The iPhone 5 is a surefire hit, but faces long term challenges

September 11, 2012
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Apple launched the iPhone 4S around this time last year and sold a million units the first day, a record number even though its new features were considered incremental. 

Frost & Sullivan said today that it expects Apple to sell between 1.5 to 2 million iPhone 5s within the first day. 

But a lot has happened in the year since the iPhone 4S was released. Apple’s move to ship the less than revolutionary iPhone 4S gave competitors a chance to catch up. 


The result has been a bevy of smartphones with bigger screens, NFC chips for mobile commerce and other features that made the devices more attractive to many buyers than the iPhone. 


“The Androids are taking over the world of smartphones,” said IHS analyst Daniel Gleeson. 


In a report released earlier today, IHS says it expects worldwide shipments of Android phones to reach 451 million in 2013 and cumulative shipments of smartphones based on Android to go over a billion by the end of next year. 


By contrast, IHS forecasts cumulative shipments of iOS-based devices will reach 527 million in 2013 and won’t reach 1 billion until 2015. 


Of course Android devices are made by scores of companies so for Apple to have about half the market all to itself next year is still an exceptional business. 


And with the iPhone 5 Apple will match or trump its rivals on the technology side. The new iPhone is expected to have a larger 4-inch screen, support NFC, include improvements to Siri and a faster processor, better camera and a smaller dock connector, which is expected to be a part of all future iOS devices as well. 


"No one can deny that Apple is the only smartphone vendor whose focus transcends beyond the hardware feature set to creating the overall ecosystem,” Abhishek Chauhan, Senior Consultant for Frost & Sullivan’s ICT Practice in South Asia & the Middle East.


“By creating a formidable ecosystem with an abundance of content, services and applications, Apple has won over millions of end users, who just have to have the next Apple product,” he added. “


“However, other vendors are also now building their own ecosystem. Proliferation of Android apps and emergence of Google Play app storefront threatens to slow down the growth of Apple.” 


Winning over smartphone buyers — watch out for Amazon?


Frost & Sullivan thinks Apple will have no problem winning over the Apple faithful, i.e. current iPhone customers to the new iPhone 5, but convincing customers of competing devices to switch to Apple could be a challenge. 


Google for one is building up its Google Play store to compete more effectively with Apple’s App Store. And although the rumors Amazon would announce a smartphone last week turned out to be false, Pranabesh Nath, Frost & Sullivan Research Manager in the ICT Practice in Asia Pacific, thinks it could still happen. 


"Depending on how far Amazon wants to take the platform strategy in its search for platform control and profits, we may even see a smartphone from Amazon in the near future as it is the single largest point of content consumption,” said Pranabesh. 


And then there’s Microsoft. Pranabesh says he expects Microsoft to ramp up its service portfolio once its Windows 8 platform launches later next month. 


Microsoft “may be a very powerful contender in the consumer as well as enterprise side," said Pranabesh.


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