Jun 27, 2014

    Apple ditches Jobs DNA with bigger phone

    APPLE'S Chinese manufacturing partners are gearing up to start making iPhones with a 5.5-inch screen next month.

    The move is a reminder of some past missteps, such as Apple's decision in the early 1990s by then chief executive officer John Sculley to expand the company's product line until it became confusing, or Sony co-founder Akio Morita's order requiring employees to wear shirts with big pockets that could hold the bulky original Walkman.

    Apple, while still technically a market leader, is now a follower - but there's not much else it can do, given the growing role of Asian markets for smartphone-makers.

    Last month, the research firm Canalys issued a report showing that 34 per cent of mobile phones sold in the first quarter of this year had screens bigger than 5 inches, placing them in the "phablet" (phone plus tablet) category.

    Take a subway ride in Hong Kong, or get on a bus in Singapore, and you'll see locals peering - and talking - into oversized smartphones.

    In Greater China, phablets accounted for 39 per cent of smartphone sales; in the Asia-Pacific region, they made up 43 per cent of shipments.

    Apple has watched the rise of Xiaomi, the Chinese smartphone-maker that increased its market share in its home country to 9.2 per cent in the first quarter of this year from 3.9 per cent a year earlier, and the solid performance of another local brand, Coolpad, which increased its market share by 0.8 percentage point to 10 per cent in the same period.

    Both Xiaomi and Coolpad sell more phones in China than Apple. And both companies have flagship phones whose screens are 5 inches or bigger. So does market leader Samsung.

    "Apple plainly needs a larger-screen smartphone to remain competitive, and it will look to address this in the coming months," Canalys correctly predicted last month.

    From a conventional marketing point of view, that is the only possible approach.

    Apple is a popular brand in China, accounting for 8.7 per cent of unit sales in the first quarter, despite its pricey offerings and small screens.

    The real growth in phablets is likely to occur in the next few years as 3G and LTE networks develop throughout Asia.

    There are just two problems with Apple's plan to portray a big-screen iPhone as this autumn's major "innovation". It's a copycat move, and it's a move away from the product-line asceticism that co-founder Steve Jobs fought hard to institute after his Apple comeback in 1996.

    Under CEO Tim Cook, Apple has already departed from this principled stand by offering the slightly cheaper, colourful iPhone 5c last year. It did not do as well as the flagship 5s. That should have taught Apple to stick to its Jobs DNA and release one model this year, perhaps with a larger screen.

    We have to get used to the fact that, despite its pedigree, Apple is now just another player - albeit an exceptionally strong one - in a commodity market.

    Mr Sculley (through his company called Inflexionpoint) now plans a smartphone made for the Indian market.

    Here's a quote from the marketing guru who couldn't live with the way Jobs did things: "We feel there is an opportunity to build another brand in India that would combine global branding skills...(and) go into price points that are more like the local brands."

    See, he appreciates Asia's importance, too. Breakthrough engineering? Forget it, there are more important considerations.