m talking about because I don’t know for certain that the iPhone 5c is an iPhone 5 in a plastic case. That has been widely reported in the press and Apple has posted technical specs for the 5c on its website, so beginning the analysis at that point is the best one can do without breaking into Tim Cook’s MacBook. Of course that assumption may not be acceptable if new information comes to light.

            To this point, however, neither you nor the main article have quoted a single number or supplier or analytical insight suggesting that the unit production cost of the 5c is above $200, much less $399.

            The part of the article to which I responded claimed that Apple is not capable of selling the iPhone 5c below $399 (due to high costs). However, if Apple does have the ability to set price at $399 or lower, the fact that it doesn’t indicates that its higher price reflects a marketing/profit maximization decision.

          • TheEternalEmperor

            “One element of your argument seems to be that I don’t know what I’m talking about because I don’t know for certain that the iPhone 5c is an iPhone 5 in a plastic case. ”

            No. What I’m talking about is that you don’t know their sunk cost, so you don’t know what their profit is or needs to be.

            My point about the the 5C is that we already know it has a bigger batter, supports more LTE bands and has a better front camera, so we KNOW that it is not *exactly* a 5 in a plastic body.

            But, your magic word, to me at least is “if”, if Apple does have the ability, etc. My main point is that we don’t know for certain that they can sell it for less than $399 because there are so many unknowns.

          • Hosni

            1- Every microeconomics textbook will explain this: Sunk cost does not affect the profit-maximizing price to charge or number of units to produce. Therefore, I do not need to know Apple’s sunk costs to perform the analysis I provided earlier.

            2- An incrementally upgraded component has approximately the same price from year to year due to productivity gains in its production (Moore’s Law, etc). This is not true for every component, but some component prices fall by unusually large amounts so the principle generally holds. How do I know? Because I have studied BOM’s for several consecutive years, and that’s what I’ve observed. For this reason the issues you highlighted (incrementally upgraded wireless chipset and camera) may perhaps have a $5-$10 impact on the unit cost of a 5c — which still leaves the 5c’s unit production costs at or below $200, and my conclusion unchanged.

            What impress you as significant unknowns are minor compared to those glossed over in the article, which makes no attempt to discuss the BOM for an iPhone 5c before jumping to the conclusion that Apple simply can’t produce iPhones at a low enough cost to compete. You have made no reference to BOM’s either.

          • Mark Jones

            If by “can”, you mean that Apple’s costs are low enough to produce a low-cost iPhone, then that answer is already obvious — just look at Apple’s margins; subtract out the margin, and we know the possible price of an Apple product at 5-15% margin (about what its competitors get). Apple though chooses to keep its margins much higher.

            If by “can”, you include other side effects, such as the impact on its “brand”, then I would likely agree that Apple “can’t”. That said, Apple could release something akin to the iPod shuffle, a high-end, reduced flexibility product at the lower-cost end of the market. But what such a product would include for the iPhone line is unclear to me.

          • Hosni

            Now that it is on the market, here are the results of a teardown of the iPhone 5c. Materials costs plus assembly totals about $173/unit. (The 5s is about $25-$35 more costly.) So the belief that Apple CAN’T meet the competition is misplaced.

            http://allthingsd.com/20130924/teardown-analysis-shows-iphone-5s-costs-at-least-199-to-build-173-for-the-5c

      • isitjustme

        I believe you are calling the kettle black.

        Beside it is also full of FUDs. I don’t have to explain and I don’t need to.

        I had read many of your writes perhaps this is first one that I came across which was full of negativity.

      • jfutral

        “They are a for-profit company with a global footprint and a very high-profit ecosystem whose value increases with each new entrant.”

        Hmm. I don’t think that is a correlation Apple would agree with. And I think Android’s huge numbers but global lack of profit and engagement for anyone other than Samsung bears that out as a comparison. Just because someone buys a smartphone, especially on the low end, doesn’t mean they add value to the high-profit ecosystem.

