US tech giant Apple has launched two new iPhone handsets at a long-hyped event at the company’s headquarters in California.
The iPhone 5S, which features a finger print sensor for improved security, is aimed at the top end of the smartphone market.
In contrast, the iPhone 5C can be purchased from just $99 with a contract. It is available in a variety of bright colours: blue, white, pink, yellow and green.
But the ‘low cost’ 5C may not be all it seems, according to new technologies expert Paolo Ottolina: “The iPhone 5C isn’t actually that cheap because in the US it’ll cost at least $549 for those not subscribing to a contract.”
Ottolina added: “The 5C could help compete in important markets such as China where sales of the Google Android have been rising. But will it be enough to tackle the growth of other competitors, particularly Samsung? If we look at the stock market reaction I would say no, but the next few months will tell us more.”
Profit over market share
The higher-than-expected price of the cheaper iPhone eased worries about gross margins, while arousing concerns Apple was not being aggressive enough in its fight against Google’s market-dominating Android operating system.
“…We worry that Apple’s inability/unwillingness to come out with a low-priced offering for emerging markets nearly ensures that the company will continue to be an overall share loser in the smartphone market until it choses to address the low end,” Sanford C. Bernstein analysts said in a note.
Apple’s shares were down more than five percent on Wednesday, a day after it unveiled the new handsets.
On the share price Keith Bliss, senior vice president at Cuttone & Co in New York said: “Apple is a victim of their own success. They have gotten in the unfortunate circumstance where every time they have one of these events, people want them to come out with some groundbreaking technology that is just going to change everybody’s lives – it’s just not going to happen.”
‘A little expensive’
As well as the unveiling at Apple’s headquarters, for the first time, it held a launch event in Beijing a few hours later, a move seen as underscoring the importance of the Chinese market.
However many there said the “cheap” iPhone looks too pricey.
The iPhone 5C will sell for 4,488 yuan ($730/550 euros) China, almost $200 more than the United States retail price of $549 (412 euros)and only 800 yuan ($130/97 euros) less than its top-of-the-line sibling, the 5S.
The pricing of what was expected to be a cheap model aimed at growth markets such as China and India has not only stumped investors, but also Apple aficionados in China, a country of 1.4 billion people and the world’s largest smartphone market.
“My original estimate of the 5C price was around 3,000 yuan, but more than 4,000 – I think for a budget version the price may be a little expensive. I don’t think I can buy one,” said Liu Donghai, a 25-year-old chemical engineer.
“If the 5S is around 5,000, then it’s similar to the already-released 5 and 4S. I would accept this,” he added.
The phrase “iPhone 5S” was the most popular search term on Sina Weibo, China’s most widely used microblogging service, on Wednesday, while “iPhone 5C” did not appear on the top searches list.
Price seemed to be the reason. “The iPhone 5C is so expensive. Originally I absolutely planned to buy it, now the price makes me uncomfortable. Isn’t it just an iPhone 5 with a plastic back?” said Sina Weibo user Shangzhiruixin.
Mid-end, not low-end
Apple’s share of the China smartphone market slipped to five percent in the second quarter, according to research firm Canalys, trailing not just Samsung but also the likes of Lenovo, ZTE, Huawei and Xiaomi.
“Even though Apple has a lower end iPhone now, its price is still considered mid-end in China and not low-end,” said Sandy Shen, a Shanghai-based analyst for Gartner.
Around half of China’s smartphone shipments are in the 700-1,500 yuan range, said Shen, but competing on those prices isn’t an attractive prospect for Apple.
“Considering Apple’s old rival Samsung and domestic players such as Huawei, Lenovo and Coolpad all have phones in that category, Apple will still lose out in market share in these key segments,” she said.