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October 04, 2011
Apple added a new iPhone 4S to its portfolio:
- iPhone 3GS is now offered for free on a 2-year contract in the US.
- iPhone 4 sees its capacity reduced to 8Gb and is now offered for $99 on a 2-year contract in the US.
- iPhone 4S is a speedier version of the iPhone 4, keeping the exact same form factor. It features the A5 processor already found in the iPad 2; therefore promising improved performance and graphics processing. It also introduces an 8-megapixel camera with improved optics, as well as 1080p-stabilised recording. Among the new features unveiled today is the "Siri" virtual assistant feature that will use voice recognition to process spoken requests from the user such as meeting schedules or text dictation. It will be offered for $199 (16Gb), $299 (32Gb) and $399 (64Gb) on a 2-year contract in the US.
These iPhones will feature neither 4G connectivity nor Near-Field-Communications (NFC).
iPhone 4S will launch internationally on October 14 in the US, Canada, Australia, United Kingdom, France, Germany and Japan, with worldwide rollout in 70 countries expected to be complete by the end of December.
iOS 5 and iCloud, initially unveiled in June, will launch on October 12. The "iTunes match" music component will launch in the U.S. at the end of October.
Apple also refreshed its iPod line with cheaper iPod Touch and iPod nano, and announced it had sold over 250m iOS devices (iPhone, iPod Touch, iPad) sold to date.
With strong competition from Android handsets in the mid-range, erosion of iPod sales, as well as pent-up demand in pre-paid markets, Apple needed to lower the entry price of the iPhone. The "free" (on contract) 3GS will serve that purpose and will be intended to drive volume, whilst conserving healthy margins thanks to components that have reached scale production and are cheaper to source, more than 3 years since the iPhone 3G form factor was introduced.
At the other end of the spectrum, Apple will satisfy the needs of high-end customers with a $399 model on contract, a price not seen since the first iPhone launched in 2007.
By stretching its product portfolio from $99-$299 to $0-$399 on contract, Apple is better prepared to compete with Android - and soon Windows Phone 7.5 - handsets, which are competing with iPhone both on price (in the mid-range) and features (in high-end devices).
The absence of 4G or NFC is not surprising, given Apple's habit of waiting for technologies to mature, rather than make design compromises on size, battery life and/or cost.
Finally, the lack of radical redesign might underwhelm some demanding customers, but it also implies that Apple is confident enough in the competitiveness of its form factors for a few more quarters, as evidenced by the sustained demand for the iPhone in calendar Q2 (over 20m sold). Also, supply constraints associated with a new design will likely be averted in the crucial final quarter of the year.
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