        I think, for instance (assuming high quality experience and product are maintained, which I believe the Android offerings bely, but let’s assume a high quality iPhone is still possible at a lower price for the sake of argument), if Apple adds a colour range to the iPhone it is because they have reason to believe that adds value to some potential customer demographic, not because of some irrational belief that “choice” intrinsically adds value. So, if Apple avoids the sub $500 price range, I have no doubt that they have reason to believe that simply offering a phone in that price range does not intrinsically add a valuable entrant to the ecosystem.

        My only proof is my observation of how Apple has always operated, at least since Jobs’ return.

        Joe

      • Kizedek

        Sorry if you don’t buy it. In support of *can’t*, you have cited things like having no experience with sourcing from multiple third-parties — as opposed to custom-designing their own parts, presumably.

        This seems a rather odd thing to say about a company that prides itself on its engineering and know-how of thirty-odd years. A company which strives to create the best product it can.

        How is it insightful to say Apple can’t cut corners with the best of them? Indeed, Apple are so creative in their custom manufacturing that they can compete with the likes of Dell when it comes to delivering a product that is actually spec for spec comparable through Dell’s build-to-order options!

        So, according to you, Apple is so stuck in doing things bespoke and for itself, that it can’t enjoy the “enlightened” approach that everyone else takes to manufacturing?

        To go down market would require Apple to outsource more of its production. It would require more deals with more carriers and retail outlets, offering them more leeway on pricing. It might require using other’s processors, other’s batteries, ramping up global manufacturing and sales capacity. Apple has close to zero experience with these. You can’t simply magically alter who you are. It’s hard enough just to try and buy your way into transformation.

        Anyone can always go cheaper by cutting corners — Apple won’t!. Will Apple source the same crappy, off-the-shelf, third-party components that everyone else uses? Will Apple commission some manufacturer to come up with something that will be good enough according to some vague “reference design,” and then slap an Apple logo on it? Certainly not!

        Can’t because it means “Ramping up global manufacturing and sales capacity?” Certainly Apple has shown its industry-leading ability at both with production of some 20M units of ONE product each and every quarter, and remembering that its stores are the most visited and valuable spaces on the planet!

        Seems to me the answer is that Apple surely *can*, if the aim is to do something that others aim to do: ie., MS “aims” to get Windows everywhere; Google “aims” to get your data one way or another, whatever device or platform you are using; Amazon “aims” to sell you products through its store; Dell aimed to get marketshare…

        But Apple doesn’t aim to do any of these things — Apple aims to build and sell the best products it can. End of story. And their relentless focus means that aiming resources at down-market products would take focus and talent away from other products — resulting in more contradiction.

    • indiana61

      Fact #2) iPod shuffle

  • neutrino23

    I agree that going down market is difficult I would point out that Apple did make a cheaper iPod. The first iPod was $500 or so. Later iPods were much cheaper.

  • TheEternalEmperor

    I’m getting a 5S. The wife and I have staggered contracts so each year, one of us is hitting the two year mark which enables ME to get new phone each year on contract.

    Each year, there has been something that has made the upgrade worthwhile.
    3GS – our first, but she destroyed her’s, thus the staggering
    4 – retina
    4S – Siri was good, 64gb was better, but it enabled me to get her on retina by giving her my old 4
    5 – LTE, better screen, better body, faster, nuff said
    5S – touch id, faster, but the real deal is it gets her on LTE and we are both grandfathered on AT&T with unlimited LTE. We can now facetime from anywhere.

    Next year, touch ID for her will be enough to move us again.

  • Michael

    Can’t wait for my 5S. It’s an improvement over my 4S in many ways, and I’m due for the upgrade.

    I hope Apple keeps doin’ exactly what they’re doing, ’cause it’s easy, reliable and trustworthy.

    • Cool. I did not really address this but what I find most surprising is that…for some people I tell them they should buy/upgrade to iPhone 5S. I can’t even contemplate a scenario yet where I can recommend the 5c to anyone.

      • Bart

        Uh, to save $100 or get twice the memory. Let’s say they think their iPhone 3GS or 4 camera is ‘good enough’, and they don’t care about the fingerprint thing. Some even like plastic phones (klutzes who drop their phone a lot–see last comment).

