Apple (NASDAQ:AAPL) has only released one new iPhone model each year since 2007, but Wall Street analysts say 2013 will be different.
After Morgan Stanley analyst Katy Huberty pegged a dual release date for two iPhone 5 successors in 2013 -- the "iPhone 5S" (the true follow-up) and a cheaper "low-cost iPhone 6" -- Kirk Yang from Barclays (via Taiwan's Commercial Times) chimed in on Friday, releasing a similar note that said Apple is indeed preparing to release both the iPhone 5S and iPhone 6 in the same period, between August and September of this year.
According to Yang, Apple will release both the iPhone 5S and iPhone 6 in two models each: One model will feature the standard support for frequency-division duplexing (FDD) technology, which is used by most of the world's carriers, but another model is said to finally support the unique time-division duplexing (TDD) technology used by China Mobile (NYSE:CHL), the largest telecommunications carrier in the world.
This report makes a great deal of sense, considering Apple's reported efforts over the past several years to woo China Mobile into introducing the iPhone on its platform. With 703 million active subscribers, Apple badly wants to strike a deal with the carrier -- on Jan. 10, Apple CEO Tim Cook even stopped by China Mobile headquarters to meet with company chairman Xi Guohua, looking to "discuss matters of cooperation."
Yang's report says Foxconn will work on three models of the iPhone 5 successor, while Pegatron has already received orders to build the lower-cost TD-LTE-capable iPhone 6.
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The report says Apple is still crunching the numbers, looking to estimate how much the cheaper, lower-cost iPhone 6 might cut into sales of the iPhone 5S. The iPhone 5S vs. iPhone 6 predicament is not dissimilar from the iPad vs. iPad Mini predicament, which the company is still trying to figure out, as iPad Mini sales continue to cannibalize sales of its larger, older brother.
That said, Yang said Apple does expect to ship more iPhones in 2013 than it did in 2012, which would be a given if the company actually does release two iPhone models this year.
Will iPhone 5S and iPhone 6 Both Release In 2013?
As much as some customers may want to believe Apple will release a treasure trove of iPhone models this year, there is some discrepancy in what the rumors have been saying about the iPhone 6.
While most reports have claimed Apple intends to release the iPhone 5S in 2013, some have said the cheaper iPhone 6 will be released in 2014, if at all. Even the most recent report from Japanese Apple blog Macotakara said Apple's lower-cost iPhone 6, which was said to feature a 4.5-inch display and a polycarbonate enclosure, isn't expected to release until 2014.
That said, one of the most accurate analysts in the business -- KGI Securities analyst Ming-Chi Kuo, who accurately predicted Apple's entire product roadmap last year -- believes Apple will indeed release both the iPhone 5S and iPhone 6 in the third quarter of 2013, which would be right around August-September.
There are more reasons for why Apple should release both the iPhone 5S and iPhone 6 in 2013 than against: With analysts and investors concerned with Apple's diminishing share price, and the constant threat of rivals' releasing better and better smartphones each year, the pressure is on Apple to stay competitive: Releasing a low-priced iPhone 6 to attack those emerging markets might be the key.
Even though Apple wants to make greater inroads in China, the price of the current iPhone 5 is simply too steep in the country.
“One of our sources claims that Apple’s iPhone prices remain too high for most mainland Chinese customers -- the iPhone 5 hardware alone starts at $849 there, versus the iPhone 4 at $500, in a country where the average annual salary is around $3,000 per person,” iLounge editor-in-chief Jeremy Horwitz wrote in January. “The source has said that mainland Chinese iPhone 5 sales are already tapering off as a result of the pricing, which is higher than in Hong Kong. A budget iPhone model would help sales in populous but underdeveloped countries to grow.”
Thanks to cheaper, smaller, and more power-efficient chipsets, Apple can afford to build an entry-level to midrange smartphone on top of its current iPhone -- either one that's larger, like the Samsung Galaxy S3, or a smaller iPhone Nano -- to appeal to consumers who can’t quite afford Apple’s most popular product, including many in China. Furthermore, if Apple’s iPhone 6 was not only cheaper but also smaller, the phone would greatly appeal to Asian consumers who find small devices both chic and easier to hold.
