At Apple Park Campus here in California, at the world’s most hyped annual tech media event, Apple on Tuesday announced three new iPhones, a new Apple Watch and a new iPad. There were no big surprises — even though the slightly lower pricing of the iPhone 11 base model, and the aggressive monthly subscription rates of new services Arcade and Apple TV+ got some applause.
Why does Apple launch new phones every year in September?
Apple is different from other smartphone makers — it has, at least in countries like the United States and Australia, a captive base of users who don’t actually put a lot of money down to buy a new iPhone; rather, they pay for it as part of their monthly telephone bill. It is almost like a subscription service — every time they get a new iPhone, their monthly bill goes up by a few dollars. These users — whose numbers are substantial — end up periodically upgrading to newer devices, thus assuring Apple a certain sales volume every quarter.
But to persuade these users to upgrade, Apple must come up with new phones every year, catering to all sorts of budgets and users. So, this year, the iPhone 11 is the budget phone, while the iPhone 11 Pro and iPhone 11 Pro Max are the premium ones.
But what explains the huge hype before Apple events?
The iPhone is the original smartphone — Steve Jobs pretty much created this segment when he announced the first iPhone in 2007. Apple has been setting smartphone trends ever since. Over the years, the entire mobile phone industry, and even users, have come to look at the Apple event expecting new features to be introduced.
However, over the past few years, rivals have beaten Apple to at least some cutting-edge features. The ultra wide lens that the new iPhone has got for example, is something that Samsung, OnePlus and some others have had for at least a year. But most of these brands are also trying to preempt what Apple will launch — and often don’t provide the same experience as Apple in terms of syncing the hardware and software.
The hype cycle usually helps Apple trigger a fear of “missing out”, at least among its loyal user base — and to get a lot of upgrades going, even if they are not actually based on user needs.
So is every new phone really better than the earlier one?
Yes, they are. What is tougher to say, for Apple as for all smartphones though, is exactly how much better. Technology and innovation have peaked in smartphones, and it is much more difficult to offer a new feature that really changes the user’s experience. Apple, for instance, is talking about its better camera experience powered by its more powerful A13 processor — but that’s about it this year.
For many users, these so-called “incremental updates” have started becoming less exciting. Fewer customers are upgrading, many are holding on to their phones for longer, thus impacting the volumes of companies like Apple. It remains to be seen, for example, whether “the A13 Bionic chip and its neural engine tied to the new cameras” really do succeed in driving new demand.
Next year though, could be different. Companies will try to leverage the rollout of the 5G network in the biggest economies. 5G is core technology that can be used to offer fundamentally new experiences that go beyond just an upgradation in speeds.
How is the global smartphone market doing right now?
Over the past few quarters, it’s been flat at best. According to research firm Canalys, shipments for Q2 2019 actually fell 2% year on year. Samsung and Huawei, which hold the top two spots, grew in single digits; Apple, in the third spot, saw its numbers fall 13%. Apple will be hoping to recover in Q3, which, because of the new launches, is traditionally its best quarter. Chinese startups like Xiaomi, Oppo, and Vivo having been dominating the budget phone markets.
How important is India for Apple?
Over the past few quarters, Apple has lost its way in China, its biggest growth market. This is why it will turn focus on to India, where it is already manufacturing iPhones. Buoyed by the success of the iPhone XR after a price cut, Apple has launched its successor, the iPhone 11, at Rs 64,900, much below the Rs 76,900 launch price of the XR. It has also been pushing cashbacks via banking partners, EMI schemes, and other offers that make the phone cheaper.
But even so, an iPhone is still very expensive for the average Indian user. But Apple will win even if it manages to become the dominant player in the luxury segment, which now has very few smartphone makers left.
Rajan is in Cupertino on Apple’s invitation.