1. Apple iPhone
Announcement
New York Team 12/09/2013
Background
As many of us know, on Tuesday, Apple announced that iPhone 5 has been replaced by two phones, the
iPhone 5C and iPhone 5S.
One of the common themes that we have seen in the mobile space is the customization of the device not from
just the screen perspective but the look and feel of the hardware itself. The vibrant new physical look, matched
with the updated look and feel of iOS 7 brings an even more elegant and personalized experience to the device
driving more of a personalized always on relationship.
There’s an important preface to share on Apple’s latest round of iPhone updates. Following up on this
summer’s announcement of iOS 7, this launch focused almost entirely on the significant internal hardware
upgrades Apple engineered only for the iPhone. There was no talk of iPads, iPods, or the mythical iWatch or
iTV this time around. These updates still have implications on our business especially when examined in the
context of Apple changing its usual course by offering two iPhone lines, the 5S and 5C.
Details
The highlights below:
 iPhone 5C comes in five colors like iPods, has an 8MP camera and the A6 processor from the iPhone 5.
The iPhone 5S extends its current pallet to gold.
 iPhone 5S is the updated iPhone 5 and will become the higher-end iPhone product. The 5S upgrades focus
on three specific innovations:
1. The 5S looks like the iPhone 5, but has a faster processor - the A7, which is a 64-bit processor and
includes a second “M7” chip, a motion processor which tracks and measures a user’s movement data.
This is perfect for next-gen health and fitness apps. Nike is already working with Apple to game-ify
fitness using Game Center. It could be perfect to integrate their Fuel points. Exchange for real world
rewards or digital content perhaps?
2. The 5S includes new flash and technology in the camera to take better photos, including burst mode -
like on the GoPro. Another function is Slo-Mo, great for the iMovie App.
3. The 5S includes Touch ID. This was the fingerprint technology many expected and it will replace the
cumbersome passcode. Touch ID also authorizes purchases on the device, including Apps and music.
For those concerned with security, your fingerprint data is not uploaded to iCloud or stored online, it
is only stored in a secure section of the A7 chip.
Implications
Global Scale & iAd. During the launch, Apple CEO Tim Cook proclaimed that by the end of September, Apple
will have shipped 700 million iOS devices, worldwide. By contrast, there are approximately 1 billion Android
devices already in the global market (comScore). While Android leads in global device share, the actual Android
OS is highly fragmented among different versions ranging in age from a few months (most recent OS
upgrades) to a few years old (original versions of Android). Apple boasts a 80% OS update rate when it releases
a new OS, like the upcoming iOS 7. Therefore, Cupertino is once again playing to its strength of owning the
entire product development and its accompanying ecosystem, from the hardware to the software. This means
that Apple’s iAd advertising platform should provide an even larger global scale for our brands, reaching many
in the developing world who are our current and future customers.
Lower barrier to entry for a premium product. These stats also must be understood in context with Apple’s
announcement last week that it has inked a distribution deal with China Mobile, China’s largest mobile carrier.
That deal will give Apple access to 700 million Chinese consumers, or roughly 65% of the Chinese market. The
5C is meant to be Apple’s foray into the “lower-end” touchscreen smartphone market. It is an atypical break in
strategy, aimed at gaining market share in and selling more iOS devices to emerging markets like China, India
and Africa. This will shape the next frontier in the ongoing battle of Apple vs. Google for mobile operating
system and hardware supremacy. Apple’s challenge here though, is that while buying unsubsidized handsets
in China and the broader emerging markets is the norm, in many of these target markets, the cost of an
unsubsidized 5C may cost as much as the market’s average monthly salary. Compared to lower cost and high
performing Android devices by Lenovo, HTC, Xiaomi and others, convincing emerging market consumers to
spend hundreds of dollars more on a 5C will be a tough sell.
Other Comments
Further Reading & References:
 Apple iPhone 5s and 5c: everything you need to know | The Verge - http://bit.ly/1fXb0Do
 How Apple's M7 Chip Makes the iPhone 5S the Ultimate Tracking Device - http://bit.ly/15PRHNu
 This is what Apple’s new ‘cheap’ iPhone 5C will cost in China, India, and Africa | VentureBeat - http://bit.ly/15PRNE.