        • Better phones than the 5c at the same price or lower.

          • Bart

            If you are willing to accept that Andoid is ‘good enough’ then maybe. Otherwise, bull. iPhone 5c gets you a ticket to everything Apple. Don’t wonder if an App will be out for Roid, it will be out for iPhone, and it will work better than the android port.

          • iObserver

            there are phones at the same price or lower but none better than the 5c. Simply because a phone has specs in hardware doesn’t mean the hardware is quality. And we know the operating system isn’t close to as good by virtually any definition.

          • TheEternalEmperor

            $99 is pretty darn low, but it depends on your definition of better. IMO, iOS has better
            apps, better support, better resale value, better third-party support, less malware risk, better content, better integration.

            If you want widgets, third-party keyboards, shakely upgrades and malware, Android is a better choice, IMO.

          • freerange

            Sorry, but I’m calling BS on you here. better in what way? Build quality and materials? No. Ecosystem? No. Customer satisfaction? No. Software and hardware design and integration? No. Resale value? No. Customer support? No. Customer satisfaction? No. Better apps? No.

            etc. etc. etc.

      • Tranz Former

        5C is for my high school and college kids

      • kcwookie

        That is because you are who you are. It will sell because of style. I have a house for sale in a nice neighborhood in Kansas City, it has been redone with a new furnace, air condition, all wood rot fixed and the house painted with a commercial grade coating that guarantees no wood rot or damage for twenty years and no need to touch up for ten years. The house has a keyless entry system and other features.

        It won’t sell, it’s not pretty enough. A house a few blocks away with massive foundation damage sold well because it was pretty on the inside and the grass was better despite being a future bag of tears for the owner.

        Style sells, even over great specs.

        • TheEternalEmperor

          Or perhaps that house down the street had better “bones.” The furnace, AC, wood rot is okay, but isn’t a deal breaker. Can be fixed easily Paint is superficial(no offense) and even more easily fixed.

          I highly doubt someone looked at the house down the street and said, “Well, it’s sinking, but it has great grass.”

          It is more likely that there were other elements that you are unaware of that made that house more desirable than yours.

          iPhone C compared to S4 is the same. Bigger screen and Air gesture are not as compelling as entry into the Apple ecosystem, resale, iOS7, etc.

  • FalKirk

    There is some great stuff in this article, Brian. Not sure I agree with it all. May respond, in part, in my next article.

    But you made me think. Is there a higher compliment than that?

  • The Cappy

    Prices aren’t incredulous. People can be incredulous at a price.

  • hannahjs

    Never fear. “…just not for the vast majority of the world” — not yet. Alexander has yet to advance as far as India.

  • iLove

    To be honest, we knew that Apple is innovation, but the analysts, journalists and we are a normal people, how don’t really understand technologies. But don’t be discouraged just keep doing what you are doing best Apple, ignore all the noises out there.

  • iLove

    Ask Chanel and Louis Vuiton go down-market, they’d definitely say N’est Pas.

  • Cornstarch

    Windows has a 93% of the market share while Mac OS has a measely 6%! Windows phone in Germany captures an 8% marketshare and rising fast while Apple is at 13% and sinking fast! All three major Russian carriers dumped the Iphone for windows phone because windows phone surpassed Apple in Market share. Apple Market share in Asia is at 8%. The trend is clear that Apple will be further thrashed by Android and Windows. More stock buybacks will further erode their power!

    • melci

      Total Devices Sold:
      iOS = 700 million
      Android = 1 billion.

      Active app-using devices (Flurry):
      iOS = 510 million
      Android = 564 million

      Android’s 70-80% marketshare is meaningless when most of those devices are cheap glorified feature phones. It is little different from when Symbian captured 60-70% of the smartphone unit sales market worldwide.

      Apple’s iOS continues to obliterate Android in actual usage share, developer revenue, profit share, web browser usage, e-commerce revenue, advertising impressions, advertising revenue, etc etc.

