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iPhone 5 Could Be the Last of the Red-Hot iPhones

iPhone 5 Could Be the Last of the Red-Hot iPhones

Apple has been unable to meet the heavy demand for the iPhone 5, and some consumers will have to wait weeks for their pre-ordered phones. Yet the more ubiquitous iPhones become, the less cachet they might have with discriminating gadget buyers. "This phone is becoming the Volkswagen of phones and losing its elite status," suggested tech analyst Rob Enderle.

By Peter Suciu MacNewsWorld ECT News Network
09/24/12 1:55 PM PT

Apple had a very good weekend, with sales of its new iPhone 5 surpassing 5 million. That's about a million units more than it sold during the iPhone 4S' first weekend a year ago. However, the weekend likely wasn't as good for those who were left empty-handed on Monday, as AT&T, Verizon and Sprint stores reportedly were sold out.

It's expected that consumers will be able to get the iPhone 5 from Apple or the carriers in three to four weeks. The weekend raises a perennial question with Apple product launches, when supply typically doesn't meet demand. Was this part of a marketing plan to keep demand and buzz high? Or did the company miss potential sales by not being able to deliver enough stock?

"The initial sales weekend numbers are traditionally a function of supply, and there were indications that Apple couldn't get enough built in time for the launch, which is why pre-order buyers will be waiting several weeks for theirs," said Rob Enderle, principal analyst for the Enderle Group.

"I don't think these problems were anticipated, but it doesn't showcase a lack of demand but one of supply," he told MacNewsWorld. "Apple supply is very difficult to estimate, particularly on a new product, because new lines often run into problems and quality control issues as they ramp, and this is a particularly difficult phone to build."

Supply and Demand Balance

Of course, with every new "must have" gadget or gizmo, it is an issue to meet demand while also ensuring that there isn't an overabundance of supply that retailers must sit on while waiting for sales. In this particular instance, though, Apple could have upset the faithful by not meeting the demand.

"Apple's initial shipment numbers are meeting our expectations so -- from our perspective -- it's on track to help fulfill our forecast of iPhone shipments for the remainder of 2012," said Wayne Lam, senior analyst at IHS iSuppli. "There are concerns over how big of an issue the component supply and manufacturing capacity is currently."

"However, in the past, Apple has been able to overcome much of those logistical challenges," Lam told MacNewsWorld. "Also, there's a bit of bad press brewing with respect to the maps applications which may have potential long-term demand impact. Apple will likely need to get in front of this news cycle and clarify their changes to their maps application -- much like what they've done with the iPhone 4 antenna issue."

Those issues aside, it remains to be seen whether longtime iPhone users will stick around for the long haul, especially those who pre-ordered and now must wait for a handset.

"The fact they had to delay pre-order deliveries indicates that they had some kind of a manufacturing problem they didn't disclose and put the impact on the group that isn't going into stores -- and has a lower value because they buy less accessories as a result," added Enderle. "In effect they are punishing online buyers so that these buyers go into stores next time, and making sure their high-value buyers are served, while meeting carrier commitments."

Sales of the iPhone 5 have been strong out of the gate, but will those sales continue or could it start strong and fall quickly?

"This is a case of expectations, not performance," said telecommunications industry analyst Jeff Kagan. "Performance was better than any previous year, but it just was not up to expectations. This year they sold 5 million in the first weekend. Last year they sold 4 million in the first weekend. The year before they sold 3 million after three weeks. So you can see they are doing better every year."

"If that was the only part of the story, it would be a wild success and we would be falling all over ourselves congratulating Apple," Kagan told MacNewsWorld. "But we expected 8-to-10 million. So in that world, 5 million is a disappointment."

Losing Its Shine?

Other lingering issues about some of the iPhone 5's functionality also haven't helped Apple in the least. While the iPhone still has the largest market share for a single device, iOS continues to trail Android as the top smartphone operating system.

This is much more than a supply-and-demand issue.

"Demand looked strong, issues with WiFi and Maps didn't seem to have much impact -- however, this phone is becoming the Volkswagen of phones and losing its elite status as a result," Enderle said.

"This perception of this elite status is what has helped Apple lock in to a very lucrative customer base, but as the phone became the one your parents, grandparents, and service providers used, it lost a lot of that allure -- and likely the buyers who bought status with iPhone are starting to look elsewhere," he suggested. "We'll likely see this impact once initial demand is met and the device has to compete with an increasing number of differentiated products."

Apple's Challenge

"The Apple iPhone will lose some of its appeal as new competitors enter the space and compete for business," Kagan said. "Apple may continue strong for several years, but every company rides a wave. It goes up, crests and then falls. Apple is still rising. But remember, 15 years ago, the company was almost out of business. These things happen quickly, both ways -- up and down."

Given that other dominant players have fallen on hard times, the question remains whether Apple would ever join the ranks of Motorola, Research In Motion, Nokia or Palm. But another parallel is present.

"We are beginning to see what happens when Apple stops looking like the old Sony and starts looking more and more like the new Sony," said Enderle. "That would indicate a drop from the top next year if this isn't reversed."

Apple did not respond to our request for further details.


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