On September 10, 2013, Apple revealed two new models, the top-end iPhone 5 and an entry-level iPhone 5C at an event in California, marking a change to Apple's one-a-year iPhone strategy. With specifications of these two iPhones already being leaked out, the key focus of this event is on the pricing strategy of iPhone 5C.

According to Eddie Han, Industry Analyst for Mobile Communications at MIC, the world's shipment share of smartphones priced above US$450 will slip from to 44.2% in 2013, down from 51.4% in 2012. This is mainly due to the reduced shipment share of above US$600 smartphones aimed at the high-end market, the target market of iPhones. "Amid the slowdown in growth momentum of high-end smartphones, Apple has not adopted more aggressive pricing strategy. Instead, it rolled out two distinct types of smartphones at the same time", noted Eddie Han.

iPhone 5S, the updated version of iPhone 5, is priced US$649 with 16GB memory. The major innovation of 5S is the introduction of fingerprint sensor built into the phone's main button to identify the user. Other features include a 4-inch retina panel, sleek brushed metal cover, 64-bit A7 chip, and M7 chip, a motion coprocessor that is responsible for measuring motion data from accelerometer, gyroscope and compass. Despite the criticism about Apple's limited innovation in iPhone 5S, the adoption of M7 processor reveals the company's aggressive plan for wearable smart devices.

iPhone 5C and iPhone 5 are similar in their hardware specifications and the major difference is that iPhone 5C is made of plastic cover. Eddie Han says "it seems that Apple is going to phase out iPhone 5 with iPhone 5C". Normally, after a new iPhone is released, Apple will reduce the price of antecedent model by US$100. This time Apple has done the same for iPhone 5. But, instead of cutting the price of iPhone 5, Apple rolled out a cheaper-priced iPhone 5C with relatively low production costs to replace iPhone 5 to improve profit margins which have been on the decline for the past few quarters.

Outlook for Apple in 2H 2013

Looking at Apple's telecom partners, Apple announced its cooperation with Japan's leading telecom operator NTT DOCOMO which has about 60 million subscribers but its cooperation with China Mobile, one of leading Chinese telecom operators with 740 million subscribers, is yet to be confirmed. Despite that, the TD-LTE/TD-SCDMA/GSM versions of iPhone 5S and 5C have obtained the telecom equipment trial licenses from China's MIIT. This represents that Apple is going to jointly release new models with China Mobile. The release date of those TD-LTE/TD-SCDMA/GSM iPhone 5S and 5C, however, will depend on when China will release its 4G licenses. Refined by its less aggressive pricing strategy and its yet-to-be-successful efforts in boosting potential user base, iPhone shipment volumes are expected to be less than expected in 2013.

Companies covered: Apple, NTT DOCOMO, China Mobile

Countries covered: China, Japan, USA

Regions covered: Asia, North America

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Market Intelligence & Consulting Institute (MIC), based in Taipei, Taiwan, was founded in 1987. MIC is Taiwan's premier IT industry research and consulting firm providing intelligence, in-depth analysis, and strategic consulting services on global IT product and technology trends, focusing on markets and industries in Asia-Pacific. MIC is part of the Institute for Information Industry. https://mic.iii.org.tw/english