      – 67% of mobile video was played by iOS – devices in 2012 (Ooyala)
      – 83% of airport wifi connections are iOS devices (Boingo)
      – 88% of mobile e-commerce revenue is from iPads (IBM)
      – 90% of online retail revenue is generated by iOS devices (Rich Relevance)
      – 89% of tablet e-commerce web traffic in Q1 2013 is iOS (Monetate)
      – 76% of mobile web browsing is iOS (April 2013 figures averaged over Net Applications, ComScore, AT Internet, Statcounter Global Stats (OS), W3Counter, WikiMedia)

      In business, Apple is accelerating away from Android:

      – Apple’s iOS mobile business market share increased from 69% to 78% in Q1 2013 while Android declined from 30% last year to only 22% (Egnyte)
      – iPad captured 93.2% of Business tablet market in Q4 2012 (Good Technology)
      – iPhone accounted for 73% of all non-BB business smartphones (Good Technology)
      – iOS devices in total represented 77% of mobile device activations in the enterprise market in Q4 2012 (Good Technology)

      In terms of app platform, Apple continues to destroy Android:

      – iOS developers make 430% more revenue than Android developers in 2012 (Distimo)
      – 84% of mobile games revenue is generated by iOS (NewZoo)
      – iOS games revenue is almost 3x greater than Android in Q1 2013 (IDC and AppAnnie)

      Developers, content providers and publishers are not making up the difference in advertising:

      – Flurry reports that in-app ad income is only 23% the amount of paid-for app revenue.
      – 63% of ad impression within apps came from iOS in 2012 while Android plummeted from 53% in 2011 to 37% in 2012 according to Velti.
      – 98.1% of tablet ad traffic comes from iPads (OnSwipe)
      – 94.6% of Tablet web browser share is iPad (Chitika)
      – 69% of mobile ad viewing share is iOS vs 29% for Android (Chitika)
      – 51% of in-app and web ad revenue is generated by iOS (Opera)
      – MoPub reports that 75% of ad revenue is generated by iOS users.

      And iOS users are far more lucrative for advertisers, developers and content providers:

      – Neilsen reports that in the USA, 40% of iOS users have incomes above $100K versus only 25% of Android users, while double the percentage of Android users have incomes below $25K.
      – CPM rates are twice as high for iOS devices compared to Android
      – Click-thru rates are twice as high for iOS compared to Android

      Android is losing the teenage demographic:

      – 48% of teens now report that they are using iPhones in Q 1 2013, up from 40% just six months previously
      – 62% of teens expect their next phone will be an iPhone
      – Only 23% of teens expect their next phone to be an Android device (Piper Jaffrey)

      It is very obvious that Apple’s iOS has taken over the world in all the metrics that actually matter.

      • Cornstarch

        dubious distorted web traffic “study” funded by Apple is to mask the true fact that they are losing. 98.1% web traffic comes from Apple! only a fool would believe that. Hong kong and Tokyo is by no mean a poor place but somehow people there choose Android Big phablet over the iphone.

        • melci

          I think you need to work on your canned responses. If you don’t believe OnSwipe has reported that the iPad generates 98.1% of tablet web traffic, go argue with OnSwipe. I have referenced every source.

          The web traffic figures I gave were averaged over multiple analytics sources and of course Apple has funded none of them. Here they are in detail:

          As of August 2013:

          Wikimedia:
          – iOS = 24.3%
          – Android = 6.2%

          W3Counter:
          – iOS = 9.4%
          – Android = 5.2%

          StatCounter Global Stats:
          – iOS = 4.3%
          – Android = 1.7%

          Net Market Share:
          – iOS = 9.9%
          – Android = 5.1%

          As you can see, iOS as a whole continues to account for between 2 – 3x the web browser share of Android with the iPad utterly dominating the tablet segment.

        • TheEternalEmperor

          “I don’t like it. It can’t be true!”

    • Comment Zilla

      Did you know that Apple is the worlds most profitable PC maker (Mac), above HP?

      If you include the iPad, Apple is the world’s largest PC maker (Mac + iPad), above HP.

      Apple is still the most profitable mobile OS manufacture, above Samsung.

      I fail to see how marketshare will increase their profit or improve their products?

