By Lisa Johnston
New products on display at the American International Toy Fair, held in N
NEW YORK – The launch of the 64-bit iPhone 5s, lower priced iPhone 5c in five colors, and the new iOS 7 operating system will help Apple maintain its share of U.S. smartphone sales.
Samsung however is nonetheless poised to take the top sales spot, some analysts said.
Both Apple and Samsung posted year-over-year growth in unit sales and unit share in 2011, 2012 and the January through July 2013 period at the retail level, excluding sales to enterprises, The NPD Group found. But Samsung’s faster unit growth enabled it to match Apple’s 31 percent share for the first seven months of this year.
Whether the new iPhone introductions will put Apple back in the lead is an open question. “I think the marketplace was looking for some really big moves,” said analyst Jeff Kagan. “They were disappointed.”
Pessimists include Chris Ambrosio, executive director of Strategy Analytics, and Mark Lowenstein, managing director of Mobile Ecosystem.
“I don’t think Apple goes back on top,” said Ambrosio. “Samsung has too much scale across price tiers with Android for Apple to out-do them in the long run. There could be a quarterly blip where Apple goes ahead, but it would be short term.”
Apple, however, doesn’t have to sweat the loss of a few percentage points, Ambrosio noted. “Right now the game is profits for both of these players. They both take a huge, disproportionately large share of industry profits due to their strength in the high tier. While the competition for Apple is strengthening, Apple still sees steady replacement/ upgrade trends in its base and strong loyalty in this most profitable high/premium tier of the market. So as long as those metrics remain strong, Apple won’t sweat a few percentage points of share.”
Apple’s share in the higher price tiers, he added, “is pretty much maxed out.” The new products are “largely an upgrade path for current iPhone users. To OEMs, maintaining share becomes a top priority especially for linear product refreshes like these.”
For his part, Lowenstein said, “I am not sure whether they [the new products] will put Apple back on top, but I think they will at least slow the decline.”
Optimists include Roger Entner of Recon Analytics. The new iPhones and iOS 7 will put Apple back on top in U.S. share for the full year, he said. Apple is the “number one manufacturer and will remain being number one,” though he did say that Apple “will slowly lose market share against Android.”
Stephen Baker, industry analysis VP for The NPD Group, is also optimistic and believes the new iPhones and iOS 7 will put Apple back on top for the full year. “Apple is the leading postpaid smartphone brand in the U.S.” he said. “We do believe that these products will allow it to continue its leadership and possibly extend it as the 5c opens up new markets with consumers at $99 for a first-generation Apple phone.”
The iPhone 5c will attract “a more casual smartphone buyer, more female and younger,” he continued. The 5c will also attract “some lower-income customers looking to get a premium product at a perceived high value price. These are customers Apple hasn’t really attracted recently.”
Lowenstein also sees strong potential for the 5c. “On Android in the U.S., it is clear that the Galaxy line is Samsung’s premium brand, and that competes directly with the Apple devices. But once you get into the midtier Android market, the field is crowded, and the devices are relatively undifferentiated. Apple now has a horse there, and I think they’ll gain some share on Android in the midtier segment.”
Lowenstein also sees the 5c benefitting from carriers’ new no-contract, installment-plan early-upgrade options. “There is a higher percentage of buyers who are opting to not go the subsidy route, so the $100 to 200 price difference [of the 5c] is more meaningful,” he said. Although the 5c is basically a repackaged iPhone 5, Lowenstein noted that “more price-sensitive users who have been buying the iPhone 4/4S [which lacked LTE] just got a huge upgrade.” The 5c, he said, “is worth it just for the LTE.”
Baker and Entner agreed on the 5c’s potential. The plans “will help drive sales as the overall price of an annual upgrade iPhone became cheaper at all operators excluding Sprint,” Entner said.
Baker said the no-contract plans, in combination with the cost on the 5c, provides “underserved segments with a first-generation Apple device at an attractive acquisition cost.”
Worldwide, the new products will do little in themselves to stop Apple’s declining global market share, analysts said, especially because the iPhone 5c is not nearly as low cost as some analysts expected to accelerate sales in developing markets where phones aren’t subsidized. Apple’s tieup with NTT Docomo in Japan and a potential deal with China’s largest carrier, China Mobile, will have a greater impact on boosting Apple’s worldwide share, said Baker.
For his part, Lowenstein noted that “a lot of smartphone growth in other parts of the world is in economies where there is more price sensitivity and/or no carrier subsidy. That’s where the Android ecosystem is really gaining. The Android devices that are selling in the $100 to 300 range are good devices. They might not be great, but good is good enough for many users.”
Ambrosio added, “I think it’s pretty much a unanimous view that the 5c isn’t that much lower in price to help Apple gain significant share in lower tiers. I’d say that it will probably gain as much if not more share in emerging markets, where a big volume growth opportunity exists, from lowering prices on legacy products like 4 and 4S.”
As for whether the introductions burnish Apple’s reputation for innovation, opinions are split.
“I think they do,” said Lowenstein. “64-bit [in the iPhone 5s] is pretty important as far as performance and opens new doors for the developer community. With the M7 [motion] coprocessor [in the 5s], Apple has thought a lot about the emerging health/fitness app market and now has a differentiated device in this category.”
Enter said the launches show that “Apple is continuing to innovate, but the innovative jumps are getting smaller.” He also said the fingerprint-reader method of unlocking the 5s “is a double-edged sword, especially overseas, due to concerns about NSA.”
For his part, Ambrosio pointed out that “it is extremely difficult to ‘innovate’ new products from one iteration to the next. We’ve seen that with other vendors. And when Apple doesn’t improve or upgrade in some of the base features, such as using larger LCDs like Samsung and a few others, I’d say they struggled this round to offer any real differentiated features or techs.”
Nonetheless, he said, “they are still the leading vendor that is watched by all other vendors, so we can’t rule them out as possibly innovating in the future.”
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