Apple's challenge in a growing smartphone universe

This week I finally took the plunge and bought an iPhone 5s, largely because it was time to get a new phone (three years with the iPhone 4; I like to thrash my devices into the ground) and also because I wanted to jump on the LTE bandwagon that is steadily rolling across Europe. Not that I have access to LTE as yet-Orange has not yet extended the service to its Sosh brand, which is what I currently use in France (hint?)--but the possibility is now there for me to opt for an LTE package.

In some ways, though, such a device is really wasted on me. I am never going to be interested in playing games on it or downloading billions of new apps. I don't even really watch video on it that much because in all honesty I find the screen too small, although I have watched video on an iPhone in the past and probably would do so again if that was all I had available and had time to kill.

I use smartphones to check email and the weather, find my way from A to B and browse websites when out and about. I probably didn't need to spend such a large sum on a phone, even one that is coloured gold.

I have written about the ongoing phenomenon that is the iPhone in the past, and I do find it incredible that people in some markets such as China are prepared to spend what could amount to an entire month's wage just to have a gold smartphone. I know I am also a victim to the enduring appeal of the devices, but would I really buy one if it meant financial hardship? No, I would not.

The market has long talked of the democratisation of smartphones in order to connect people in emerging and developing markets, but it seems to me that the mobile community still has a deal of work ahead to ensure there are more attractive devices out there at a lower cost to give people more options. It was therefore encouraging this week to see Orange report that sales of its low-cost smartphones under the Orange brand have been outselling all other brands in some markets such as Spain and Romania.

In Spain, the operator said the Orange Daytona smartphone sold 50 per cent more than all other phones sold by Orange in Spain, whether feature phones or smartphone. In Spain, the one-off retail price for the Orange Daytona is listed as €145.20 (around $200), which is pretty cheap for a smartphone, especially when you consider that in Europe the iPhone 5c starts at €609 and the iPhone 5s at €709.

How long Apple's appeal will endure as it seeks to break into more emerging markets is also uncertain, and analysts have criticised the manufacturer for not having a cheaper device for these markets. Apple has always made it clear that it's not in the cheap smartphone game, and that the iPhone 5c is a mid-range offer while the 2011-vintage iPhone 4S is its entry-level product. But will Apple really have a choice as it seeks new sales markets? Will its greed for high margins be its undoing?

Currently, Samsung Electronics and Apple continue to dominate the smartphone market, according to research published this week by a number of analyst firms for the third quarter. However, IDC figures show that Apple's sales increased by 25.7 per cent compared with 40.5 per cent growth at Samsung in smartphones. Even more interesting was the fact that Huawei made a 76.5 per cent gain and Lenovo a 77.6 per cent gain.

IDC noted Apple's total volumes of 33.8 million shipments in the third quarter "speak to the early success of the iPhones 5s and 5c, and the softening demand of older devices prior to the new models launching," although the research company noted that higher-than-expected pricing on the iPhone 5c drew mixed reactions.

"Price points have declined significantly, driven largely by low-cost Android solutions," added IDC analyst Ryan Reith. "This has helped China to become one of the fastest growing smartphone markets in the world, accounting for more than one third of all shipments last quarter. We expect this trend to continue going forward."

It will be interesting to see how long Apple will maintain its leadership position as Android continues to flourish and the percentage of overall smartphone sales continues to increase in less developed markets. The 5c may have been launched to test the waters for a cheaper iPhone, but much lower prices are probably required to tap into the lower end of the market and provide Apple with a truly differentiated offer.--Anne

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