  • Cadillac88

    I don’t really get what you are driving at here. You’re heavy on the negative side and rather than coming across as opinion or analysis it just sounds like complaining. So what is it? Really. Are you in-between upgrade cycles? Can’t decide? iPhone 5s not usefull enough. iPhone 5c is just a 5 in plastic. What to do? Or are you trying to help your readers decide? So, if I have a 4s, should I just skip my upgrade this year because the whole thing is just too boring? Or just buy something completely different this year? Something cheaper and with more value if I read you right. Apple is not upscale enough but neither is it down scale enough? No one ever bought the 4 or the 4s once the iphone 5 came out, right? Oh wait, maybe they will sell some 5c’s then – now that I think about it. The 5c is too yesterday. The 5s is too tomorrow. Apple doesn’t make something for everybody. That too bad. You see? You don’t really go anywhere. No actual conclusions. Let me know when you finish this article.

  • AhmadZainiChia

    “Apple cannot go downmarket.” This is true to an extent but I think the bigger picture on why iPhones are expensive off-contract because Apple does NOT want iPhone users to be on prepay. Why? Simple: if you’re on pre-pay, you’re very likely to be more worried about your data usage, etc. That kind of user attitude in using an iPhone would result in a poor experience; something which gives Apple hives. That’s where the iPod Touch comes in. Basically, Apple’s thinking is this: if you’re gonna be on prepay and worrying about data, then we have a good solution for you: a wifi only iPod Touch, so when you use it, you don’t have any kind of nagging thoughts in your head, wondering about how much data you’re using.

  • ey

    True end-to-end ownership of the hardware and software, delivering the best reliability, customer support and security.

    Excuse me? Obviously you know nothing about desktop or mobile device security, let alone reliability.

    • Comment Zilla

      Then enlighten us…

  • Mark Jones

    In the same way that hardware-wise (components, displays, etc), Samsung non-Galaxy smartphones are one or more steps below the Galaxy smartphones, the iPhone 5c is a step below the 5s, whether you want to call it mid-tier or not. Apple has previously covered three market levels using one-year old and two-year old products; it now has launched a new product in the one-step-below level for the first time.

    Apple’s top level device at $649 costs up to $200 more than its competitors top level device. In the same way, Apple’s next step down device at $549 will cost up to $200 more than its competitors next step down device. The premium is for the integrated Apple ecosystem (primarily software and accessories, now including iWork/iLife apps), Apple support and service, and Apple prestige/image, all of which are part of the Apple brand.

  • wfolta

    Another important factor is: those making those “great” sub-$400 smartphones are making how much profit? The latest graphs I’ve seen indicate that Apple and Samsung are basically making 100% of the profits in the smartphone segment. So when you talk about those sub-$400 smartphones, you mean Samsung smartphones.

    It’s true that two years ago — at the peak — Apple made 80% of the smartphone profits and Samsung made only 20%, and it’s now down to a 50-50 split. But this isn’t an Android-Apple battle, it’s a Samsung-Apple battle, and as you note Apple has just laid the groundwork (A7/M7) for future devices that are at least a year ahead of Samsung. In fact, Samsung was seemingly caught by surprise by the announcement and had to come out a day later with a “we’re going to do that, too!”.

    All the other smartphone manufacturers are racing to the bottom and losing. Samsung has done very well by being nimble and following Apple’s lead, combined with a “throw everything at the wall and see what sticks” approach and incredibly deep pockets and vertical integration. With the A7/M7 and the move away from Samsung as a supplier, Apple is arguably closing the vertical integration gap, so it’ll be interesting to see how this plays out.

  • Secure ecosystem, best tablet, free iwork, premier dev community. Yes that is quite a bullet list! Poor microsoft.

