iPad 2

Gentlemen Apple could use some serious competition in order for prices to drop in the longrun.

 

No question about that. And it's working - I already would strongly consider getting the Samsung 10.1 over an iPad 2 at this point. And the Touchpad being so much better at email is also noteworthy.

 

Ironically tablets aren't all that overprized in general (well maybe compared to mainstream notebooks yes); I was more targetting smart-phones than anything else. No wonder Apple makes such a remarkable profit out of them.

 

The problem, as I see it, is that only Apple, and probably Google has a strategy that goes beyond "Apple is making money on these things, and we want in on that!".

The handset makers are just slapping phone designs together and seems to be putting whatever Android version they happen to have lying around on an USB-stick on top of them, and would much rather you bought a new handset than upgraded your old. That the devices are sold via the network operators who have their own agendas doesn't exactly improve the situation.

I do wish Google can strong-arm the Android status quo into order, but at this point I still feel about Android as I did when the handset producers first put out their own god awful touch mobiles to be able to say that "they had touch too". It's a sorry mess, hamstrung by the lack of coherent vision beyond greed, and lack of innovation.

I don't mind cheap copy-catting really, as it makes new technology available to more people and speeds up transitions, but from an innovation and integration point of view, well, Apple is where its at, and the ones who do little or no R&D and just slap Android on top of their devices don't really do their job cost-cutting. Cheap hardware, with lackadaisical support at similar or higher prices (as in tablets, phones are different price wise) does little to expand the market. I hope it changes in the future.

Interestingly, both Apple and Google are progressively moving beyond/side-stepping the PC, so regardless of how their market share war plays out, in the end Microsoft and Intel/AMD are the dinosaurs of this evolutionary path. They have little to nothing to bring to this table, and their business models won't work in this space. They both however have oodles of cash from their respective nigh-on monopolies to throw at whatever seems promising, and it will be interesting to see how they respectively will try to buy their way into mobile. But bring some true innovation and new value into the equation? Based on past performances, I just don't see it.

 

Android phones are certainly bringing the competition. Google boast 550k activations per week, on a trajectory for a million a week.

Apparently there are all these $100-200 Android smart phones in Europe so they're soaking up the volume.

But Android could be in trouble from all the patent infringement suits.

 

If Android's growth area is Europe I'm guessing it's at the expense of Nokia. It'll be interesting to see what's left for WP7 once Nokia gets it on stream. For Apple, the question is whether they can finally achieve the much rumored China Mobile deal which would definitely drive large volumes.

 

I just checked local prices and the Samsung Galaxy Tab10.1 is at 620,00 Euros and the Samsung Galaxy S2 at 479.00 Euros.

iPhone4 (16GB like the ones above) at 540,00 while the iPad2 (16GB) is at 495,00 Euros. Despite possible other differences, the first has an older and smaller SoC integrated and is by far a much smaller device.

Compared to the GalaxyS2 the iPhone4 should sell today a whole damn lot cheaper.

 

Apple may talk up their comparative numbers now while they're still close, but they don't actually care about competing on total installed base and won't employ a strategy to realistically do that, like licensing out their OS and/or making many different models to cover every niche.

They'd rather cater to the majority without compromising optimization for the rest of the market, and they're more profitable for it.

 

They didn't care in the desktop space either years ago and look where they are today outside of the embedded space. In fact their biggest money milking cow right now IS the embedded space.

They're obviously not changing in the embedded space their strategy either, yet if Apple's only other reaction is to file a lawsuit against any other competitor they feel threatened with, I won't feel sorry for them either in the longrun if they should end up with some sort of niche products like Macs are.

And it's by far not only Android that is catching up; next in line is windows mobile. Google and Microsoft know how to handle the bigger masses and Apple can continue throwing out one ridiculous lawsuit after the other and cry like a spoiled brat because "that's the way they're doing business".

http://www.dailytech.com/article.aspx?newsid=22173

http://www.dailytech.com/article.aspx?newsid=22166

Thank God they haven't sued everyone else yet for "inventing" smart-phones, but errr wait that's what they're actually doing pfffff

 

<devil's advocate> Why? </devil's advocate>

 

That's bloody nasty from your side, because you know I know the answer.

