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 Prior to its June 29th release in 2007, Apple's iPhone had already seen the kind of media hype and expectation that other consumer products could only dream of. In its first year of existence, 6M iPhones have been sold. The new 3G iPhone was released on July 11th 2008. This time around Apple is going for volume as the 3G iPhone is priced at only $199, with the help of a subsidy from AT&T (T). In the first 3 days, 1 million 3G iPhones were sold around the world (it took the first generation 74 days). The iPhone could potentially invert the existing power dynamic between cell-phone handset manufacturers and the telecommunications companies that control the mobile networks on which these handsets operate. Today, service providers dictate terms to handset manufacturers, often specifying the features that should be included in a device, the messaging and marketing the company should employ, and even the price that can be charged for it. Apple changed that dynamic. Because of Apple's past success designing game-changing consumer electronic devices such as the iPod, it was able to strike a different kind of deal with cell phone carriers. AT&T had to cede virtually all control over the device to Apple in exchange for an exclusive deal on the phone.[1]  A survey done by ChangeWave research showed that as on 1st Apr 2008, an extraordinary four-in-five iPhone owners (79%) report they're Very Satisfied with their iPhone - a significant lead over number two RIM (54%) and far ahead of all other major manufacturers. This shows us how well the iphone has done amongst users. [2]
[edit] IPod CannibalizationIt’s not a surprise that sales of iPods have been slowing. Since we live in a world of limited resources, growth cannot persist indefinitely. As iPod sales have grown to staggering heights, the Law of Large Numbers takes effect. To continue its FY07 31% unit growth rate, Apple would need to sell close to 70 million iPods in FY08, which is one-half the 140 million total sold over 6 years. At that growth rate, iPod sales would be 200 million FY12. It’s highly unlikely that annual sales volume would ever achieve that level. Unit growth has been trending towards a rate in the teens, possibly single-digits. Last quarter, Q1 2008, units increased 5%, compared to 50% growth in Q1 2007. Yr/Yr 2007 growth rates were 24% (Q4), 21% (Q3), and 17% (Q2). Unit growth was 31% in FY07, compared to 75% (FY06), 409% (FY05), 371% (FY04), and 149% (FY03).
iPod unit sales only grew 5% yoy for Q1, but dollar sales increased by 17% due to a higher average selling price (ASP). After 8 consecutive quarters of declining ASP, the Touch reversed that trend as ASP rose last quarter to $181/unit. You would have to go back 6 quarters to find a higher ASP. Boosting the ASP is a very positive sign in light of the slowdown in volume. Going forward, ASP will be the key metric to focus on. iPod sales have mirrored the S-curve, which generally depicts the product life cycle. There are 5 stages in the PLC. Initially, sales growth is flat and then begins to increase in the introduction stage. The product enters the rapid growth stage, where sales increase at an accelerating rate. In the slowing growth stage, sales increase at a decreasing rate, finally to a point where sales turn flat as the product enters the maturity phase. Sales growth turns negative in the decline stage.
To avert the Decline (or mature) stage, product innovation is needed to rejuvenate sales growth. Introducing improved models with new features can sprout a new curve from sales growth reaccelerating. The S-curve then takes on a more scalloped shape. The new iPod Touch presents the opportunity for attracting new PMP users plus influencing current owners to “trade up” to a device at a higher ASP. The Shuffle should appeal to price sensitive consumers who previously weren’t willing to pay the high prices for iPods. These two factors should strengthen demand in light of a maturing market. [edit] Companies that benefit from the iPhone's success
[edit] Component suppliers that benefit from the iPhone's successApple uses a number of contract manufacturers and suppliers to make its products. Most are Taiwan-based. While shares of some of these companies are listed on U.S. exchanges as ADRs, others can only be purchased through the Taiwan or Hong Kong stock exchanges. [edit] 3G iPhone
[edit] First Generation iPhone
[edit] Apple Planning on Designing Chips in HouseApple acquired P.A. Semi which is a fabless semiconductor company. Apple acquired P.A. Semi primarily for the purpose of designing the SoC's (system-on-a-chip) for future iPod's and iPhones. This is a potential blow to companies like Samsung, who makes the microprocessor for the phone, as well as possibly Intel who was trying to promote its Atom processors which are made for handheld devices like the iPod and iPhone. P.A. Semi will most likely work with Apple in the design of the processors, but because P.A. Semi is fabless, companies like Intel and Samsung may still get some business actually building the processors. [edit] Companies that benefit from the iPhone's failure
[edit] Trends and Forces[edit] Could the iPhone Replace Notebooks in China?The average internet user in China is 25 years old, but in China, owning a computer is not socially acceptable yet.[25] As a result, the Chinese youth pack into internet cafe's that are open 24 hours a day. The young demographic and their hunger for technology and the internet plays right into the hands of the iPhone. While computers are not socially acceptable, cell phones are, which means that the Chinese consumers may very well replace computers with smart phones, like the iPhone. Not to mention, the market for Chinese cell phones is already massive - China Mobile had as many as 574 million customers.[26] [edit] The Rise of of iPhone ApplicationsAt the release of the 3G iPhone, 500 applications are available with 10% of them being free and the other 90% being $10 or less.[27] The rise of applications brings the iPhone, and other smart phones, that much closer to becoming handheld PCs. Companies like Sega are utilizing the accelerometer, which detects motion, to produce a game app. Other companies are producing apps that help build friend networks, and others are utilizing the GPS to notify you when you are near a restaurant you like or that a friend recommended.[28] On August 11, Apple announced that it had $30 million in application sales for the iPhone. In comments with the Wall Street Journal, Steve jobs said "This thing’s going to crest a half a billion, soon.... who knows, maybe it will be a $1 billion marketplace at some point in time…. I’ve never seen anything like this in my career for software.” [edit] The launching days: recent iPhone news[edit] First Generation iPhone
[edit] The 3G iPhone AnnouncedThe 3G iPhone was released on July 11th 2008 to 22 countries, and in the first 3 days 1 million 3G iPhones were sold. This makes the 3G iPhone one of the largest consumer electronics launch in history.[29] The new iPhone is priced at $199 and $299 for the 8GB and 16GB versions, respectively. However, Gene Munster, a Piper Jaffray analyst, did a survey that found only 35% of buyers will be eligible for the price subsidy and that the average entry price level for an 8G will be more around $400.[30] The 3G speed is about 3x as fast as the current EDGE service and battery life has been boosted to 10 hours of 2G talk time or five hours of 3G talk time, about five hours of browsing, 24 hours of audio, seven hours of video playback, and 300 hours-standby. In addition, it will feature real GPS capability. The new iPhone was released to 22 countries on July 11th and will be offered in 70 countries by the end of the year. As for iPhone applications, a survey taken of iPhone developers found that about 70% of applications were expected to be offered for free, and for the rest the price would begin at $10, but likely drop to $3 or less.[31] Apple (AAPL) is initially offering 500 applications. One concern about the new iPhone is its camera. The iPhone still has a 2 megapixel camera which is inferior to many of its smartphone competitors that have 3-5 megapixel capabilities. Apple may not put as much priority of the camera but a representative from Nokia called it the most important capability for a consumer purchasing a phone of this caliber.[32] It was first thought that consumers were going to have to buy the plan at the same time they bought the phone. However, at some future data, the no-contract 3G iPhone will likely be available, but it will cost you upwards of $599 for an 8 gig and $699 for a 16 gig.[33] Whenever the plan is actually bought, consumers will be required to agree to a two year contract and pay a $36 activation fee.[34] [edit] Footnotes and References
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