  • Alfiejr

    seriously, Brian, it’s clear what Apple actually did last week went way over your head.

    we don’t need a “radical improvement in camera specs” – we simply need to easily take much better photos in typical everyday less-than-optimal circumstances, silly. specs are for geeks. good pix are for all of us. what Apple did offer were important advances in (dual) fLED flash engineering and simultaneous multi-image processing, both designed to achieve that outcome. we have to wait for the reviews to learn how well they succeeded, but they, not you (nor mega pixel overkill), are headed in the right direction here.

    while a “simple” thing, like the Touch ID fingerprint scanner merely does one thing “here and now,” but it’s a really welcome thing – saves you the chronic pain-in-the-butt of entering a passcode dozens of time a day and your iTunes password every time you buy something. and the technology behind it, which you fail to acknowledge, is in fact state of the art. if it becomes the first fingerprint reader to work consistently on a consumer device and be widely deployed (all previous efforts flopped), that IS a “radical improvement.”

    and you managed to totally ignore the arrival of iOS 7 as part of this launch package. i guess it’s old news to you, but will be nonetheless brand new to consumers, which is what really matters. it offers a couple dozen significant everyday improvements we will all welcome/enjoy, tho none i guess are “radical” enough for your taste.

    there are other elements of the new iPhone and iOS 7 – like iBeacon and the M7 chip – that may or may not become very important in coming years. but complaining that they are meaningless because that may take more than 2 years – the typical ownership cycle of any smartphone – is a really silly cheap shot. these technologies will never even be deployed by third parties unless a market leader like Apple gets the ball rolling like this. if they lead to something big eventually – and they might – then they actually are “radical” innovations today. only time – not you – can tell.

    i guess you had some check list of what you wanted from the iPhone 5s in your head, and didn’t get it. so you just ignore the rest. that’s a foolish approach to life.

    • If you want to pay your hard earned money to be a beta tester for Apple, so be it.

      • Kizedek

        Sounds like you are buying into the opinions of the nay-sayers who say, for example: “64-bit doesn’t mean anything any time soon; it’s just a marketing gimmick…”, etc.

        Don’t know if you saw the Event video that I saw, but I saw a game developer demonstrating something new and testifying that it took them all of 2 HOURS to make their new app ready to take advantage of the new capabilities of the 5S.

        2 HOURS, or 2 YEARS? Bit of a difference, there. Hmmm.
        How about we just give some motivated developers 2 weeks or even 2 months to start making use of the new features in ways that not even Apple imagined?

  • Kizedek

    “To go down market would likely require Apple to alter device specs — which would badly upset much-needed developers. To go down market would require Apple to outsource more of its production. It would require more deals with more carriers and retail outlets, offering them more leeway on pricing. It might require using other’s processors, other’s batteries, ramping up global manufacturing and sales capacity. Apple has close to zero experience with these.”

    Close to zero experience with these things? I find this notion very difficult to reconcile with what we do know about Apple. For example, statements such as this, by Tim Cook during a quarterly earnings conference call:

    “The supply chain is very complex, and we obviously have multiple sources for things. Yields might vary, supplier performance might vary. Even if a particular data point were factual, it would be impossible to interpret that data point as to what it meant for our business.”

    I find it much more plausible that Apple is only too intimately acquainted with all these things through experience gained during its 40 years of existence — I think it has simply rejected them.

    However, the next bit: “You can’t simply magically alter who you are.” That I do agree with. I think MS will find it hard to become a functionally oriented services company.

    And, “It’s hard enough just to try and buy your way into transformation.” That I also agree with. Seems like the reference was made in regard to Apple, but is more aptly applied to Google’s questionable acquisition of Motorola and even Android, and to MS’ acquisitions of Danger, Skype, Nokia, etc. — rather than to Apple’s smaller and strategic acquisitions of teams like PA Semi-Conductor, etc., or to Apple’s focused cap ex spending on particular equipment for particular assembly lines, to achieve a global hold on particular processes and methods of production.

  • Chris BSomething

    It’s ridiculous to say Apple can’t reduce their margins or greed because “they have more money than they know what to do with”. Apple needs to make more money, so the share price can go up, so Tim Cook’s options can vest in the money (along with the other management) and the share funds can be happy. This is the same for any company. Whether going downmarket, or staying upmarket is the way to achieve that is a different matter. But that comment was so dumb, I didn’t bother reading the rest.

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