However convince me (preferably as an impartial average consumer that doesn't know all the nasty details) that if Apple would reduce the iPhone4 price they still wouldn't make a shitload of profit out of it and wouldn't push their sales even more.

 

I don't. Seriously.

They probably would, but at the expense of margins obviously. And at the expense of price clarity with the consumers: it's reassuring as a buyer to know that the price will not be sliding down until the next model arrives.

And for all technical achievements on the HW front of competitors, for a lot of consumers (me included), the iPhone 4 is still the best all-round phone around. (I mean: who cares about whatever technical spec when you can't follow the Tour de France with live video streaming?)

 

Ailuros, if you reduce your price from $600 to $500 and therefore your gross profit from $300 to $200, you need to sell 50% more phones just to make as much money. And it's also harder to secure enough capacity (something Apple is nearly always constrained by in the early months of a new product).

As I said before though, the iPhone 4 isn't inherently more expensive than the 3GS, and there are some easy small tweaks you could do to make it even cheaper. It would be very easy for Apple to sell something practically identical for $0 with operator subsidies and very good gross margins once they launch the iPhone 5.

As for the Galaxy S II... It does have a bigger screen and a much bigger application processor, but it also has a newer/cheaper baseband (XMM 6260), a cheaper RF subsystem, and very high volumes (even if not quite as high). I agree the iPhone 4 would sell a fair bit cheaper at similar gross margins but I think "whole damn cheaper" is an exaggeration.

 

The point I was trying to make is that a smartphone's price isn't just the sum of its hardware parts plus some margin. It's a price (hopefully) befitting everything you end up holding in your hand, and includes amortisation of the software investment, quality of that software, the physical design and a whole bunch of other things.

I don't see why the iPhone4 should sell a whole load cheaper than the Galaxy S2, despite the latter phone being really good. Screen, UX, physical design, battery life.....all better on the cheaper phone. If anything it surprises me that the Galaxy S2 isn't the same price.

Note, I'm speaking as a consumer here and not an Imagination employee, so I'd say the same things (potentially with a different battery life position) if the S2 shipped with OMAP4 or whatever.

 

If iPhone4 wasn't selling fast enough, over a year after release, then presumably the price would drop.

So the price is in line with demand?

Not sure that other smart phones market specs so it may be moot what the internals are. iPhone brand isn't based on comparing specs. but instead on status. It's something to be seen with so a lot of purchases are based on getting what everyone else seems to be getting.

Of course Apple isn't going to be able to drive up volumes to compete with a dozen other manufacturers so they won't have majority market share. But they have majority profit share and so far, they haven't had to trade profits for pure market share, because the overall smart phone market is growing and Apple's share is growing with it.

 

iPhone is being outsold by Android 2 to 1, so the status factor can't be it.

 

Certainly price trumps status.

BMW and other luxury marques are outsold by Ford and VW.

But there's an aspirational quality to it. iOS products are in demand in China, even if they have to be bought at black market prices or people going down to Hong Kong to line up to buy iPad 2 at department stores which require buyers to purchase other electronics products in order to have the opportunity to buy the iPad 2 from their limited inventory.

 

In which case, Apple will have to play the price game, unless they are OK with getting marginalized like they are in PC space, in a category that they invented for all intents and purposes.

 

I'm not sure Apple has ever wanted to be the PC (though I doubt they wanted to be as marginalized as they were for so long), and they are starting to hit the sweet spot with the Mac market now, too.

I'm not sure who is to blame for the lawsuits dilemma, but these phases in a market's development are common and are just a way for the manufacturers to arm themselves with protective IP.

Apple is ceretainly not the only one filing bogus claims here... some of the others' lawsuits are downright shameless.

 

Pretty sure Apple is already close to the sweet spot in terms of profit vs marketshare, but I think they still may have something up their sleeves...rumors have it they'll be releasing a cheaper version of the iPhone 4..same internals different casing. I could see the cheaper iPhone 4 using a stamped or molded frame casing vs the current CNC machined one.

Moving forward they will want to phase out the older weaker 3G models given that new Apps won't be able to run well on the older phones once the A5-based iphones hit the market. I doubt Apple wants to flood the market with cheap crap just to gain more marketshare. Having both ATT/T-Mobile and Verizon offering the new iPhones will guarantee a healthy growth in marketshare.

With regards to the iPad, I think their current pricing is spot on given that they're still supply constrained.