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Apple’s September 10 event will show us new iPhones, but it might be the services that rake in the money

If Apple prices the iPhone 11 right, it could drive volumes and ultimately market share in India, the world’s second-most populous country.

Written by Anuj Bhatia | New Delhi | Updated: September 10, 2019 12:46:12 pm
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On September 10, Apple will launch a new iPhone. Over a decade after the first iPhone changed the way people communicate, Apple’s current CEO Tim Cook will take to the stage at the company’s Apple Park headquarters in Cupertino, California, on Tuesday to announce what the company has on offer for its millions of fans worldwide, well in time for the crucial holiday season.

This year, the company is expected to launch three new iPhones. Reports suggest there will be the iPhone 11 Pro and iPhone 11 Pro Max, the successors to the iPhone XS and iPhone XS Max, as well as the iPhone 11, a sequel to the iPhone XR. But experts believe the iPhone 11 lineup will offer a minor upgrade over the 2018 models.

“It is very likely that Apple will launch three devices to replace the XR, XS and XS Max range,” Thomas Husson, VP, Principal Analyst – Marketing & Strategy, Forrester Research, told indianexpress.com over mail. “One of them, the iPhone 11 (whatever the name ends up to be) will be more affordable and have an LCD screen. I really don’t think Apple will offer a new design, a pocket-sized form factor or a 5G smartphone,” he said.

While the iPhone now contributes less than half of Apple’s total revenue, it is hard to argue that the iPhone is crucial to Apple’s success. With redesigned iPhones with the built-in 5G support slated to land next year, Apple has an uphill task trying to sell the iPhone 11 lineup to new consumers.

“Apple’s dependency on the iPhone is nothing new but this year more than ever, Apple has no choice but to perfectly execute the marketing and commercial launch of its new iPhone range,” adds Husson.

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‘iPhone 11 will drive volumes’

Out of the three new iPhones, iPhone 11 will be the smartphone that most users would be interested in. It is likely the phone that may change Apple’s fortunes in emerging markets, especially India. If Apple prices the iPhone 11 right, it could drive volumes and ultimately market share in the world’s second-most populous country. The popularity of the iPhone XR in India shows that despite the lengthening smartphone cycles and a slowing economy, consumers are willing to pay for a smartphone that doesn’t cut corners on performance.

Interestingly, however, the iPhone XR met with the same response all over the world. A report from IHS Markit reveals that Apple sold 26.9 million units of the iPhone XR in the first half of 2019, making it the best-selling smartphone of 2019. This is a phone that costs $749 globally, so it doesn’t come cheap.

William Stofega, an analyst with IDC, said Apple can learn a lot from the success of the iPhone XR. “The XR success proves that Apple does not need to include all of the top-tier bells and whistles such as OLED screens and 3D touch to make a popular. Ultra-high priced phones have their appeal and help margin but the XR proves that Apple can compete on price as well as value,” Stofega added.

“Apple needs to price its products to meet consumers ‘willingness to pay’,” he said. Stofega is of the opinion that the iPhone 11 is likely to be priced at par with what the iPhone XR used to cost during the launch window.

Husson too agrees that if Apple needs to maintain growth momentum for its installed base of devices, it must continue to excel at managing the lifecycle of its product portfolio, especially on pricing.

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‘iPhone 11 lineup will focus on cameras’

There is a perception that the iPhone XS Max’s camera has fallen behind to the likes of Google Pixel 3 XL and Huawei P30 Pro. With the iPhone 11 lineup, Apple will try to address the issue and bring improved camera performance that rivals smartphones from Google, Huawei and OnePlus.

The iPhone 11 Pro and iPhone 11 Pro Max are expected to get three rear-facing cameras, including an ultra-wide-angle lens, similar to the Samsung Galaxy S10+ and OnePlus 7 Pro. The third ultra-wide angle lens will join the standard wide-angle lens and a telephoto lens. The iPhone 11, on the other hand, will get a dual-camera setup over a single camera seen on the iPhone XR.

Husson agrees that smartphone players like Huawei, especially with the P30 Pro, have proven that they can outperform the iPhone on the photography front. According to Husson, the iPhone 11 lineup will focus on a “differentiated” photo and video experiences.

