Waiting for Apple’s budget iPhone

A new generation iPhone and a cheaper iPhone are expected to be unveiled next month - and September 10 might just be the day, according to US technology blog website AllThingsD.

Unnamed sources quoted by AllThingsD on August 10 said that "any new phones will be running iOS 7," referring to Apple's new operating system that has been undergoing testing since its June release. The report also alluded to a fingerprint sensor that could also be introduced as a new touch-screen feature.

The news was also backed by Katy Huberty of Morgan Stanley. After visiting some Asian carriers and suppliers in May, she told investors that Apple will unveil a "sequel" of the iPhone 5 and a new low-end iPhone this fall.

Zee M Kane, CEO of UK tech blog The Next Web, said on August 11 that the new iPhone, likely to be named as iPhone 5S, is expected to embody the same design as the 4-inch iPhone 5, but have a better battery life thanks to Samsung's A7 Chip and Sharp's IGZO display. Apart from a fingerprint reader, Kane speculated that it would also come equipped with an exciting slow motion camera with dual-LED flash.

The fingerprint sensor is likely to be housed by a "sapphire-covered convex home button," which should make for a convenient user-experience, Kuo Ming-chi, an analyst from KGI Securities, was quoted by US tech news portal appleinsider.com on August 10.

As for the low-end iPhone, most likely to named the iPhone 5C, Kane said that consumers could expect multiple colors and a 3.5-inch display, which could signal the end of the iPhone 4 and the iPhone 4S.

If the speculations are correct, it will be the first time in iPhone history for Apple to launch two models at one time. The company could not be reached for comment by press time.

Analysts said that two handsets at once is possible as its global market share has dropped amid a growing number of lower-cost Android smartphones and high-end Samsung devices gaining in the market.

Rise of the Androids

To fight off increasingly fierce competition from Android smartphones, Apple has already advanced its launch time of the iPhone, Wang Jun, an industry analyst from Analysys International, told the Global Times Monday. "At first it used to be one model a year, now it's a new model every half-year," he said.

But even the more frequent product launches have been unable to stave off Android smartphone manufacturers as they devour Apple's market share with remarkable lower-priced devices popular among users.

Data from US leading market research firm IDC indicated that the global shipments of Android handsets reached 187.4 million units in the second quarter, accounting for 79.3 percent of the market share while iOS seized only 13.2 percent, shipping just 31.2 million units around the world.

With a larger screen size, consumers are being lured over to the Android camp as UK market consultancy Kantar Worldpanel notes robust growth for gadgets with 4 to 5-inch screens, further predicting the "phablet" - a mobile device with 5 to 7-inch screens - to be the future of the mainstream market.

Moreover, in China, where the iPhone craze took off in recent years, Apple's popularity has diminished as more Chinese buyers have stopped blindly following the trend and are becoming choosier and more price-sensitive about their purchases, Cao Yujie, director of consultants for IT market research agency CCW Research, told the Global Times on Monday.

Even longtime Apple fans like Zhang Yang, the owner of two iPads and three generations of the iPhone, are thinking twice. The 32-year-old engineer in Beijing now has his eye on Samsung's upcoming 5.7-inch Galaxy Note III.

"There are so many more choices for smartphones out there these days. Apple is not irreplaceable, nor are their products that unique anymore," he told the Global Times on Monday.

Data from global leading market research firm Canalys also showed that during the second quarter, Apple's iPhone market share in China dropped to 4.8 percent with 4.3 million shipments - falling to No.7 in the firm's vendors ranking from fifth in the first quarter.

Samsung topped the ranking with 17.6 percent while the following five places were taken by Chinese manufacturers, which have managed to build brand awareness in the mid-to-low end market, where China's smartphone market is really taking off these days, said Wang.

Catering to China

Wang noted that Apple might be able to bounce back by making headway in the low-end smartphone market to attract price-sensitive Chinese consumers who comprise the main fountainhead of smartphone consumption - after China exceeded the US to become the world's largest market for smartphones, data research agency Flurry said in February.

Apple has been researching the low-to-mid end smartphone market since deciding to continue its iPhone 4 and 4S models after launching the iPhone 5. While it is an area of the market new to Apple, it is one in which the company still has the chance to take the reigns, say analysts.

In order to secure a favorable market reception, Apple must deliver what Chinese consumers want and for a price that they are willing to pay, said Yu Yi, account director with consumer price index of China Mobile Communications under Kantar.

Apple may want to refer to the high performance of its iPhone 4 and 4S as a guide. After their prices were reduced in China to as low as 2,550 yuan ($416) and as high as 4,488 yuan, sales volumes for both models in the second quarter accounted for 58.2 percent of the iPhone's total market sales, according to Kantar.

Therefore, the sooner Apple can unveil a budget iPhone at an agreeable price for consumers, the better its chances are of promoting its iOS as the second-largest mobile phone operating system in the world - and narrowing the gap with Android, said Yu.

No doubt the difficulty will lie in setting the right price for a budget phone, but Morgan Stanley's Huberty was confident that if the price is fixed no lower than $399, it would be enough to increase Apple's total margins.

Finally, if Apple is serious about making strides in the most-coveted smartphone market in the world, it will need to convince the country's largest telecom carrier to partner with it, said analysts.

And though Apple's CEO Tim Cook was reported to have last met with China Mobile executives at the end of July, no deal was reported to have come out of those talks.