TECH: The iPhone 5C Is All About Building Share For 16:9 Screen

August 17, 2013

Will the “cheaper” iPhone really be all that
cheap? If not, what is the real motivation
for splitting Apple AAPL +0.89% ‘s
traditionally unitary product line? Older-
model iPhones have been the defacto
“cheap” iPhones in the developing world.
What is the benefit of addressing that
market directly? Increasing the market
share for the taller proportion of the
iPhone 5′s screen, expressed as two
numbers: 16 by 9.
By now, the speculative calculations that I
first reported on at the end of June—which
predict that the announcement for the
next iPhone(s) would occur on September
10
—have been widely accepted as fact.
Apple, of course, is neither confirming or
denying the fact, but the same is true of
an increasing parade of leaked photos of
gold (or “champagne”) toned iPhone 5S
and brightly colored iPhone 5C units
churning through the rumor mill (and,
ostensibly, actual factories.)

The latest consensus is that the 5S will
not be a ground-breaking release, but
rather an incremental improvement of the
sort found in the 3GS and 4S. These, of
course, have turned out to be very
enduring products for Apple, building
upon the breakthroughs but fixing the
flaws of their numerical siblings. Given
the choice, I would always go for these
incremental releases over the debuts.
The big question with the 5S is whether it
will include the rumored fingerprint
sensor , or whether the placement of a
little code in iOS 7 was a red herring
pointing to future releases or just
throwing a scent off the trail. As cool as
the implications may be for how Apple
could use such a feature, it’s unlikely
something that will get fanboys to camp
out at Apple stores to be the first to
procure.
If the 5S is not the big story here, what
about the rumored “inexpensive” 5C?
Many experts have concluded that it will
not actually be that “cheap.” Daring
Fireball’s John Gruber writes that he
thinks, “Apple could build and sell an iPod
Touch-caliber iPhone 5C for $399,
possibly as low as $349.” He counters
Analyst Gene Munster’s prediction, that
Apple will remove some software
functions from the 5C (like Siri) to
prevent it from cannibalizing the 5S.
Gruber thinks that beyond the plastic
casing there will be hardware differences
like processing speed and camera quality
to distinguish them.
The really important point about the 5C, I
think, is that it will give Apple a way to
defragment its user base and consolidate
more and more of its app customers
within the new 16:9 format of the iPhone
5. Apple is losing the battle of numbers to
Android, in general, and Samsung in
particular, but it still has the quality
advantage. By this I don’t mean the
quality of its hardware (which is
debatable) but of its audience.
Before the iOS 7 beta was introduced,
93% of iPhone users were on iOS 6.
Conversely, the latest version of Android
(Jellybean) has only recently surpassed
the popular, almost three-year-old
version (Gingerbread), and is just above
40% penetration. And iOS users have been
well-documented to be more engaged
with their devices and, pointedly, spend
more money on apps and m-commerce.
iOS developers are moving aggressively
into updating their apps for iOS 7 and
building new ones to take advantage of its
capabilities. Getting as large a share as
possible of the global market on the 16:9
format is a key step in preserving the
coherence of the audience for those apps.
And the sanity of developers!
This is where Apple plays the present
against the future. If you look at where its
revenues come from , only 7% is from
software and the iTunes store. And the
apps that developers make is only a
portion of that. But historically, it has
been the support of the developer
community—often going against their
own financial best interest—that has
distinguished the quality of Apple’s
platform, first from Windows and now
from Android.
So the interesting question is how much
revenue will Apple sacrifice in order to
build iPhone 5 share globally? Can the
iPhone approach Android prices but retain
an advantage in terms of user experience
quality? The iPhone 5C may not be
cheap, but it will be cinematic.