Apple Inc. (NASDAQ:AAPL) remains advantaged in compute, but hardware lead disappearing according to analysts at Credit Suisse who attended MWC. Credit Suisse has a lengthy report on all their findings. Apple Inc. (NASDAQ:AAPL) and Blackberry are the most interesting so we focus on those. We previously reported about Credit Suisse's lowering their forecast for iPhone sales. We focus on that here a bit as well.
From a hardware perspective, Apple’s iPhone 5 now looks like just another high-end smartphone according to Credit Suisse. In the lead-up to MWC this year, the analysts have seen over 35 new smartphone launches, of which around 70% are aimed at the high-end and some 60% support a screen size which is larger than iPhone 5 (of over 4”), thereby narrowing the lead on hardware side.
Further, with the likelihood of an iPhone refresh in mid-2013 which may cause a hesitancy effect on demand, along with upcoming launch of Samsung Galaxy S4, this is likely to have a negative impact on iPhone volumes in the near term.
Apple Inc. (NASDAQ:AAPL) mastering compute is the key competitive advantage, but some NT risks.
Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930)’s building success in the high-end inevitably leads to questions around Apple’s competitive advantage. While Samsung’s growth and success is be monitored in a multi-device world, Apple still remains advantaged, principally because the company’s vertically integrated structure allows it to simultaneously address all three markets i.e. PCs, tablets, and smartphones. Moreover, much of the innovation comes in software.
Add to this, the broad range of “i-Services” that are built well beyond iTunes; to include the Apps Store, iAd services, iBooks and now iCloud; the company allows consumers to seamlessly access content across multiple devices. This means that market share gains in one area of compute such as PCs and tablets can have a reinforcing loyalty on the smartphone side and vice versa. Longer term Apple Inc. (NASDAQ:AAPL) with have high retention rate within its installed base, driving replacement device sales similar to an annuity stream.
Apple Inc. (NASDAQ:AAPL) will launch the iPhone 5S in the middle of the year which could drive further growth in the high-end.
As with any Apple Inc. (NASDAQ:AAPL) product cycle, the key selling period with likely be the first two quarters following the launch. As we have seen in the past few Apple launches, a successful device combined with increased levels of global carrier support results in growing the high-end of the mobile phone market.
A low-end iPhone at some point
The obvious response competitive to Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) would for Apple to introduce its own low-end iPhone at some point as many have noted recently. While Apple Inc. (NASDAQ:AAPL) has maintained robust growth so far, growth will be slower going forward and Apple needs to introduce a low-end product to penetrate the market. In addition, Android has been taking share from other vendors. Apple needs to be more aggressive to defend its eco-system.
Finally, Apple Inc. (NASDAQ:AAPL) can further expand its iTunes installed base to by introducing a new product, which provides monetization opportunities in the future which will be materially additive to smartphone share, iPhone units and gross margins.