“Camera is not the only differentiator, but one that is increasingly important for Apple as it is a key part of their ad campaign,” adds Stofega.

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‘iPhone 11 will be significantly powerful’

As you might expect, the new iPhones will also get the latest silicon and the best mobile processor. The existing iPhone XS and iPhone XR have A12 Bionic chipset, but the new iPhones will get A13 chipset. The A13 processor will improve performance and efficiency on the devices. The new iPhones are also said to get improved water and scratch resistance capabilities.

The iPhone 11 should also get bigger batteries, along with the ability to wirelessly charge other devices. With the built-in reverse wireless charging capability, you would be able to place your AirPods 2 on the back of your iPhone, and the device would wirelessly charge them up.

Husson says the iPhone 11 lineup will be Apple’s most powerful smartphones, featuring faster processing, better battery autonomy, and new wireless charging capability.

Like last year, the top of the line iPhone 11 Pro and iPhone 11 Pro Max will include 5.8-inch and 6.5-inch OLED screens. An OLED panel, likely to be sourced from Samsung, is better than LCD screens. The iPhone 11, meanwhile, will continue to get a 6.1-inch LCD screen. “Screen and processor speed will also continue to be differentiators,” added Stofega.

In terms of design, the new iPhones are expected to look similar, except for the iPhone 11 which could come in two new colour options, Green and Lavender. In addition, all three new iPhones will continue to feature the TrueDepth camera that powers Face ID for easy unlocking of the iPhone. Though, this time around, there will be a rumoured multi-angle Face ID sensor that unlocks the phone even when the device is lying flat on a table.

‘Apple betting on services to grow its business’

Apple’s fall event will give both investors and users a good idea of how Tim Cook and team are shaping the company to survive the next decade. While the hardware has always been core to Apple’s DNA, Tim Cook wants to double the revenue of its services business by 2020. It’s the fastest-growing segment, and includes prominent services like Apple Music, Apple Pay, Apple Store, iCloud, etc.

Apple is betting on the services business and the company does not shy admitting it. Earlier this year, Apple held a separate event to launch new subscription video and gaming services. The big question is how it will price and bundle upcoming services to Apple fans.

“Apple has an opportunity to evolve its business model by increasingly bundling content and subscription services on top of its hardware. So I think we will also get more details on new service offerings such as Arcade,” said Husson. Reports suggest that Apple is planning to charge $4.99 a month for its Arcade gaming service and $9.99 a month for its Apple TV+ video service.

The company is reportedly spending $6 billion on original TV shows and movies for the OTT service. But it’s not going to be easy for Apple to convince consumers to pay $9.99 a month for its Apple TV+ service. Sure, Apple has a large installed base, but ultimately it is the quality of the shows that decide the fate of Apple’s video streaming service. Then there is competition in the video streaming service. Netflix is estimated to spend close to $15 billion on original content this year over Apple’s $6 billion budget. Netflix already has over 150 million paid subscribers. Disney+ is also challenging Apple in the video streaming market. In addition to a massive library of content from Disney and 21st Century Fox, the streaming service will cost $6.9 a month in the US.

While Apple’s services business has been the biggest growth driver for the company, Tim Cook still needs to sell new iPhones to consumers. “The iPhone is key for Apple and the brand need to maintain a growing installed base of smartphone users, even though Apple also needs to launch more disruptive products like they successfully managed to enter the watch market,” explained Husson.

No matter what Apple says, the iPhone is the gateway to the company’s forthcoming services. The iPhone moves the most volume and contributes to the most to the bottom line. As Stofega puts it, the iPhone is still “relevant” for those who have invested in the Apple ecosystem it is the crucial piece of hardware to continue the Apple experience while on the go.

‘No surprises at Apple’s fall event’

Neither Husson nor Stofega expects Apple to launch a new product that we are not aware of. The iPhone 11 is certain and so is a new Apple Watch. However, Husson does expect a few more products to be launched in Q4 or more likely in 2020. He could be referring to the iPad Pro (2019) and the rumoured 16-inch MacBook Pro.

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