Under pressure to reignite stalled sales growth, Apple Inc. unveiled a new iPhone on Wednesday. But despite its innovations, it could be difficult to persuade customers to upgrade.
Although the latest iteration of the Cupertino, Calif.-based tech giant's key product is packed with improvements and updates, analysts said the iPhone 7 may be missing the wow factor of previous editions.
"I don't feel the 7 is going to hit as hard as the 6 or the 5," said Tuong H. Nguyen, personal technologies analyst at Gartner Inc. "It's almost a victim of its own success. … I'm not sure I can grasp how much better it is than this other thing you're offering."
Indeed, improving upon past success will be no easy task. The iPhone 5, 5s, 6 and 6s models unleashed impressive sales growth that saw Apple sell its billionth handset earlier this summer. Key among the updates in those devices is a transformation of the iPhone form factor: they got bigger, thinner, lighter and faster.
At least on its surface, the iPhone 7 offers no such dramatic changes. And the biggest modifications – the removal of the ubiquitous 3.5-millimetre headphone jack and replacement of the mechanical home button with a buzzing panel – could be regarded as user-hostile.
"Some people asked why we would remove the headphone jack," said Apple marketing chief Phil Schiller during the company's staged event in San Francisco. "One word: courage." Apple is also shipping a Lightning-to-analog adapter in the box – a first for a company that has previously made floppy disks, 32-pin connectors and optical CD drives obsolete with nary a concern about the abandoned users – that will allow users to keep their old analog audio devices around for a while yet.
The spotlight on the iPhone 7, which also includes camera upgrades, a faster processor and a new resistance to both water and dust, will be bright. Despite waning iPhone demand in recent quarters, partly due to the lull between product launches, the device continues to be the biggest source of Apple's revenue. The iPhone is at the centre of an ecosystem of products from Apple TV to the Apple Watch that are designed to function in connection with it. The new models will be critical to the holiday quarter, and the world's most valuable company is counting on them to prop up sales ahead of an expected overhaul of the line in 2017, the iPhone's 10th anniversary.
Apple's smartphone market share is likely to slip to 13.9 per cent this year, compared with 15.8 per cent in 2015 and an estimated 14.2 per cent in 2020, according to research firm IDC, which also forecasts slower growth in overall smartphone sales as consumers upgrade less frequently.
China has been a drag on Apple's performance this year as local rivals introduce cheaper handsets with similar functionality. Apple's fiscal third-quarter sales decline in Asia's top economy was bigger than the revenue drop in the Americas and Europe combined. It would have been worse if not for the iPhone SE, a cheaper version introduced in March to prop up sales ahead of the iPhone 7.
In the heat of the moment, it has always been easy to oversell the latest details of an iPhone announcement. But after several quarters of declining sales, the bias this time around seemed to tilt toward over-criticizing. Chief among the griping will be that, while the phone retains its basic dimensions of the 2015 edition, the premium pricing remains. The phone gets more expensive with the optional and sold-separately wireless AirPod earphones.
Prices in Canada will start at $899 for the 32 GB iPhone 7, but top out at $1,309 for the 256 GB 7 Plus. The new wireless AirPods will be $219. That's roughly a $1,530 bill, before taxes and plan, for the top-end iPhone experience.
Wireless headphones represent a growing category, according to IHS Markit senior analyst Paul Erickson. "We have wireless headphones at 22 per cent of North America's headphone market by year end, and 20 per cent of Western Europe at year end (2016). "Global annual shipment volume for 2016, total earbuds and headphones we put at 316 million units," he said. Apple's AirPods are powerful, with their own onboard system on a chip, tap-sensing interface, impressive microphones, but a weak five hours of listening battery. The headphones charge in a small pill-shaped carrying case you'll need to bring with you. Apple subsidiary Beats (the No. 3 headphone company by unit volume according to IHS) will also release larger format over-the-ear headphones with as much as 24 hours of listening time.
With a report from Bloomberg News