Reports of Apple's desire to build multiple iPhone models have been echoed on Wall Street. On Jan. 2, Topeka Capital Markets analyst Brian White said the company will likely release its next iPhone in more colors and screen sizes, implying that Apple might sell an iPhone that's smaller or larger than the current iPhone 5 or even the previous-generation iPhone 4S or 4 units.
"Although Apple offers a 4-inch screen on the iPhone 5 and a 3.5-inch screen on the iPhone 4S and iPhone 4, the company has never offered multiple screen sizes for a single model," White said. "We believe this is about to change with the next iPhone offering different screen sizes that we believe will allow Apple to better bifurcate the market and expand its reach."
Considering Apple’s urgency to strike a deal with China Mobile, as well as the growing number of rumors pointing to a 2013 release date for an iPhone 6 that would be compatible with the popular carrier, it’s likely we could see both the iPhone 5S and iPhone 6 release worldwide this year.
iPhone 5S: What Might It Look Like?
Most reports say the iPhone 5S will have an identical form factor to the iPhone 5. Two independent reports -- one from iLounge editor-in-chief Jeremy Horwitz, and one from KGI Securities analyst Ming-Chi Kuo -- said the iPhone 5S processor will be upgraded to an Apple-built A7 chip, but Apple will make major additions to the iPhone's camera and flash -- “perhaps featuring Sony’s 13-megapixel sensor,” according to Horwitz.
But analysts say the iPhone 5S will be much more than a simple processor bump: One of the biggest -- and most likely -- rumors we've heard involves the iPhone's signature home button, which is said to introduce an integrated fingerprint sensor for the next-generation, replacing the need for usernames and passwords on the phone.
A fingerprint sensor makes great logical sense for an iPhone 5S feature: Unlike other Android-based smartphones with multiple buttons at the bottom, the iPhone has always had only one mechanical button on its face, which makes it exceedingly easy and intuitive for users to find and use this feature. Furthermore, given Apple’s urgency to acquire Florida-based AuthenTec last July (as noted in the company’s own filing to the SEC), there’s an excellent chance that we’ll see this unique feature in a soon-to-be-released iPhone -- hopefully the iPhone 5S or 6.
iPhone 6: What Might It Look Like?
Horwitz, the editor-in-chief at iLounge, detailed last month what he called the "budget iPhone 5," which will allegedly look like the iPhone 5, but feature several new design elements and tweaks.
“Yes, it will be made substantially from plastic,” Horwitz wrote, echoing an earlier DigiTimes report that said the iPhone 5S or 6 would feature a hybrid chassis made of both plastic and metal. “No, it won’t just be a Retina- and Lightning-equipped refresh of the iPhone 3G or 3GS, Apple’s last plastic iPhones, nor will it look just like an all-plastic version of the iPhone 5. This new model is actually a cross between the iPhone 5, the fifth-generation iPod touch, and -- wait for it -- the iPod classic. Yes, really. It will have a 4” screen, like the iPhone 5, a bottom like the latest iPod touch and a shape that’s most similar to the iPod classic.”
The original DigiTimes report about the low-cost iPhone 6 said the new iPhone’s internal parts could “be seen from the outside through a special design." If this rumor is accurate, the finished design for the iPhone 6 might look like an iPhone 5 mixed with the plastic enclosure of the iPhone 3GS from 2009 mixed with the final design for the Bondi blue iMac in 1998, which was characterized by its brightly colored, translucent plastic casing, letting users see the innards of their desktop computers for the first time.
Horwitz believes the low-cost iPhone 6 will feature specifications nearly identical to those of the iPhone 5, but will be "a half-millimeter taller and a half-millimeter wider," as well as a full millimeter thicker. While these changes are minimal, Horwitz noted the biggest design change in the iPhone 6 will be the curves.
