MWC Day 2 – iPhone 5se.

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The 5se needs to be something very different but it is unlikely to.

• The fact the two companies that make almost all of the profit in the mobile handset industry continue to shun MWC has not stopped the endless rumours and questions.
• Foremost of these is will the iPhone 5se push iOS further into the mass market eating into the traditional Android market.
• This has been spurred by rumblings from the supply chain that Apple is gearing up to ship 50m units of this device.
• It is important to bear in mind that these same rumblings also predicted that the Apple Watch would ship 100m units in its first 12 months.
• Furthermore, this is exactly the same question that was asked about the iPhone 5c which had almost no impact at all.
• The problem with the iPhone 5c is that it was not cheap enough to appeal to the mass market meaning that most users either paid up for the real thing or bought the much cheaper 4s.
• The net result was that Apple’s iPhone ASPs barely moved and many operators ended up with far more stock of the 5c than they had bargained for.
• The iPhone 5se looks set to take the same path unless Apple does something radically different and of this I see no sign.
• Looking at the rumoured specification of the iPhone 5se, it is almost certainly not going to be a mid-range product and hence I think it will be a non-event when it comes to volumes.
• There are two problems that prevent Apple from cracking this problem.
  • First. By its own admission, Apple does not do cheap well and almost every attempt (except iPod) it has made has failed.
  • Second. To make 40% gross margin on a much lower priced product, Apple will have to meaningfully reduce the specification of the device which risks breaking the ecosystem.
  • In RFM’s 7 Laws of Robotics which measure the quality of an ecosystem, Law 7 refers to software consistency.
  • Apple’s software consistency across its entire ecosystem is second to none and this is a major reason why the user experience is so good and why developers are able to earn excellent returns from iOS.
  • A lower end product would mean that apps would no longer run consistently across all iPhones adding complexity, cost and difficulty for developers.
  • The lack of software consistency in the Google ecosystem and all of the other ecosystems based on Android is a major reason why the user experience is second rate and why developers earn less money from targeting these devices.
  • Hence I think that gaining a few points of market share is simply not worth the risk of fragmenting the incredibly consistent ecosystem that is iOS today.
• This why I think that the iPhone 5se will be a non-event as far as Android handset makers are concerned as I see nothing in this product that will make it perform any differently to the iPhone 5c.
• Hence I see no change to the status quo where Samsung is the king of Android outselling every other handset maker by at least 2 to 1.
• Samsung remains by top choice amount the Android handset makers although it needs to be extremely wary of Huawei which is showing that it is prepared to spend the big bucks to become number 1.