Questions over Apple’s new iPhone 5S and 5C

A market analyst has raised questions over Apple‘s strategic direction following the launch of two new iPhones into the market on Tuesday (10 September).

Shares in Apple dipped below $500 on the Nasdaq shortly before 17:00 on Tuesday, trading down $11.53, or 2.28% to $494.64.

The group introduced the iPhone 5C, priced to bring one of the industry’s costliest smartphones within reach of the masses in poorer emerging markets.

The iPhone 5S was also revealed at a special media event held at Apple’s headquarters in Cupertino, California.

Reuters noted that the world’s most valuable technology company is trying to beat back rivals like Samsung Electronics and Huawei Technologies in markets like India and China, where it is quickly losing ground.

Ronald Klingebiel, Assistant Professor of Strategy at Warwick Business School, noted that while the new iPhones are innovative, “they are still iPhones”.

“Strategically, the direction seems unchanged. The lower-end iPhone is to address price competition in an increasingly commoditizing market, but the likes of Lenovo and ZTE achieve sufficient quality at much lower cost,” he said.

At the upper end, the business model is about to change, Klingebiel argues. “There is a chance that the majority of value capture, which had migrated from the handset to the combination of OS and app store, will move on to apps themselves, reducing the cut for middle men.

“New entrants are gearing up to prise open the tight lock between handsets, operating systems, and app stores: Sailfish, Ubuntu, Firefox, and even Tizen offer next-generation operating systems that support the trend towards interoperable html-based apps,” the professor said.

This, he believes, could lead to an unbundling of the industry value chain and reduce Apple’s possibility to extract value from the iOS-app store nexus.

iPhone 5S

Tony Cripps, principal device analyst at Ovum however, pointed out that the 5S launch was replete with significant spec upgrades over and beyond the usual screen improvements.

“Apple is certainly offering meaningful innovation here. Moving to a 64-bit architecture means Apple can genuinely claim to have brought something new to the smartphone party.”

The analyst said that anyone expecting Apple to come truly down market with the iPhone 5C was fooling themselves. “The day that happens is the day the company signals that it has run out of headroom for expansion,” he said.

“It does though indicate an acceptance that the consumers in the upper reaches of the smartphone mid-market are increasingly looking to distinctive devices of their own, and are not happy to accept cast offs or dumbed-down versions of former flagships.”

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Questions over Apple’s new iPhone 5S and 5C