“Apple’s budget housing looks closest to the iPod classic in shape, though not in materials,” Horwitz said. “Unlike the plastic iPhone 3G/3GS, which featured soft curves on all sides, the budget iPhone’s curves start and end at flat surfaces, so each side and the back are flat. This seems like a trivial change, until you realize that it allows Apple to use flat rather than curve-matched parts: the right side has a flat, centered SIM card tray just like the iPhone 5’s, while all of the buttons and ports are on flat rather than curved surfaces. A flat-backed iPhone won’t rock on a flat surface when it vibrates, either.”
The dimensions and proportions of the iPhone 6 will resemble those of the most recently-released iPod touch, with similar locations for the camera, microphone, and rear flash, according to Horwitz. The bottom microphone, headphone jack, Lightning dock, and speaker are in the same locations as in the iPhone 5, but the new iPhone 6 is said to have an extra microphone on the bottom, as well as four individual holes for the speaker grill, rather than the 26 speaker holes at the bottom of the iPhone 5.
“In summary, the budget iPhone will look a lot like an iPhone 5 from the front, an iPod classic from the side, and an iPod touch 5G on the bottom -- only made from plastic rather than glass or metal,” Horwitz concluded. “It won’t make any bold departures from past Apple designs, but then, it’s supposed to be an inexpensive iPhone and achieves that goal pretty much as expected.”
iPhone 5S and iPhone 6: Features Across Both Phones?
While the iPhone 5S and iPhone 6 may be aimed at two different crowds, it is likely that both phones could feature the same display technology. Several reports claim Apple is investing a great deal of time, energy, and money on display panels for its next-gen iPhones.
A Jan. 3 report by the China Times said Apple might switch to a "Touch On Display" panel currently in development at one of the company's suppliers, Taiwan-based Innolux Corp. (TPE:3481), which has reportedly licensed Sharp's proprietary IGZO display technology.
Whether or not Apple specifically chooses Innolux to make screens for the next iPhone, however, the company will most likely feature Sharp's ultrathin IGZO display technology in its next iPhone -- the iPhone 5S, iPhone 6, or both.
In late December, Asymco analyst Horace Dediu and DigiTimes both mentioned Apple’s alleged investment in the ultrathin IGZO displays produced by Sharp, predicting the inclusion of the technology in Apple’s next batch of iOS devices, including iPhones and iPads. Dediu also pointed to Apple’s recent $2.3 billion investment in “product tooling, manufacturing process equipment, and infrastructure,” believing the cash was used to help bail out Sharp, which had been in financial straits last year. Sharp is reportedly going “all in” on IGZO technology, so it’s possible Apple saved Sharp to leverage its investment in the next generation of displays.
As noted by Tom's Hardware, the IGZO display is not only thin and tough, but also can handle even higher screen densities than Apple’s Retina display, which is visually stunning on its own. IGZO displays can reportedly handle display densities north of 330 ppi: In comparison, the new iPad 4 can only achieve 264 ppi.
One of the advantages of IGZO display technology is its lower power consumption. Most Apple products, from the iPhone 5 to the iPad 4, require cartoonishly big batteries to achieve just eight hours of power -- this is because current-gen Retina displays are extremely power-hungry. If Apple wanted its iPhone 6 not only to last longer during the day but also to charge faster when plugged in, IGZO seems to be the way to go for the next generation of iOS devices.
Apple is facing stiffening competition from its rivals at Samsung Electronics Co. Ltd. (KRX:005935), Google Inc. (NASDAQ:GOOG), and even the Microsoft Corp. (NASDAQ:MSFT), so the Cupertino, Calif.-based company will need to pull out all the stops for its iPhone 5 successor, as well as for the cheaper iPhone 6, as it seeks to keep customer interest in an increasingly crowded marketplace.
Apple has set its own bar pretty high: The company sold 47.8 million iPhones and 22.9 million iPads in its fiscal first quarter ended Dec. 29.