Apple

Two New IPhones: Many Colors, Fewer Innovations


Two New IPhones: Many Colors, Fewer Innovations

Apple (AAPL) introduced new versions of the iPhone at an event in Cupertino, Calif., on Tuesday. The changes to the high-end iPhone were mostly incremental, aside from a nifty fingerprint scanner built into the home button. Apple also introduced a lower-cost version of the phone for the first time. The company has been loath to take its focus off the high end of any market it serves. Still, it has become increasingly clear that Apple needs to make a cheaper phone. Don’t worry, status seekers: In order to give Apple’s high-end customers an enduring visual clue of exclusivity, the expensive and cheap versions of the iPhone do not come in the same colors.

The annual event had all the pageantry of years past, but with less of the sense of invincibility. There is an increasing feeling that other leading phone makers are catching up. Apple’s stock peaked a week after the introduction of the iPhone 5 a year ago. Even though Apple says the iPhone 5 had a better first year than any previous version, the company has lost almost 30 percent of its market value since last September. A recent surge in the company’s stock price was inspired not by a buzzy new product, but by a series of tweets from a 77-year-old man.

In recent months, Apple executives have shrugged off questions about the company’s ability to stay on top. They had a chance to prove the company’s staying power on Tuesday. Here’s what they showed:

The iPhone 5S (the expensive one): In many ways, the iPhone 5S looks a lot like the iPhone 5, although it comes in black and silver, white and silver, and white and gold versions.

The biggest physical change to the iPhone is Touch ID, a fingerprint scanner built into the home button, which will allow people to unlock the phone without entering a password. It can also be used to do some things within apps, like authenticate iTunes to make a purchase. Apple said that it will not load fingerprint data onto its servers or back it up in the cloud. Also, the scanner makes the home button look slightly different.

As always there are incremental changes to the chip (a 64-bit chip called the A7), the battery (10 hours of talking, or 250 hours of standby), and the cameras (faster lens, larger sensor). Apple also discussed some features intended to replicate functions of increasingly popular fitness tracking devices. It will cost $199 for a 16 GB version, $299 for a 32 GB version, and $399 for a 64 GB version. The phone will become available in several countries, including China, on Sept. 20.

The iPhone 5C (the cheap one): In a major break for Apple, the company is looking downmarket. It introduced the iPhone 5C, a lower-priced phone designed to sell largely in lower-priced international markets where most of the growth in the smartphone industry is expected. The phone uses the same processor as the iPhone 5, but comes in green, white, blue, pink, and yellow. The casing is plastic.

But the main feature is price. With a contract, the 16 GB version of the phone costs $100—or $200 for a 32 GB version. Making cheaper devices is essential for Apple. IDC expects phones priced higher than $400 to make up 28.1 percent of the overall market by 2017, down from 39.1 percent this year.

Many of these cheaper phones will sell overseas. Apple currently makes up 16.8 percent of the global smartphone market, according to IDC. The research organization forecasts that Apple’s market share will grow to 17.9 percent by 2017. The company would like to do better. To drive the point home, Apple set up rebroadcasts of its events for audiences in Beijing, Berlin, and Tokyo.

iOS 7 coming on Sept 18: The new toys are the focus, of course, but the biggest change for users may be iOS 7, which Apple executives sped through at the beginning of the presentation. In June, Tim Cook called the new version of the operating system used by Apple’s mobile devices the biggest change to the iPhone software since the iPhone was created. Unfortunately for everyone who learned how the spell the word skeuomorph, Apple’s has pulled the plug on its fake leather calendars in favor of a sleek, flat look. It also includes iTunes Radio, Apple’s Pandora-like (P) music service, and improvements to Siri. The oldest devices that will be able to run the software are the iPhone 4, the iPad 2, the iPad mini, and the fifth generation iPad touch.

Critics have found iOS7 underwhelming and confusing. Starting on Sept. 18, iPhone users will be able to decide for themselves.

Brustein is a writer for Businessweek.com in New York.

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  • AAPL
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