September 27, 2017
Everyone even remotely passionate about tech should have heard by now the announcement of the new iPhone X. I’ve talked with most of my geeky friends about it and their thoughts range from “it’s too expensive”, “the name is so confusing”, to “Apple’s lost its own way” and “it is not a worthy upgrade”. I think these points couldn’t be furthest from the truth. Let’s talk about them in depth.
Apple’s strongest point when it comes to the iPhone is the retention rate and it has been for a long time. Note: The retention rate is the percentage of consumer who is going to buy another iPhone as their next handset. The only market where Apple is lagging behind is China, the biggest smartphone market in the world. Its retention rate is only 50%, comparing it to the ~90% in the other western market. There are various reasons why the iPhone is doing poorly (comparatively), but one I’d propose is the perception of luxury and exclusivity in Chinese society. The design stayed the same the last 4 years, aesthetically they are almost indistinguishable. Having a visibly new and shiny model could boost the brand recognition and attract more customers which main objective is “exclusivity”, see China. Other than that, price pumping aids significantly status signaling and could help Apple grow in the stagnant Chinese market.
Another thing to keep in mind is that the market itself is not helping the consumer accessing cheaper products. While the iPhone and Apple overall tends to cater towards exclusivity and pricey design, quality at an higher price point, the other smartphone manufacturer definitely rose to the challenge. The new flagship phones are routinely priced around 700$ with particular model now reaching around 1000$ (i.e. Galaxy Note 8). Apple wants to be placed as a prosumer/status company, not a “consumer” one. If the market permits them they will keep adding a significant premium to the devices.
When Tim Cook unveiled the smartphone for the first time most us were puzzled by the choice of words: “iPhone T-E-N”. Not “X”, but ten. The choice of using the numeration “8” for the new (how do I call it) mid-level phone is understandable. They don’t want to make it look at a sub-par version to the X. Calling the iPhone ten was also certainly a choice of product placement in the existing lineup. It is not a new version of the 8 like the S, SE or Plus (iPhone 8X, boy that would’ve been a bad name); it’s a new one-of-a-kind product. As they said during the conference: an homage to the first iPhone and their anniversary, a look towards the future: what the iPhone could be in three years or so. Apple will phase out the phone long before the time the iPhone 10 will be out.
While this may be true for most people on the last few generations of phones, I think this is not meant to be an “upgrade”. The production will be limited, both for production issues (the OLED screen mainly), but also I think for market appeal. A rare, hard to find iPhone could ramp up demand and push the doubters to buy one if they see one in stores. I propose one should see the new phone more as a collector’s edition than a standard consumer product.
On the contrary I see this move as the only way Apple can still innovate in the face of its size. Limited supply means getting ready for production at scale. While company like Essential can use new material and technology because of their low volume, Apple can not kickstart an entire production line bottom-up, in a short time scale. Given OLED screen production difficulties, it’s therefore feasible to think this is just a step towards mass production of screens, from a volume in the low millions to the 40–80 million units the iPhones are expected to sell.
Another important advantage is the possibility of using the new device as a testbed for innovative technology solutions and design decisions. Test the water to see how the user react to the infamous notch at the top of the screen, the new home gesture and FaceID. It’s a platform to experiment with and make the successful changes trickle down to the base model the next years.
Thank you to have read thus far, if you have any comments or ideas feel free to contact me. I’d love to hear from you!