Thoughts and Observations Regarding This Week’s iPhone 4S Event, Written Almost Entirely Before Wednesday’s Sad News, But Which the Time Has Come to Publish Because Life Goes On

Friday, 7 October 2011

What More Could You Have Wanted in a hypothetical ‘iPhone 5’ Today?

A 4-inch screen? What sign has Apple ever given that it will ever change from the one-size-fits-all 3.5-inch screen? Every single iPhone and iPod Touch ever released has had the exact same size screen.

Now, maybe you would prefer a 4-inch screen. Or maybe a 4.5-inch screen. And maybe someone else would prefer a slightly smaller 3.25-inch screen. That’s not how Apple rolls, especially with iOS devices. There is no doubt that some people would prefer a bigger screen. But nor is there any doubt that many other people would not. I wouldn’t. I like to see things get smaller, not bigger. Bigger is not necessarily better. Apple decided on the optimal size for an iPhone display back in 2006. If they thought 4-inches was better, overall, as the one true size for the iPhone display, then the original iPhone would have had a 4-inch display. It’s not like 4-inch screens are harder to make, or use some sort of new technology. If anything they’re surely easier to make, as the pixels are less dense.

One big advantage of a 3.5-inch display: with average-size hands, your thumb can reach any pixel on screen more comfortably while holding the phone one-handed. Judging from my email, many proponents of bigger screens — those who are disappointed that the iPhone 4S doesn’t sport a 4-inch display — see no such trade-off. Bigger is better, period, they say, and anyone who says otherwise is in denial that Apple is falling behind its competition. But by that logic, 5-inch screens would be better than 4-inch ones, and 6-inch screens better still. That’s silly. Bigger is not necessarily better for handheld/pocket devices.

4G LTE support? Impossible, given the value Apple places on battery life and device thinness. The thing to keep in mind about the A5 chip is not simply that it goes dual-core, roughly doubles CPU performance, and offers up to 7× graphics performance — no, the thing to keep in mind is that it does all these things while improving overall battery life versus the iPhone 4, in the exact same form factor.

4G LTE support would make that impossible. Anand Lal Shimpi explains:

The iPhone 4 PCB is already incredibly small, not leaving any room for an extra chip to enable LTE without shrinking the size of the battery (or increasing the thickness of the phone to accomodate both a larger PCB and a big battery).

If you value tech specs over practical real-world battery life, if you would like to choose from a variety of screen sizes ranging from 3-4.5 inches, if you would prefer a thicker bulkier form factor to accomodate large LTE chips and a bigger battery to power said LTE chips, then the iPhone is not and never will be the phone for you. And, lucky for you, there’s another platform, Android, that offers you everything you want.

People who claim to be disappointed that Apple’s 2011 new iPhone doesn’t have a bigger display or LTE are effectively arguing that the iPhone should be more like Android. Whereas in truth, the iOS and Android platforms are growing more different over time, not less.

How About at Least a New Form Factor? The gist I get, after talking to some valuable little birdies over the past few days, is that a new form factor was never in the cards for this year’s iPhone. It may or may not have ideally launched a few months sooner, but the plan was always for an iPhone 4 successor that looked like the 4 but had improved internal components. I wouldn’t be surprised if the next iPhone doesn’t change, or doesn’t change much, either.

Apple isn’t going to make a new form factor just for the sake of newness itself — they make changes only if the changes make things decidedly better. Thinner, stronger, smaller, more efficient. If they don’t have a new design that brings about such adjectives, they’re going to stick with what they have.

Apple pursues timeless style, not fleeting trendiness. This iPhone design might be like that of the Porsche 911 — a distinctive, iconic, timeless, instantly-recognizable representation of the product’s brand itself.

The iPhone Product Cycle

Apple is a company of patterns and cycles. These product cycles keep the machine functioning at a steady pace. They broke one pattern with the iPhone 4S: all previous iPhones were released in June. But they’ve added a new one: a two-year cycle that starts with a new form factor (3G/4) followed a year later by a new phone with the same form factor but significantly improved internals (3GS/4S). If next year’s phone is named “iPhone 5”, then I’ll expect a lookalike iPhone 5S in 2013.

The iPhone is now a mass market product. It is of course used by many gadget and technology enthusiasts, but gone are the years when iPhone sales tapered off in the quarter preceding a new iPhone. In 2008 and 2009, the iPhone audience was still a tech-enthusiast audience. Now, in 2011, the iPhone 4 remained the best-selling smartphone in the world right up until the 4S was announced. I wouldn’t be surprised if the iPhone 4 continues to sell well today.

As for the argument that Apple has failed because the iPhone 4S, however nice an improvement overall, is not enough to entice iPhone 4 users to upgrade — so what? Normal people don’t buy brand-new $700 smartphones each and every year. In the U.S. they buy them on two-year contracts, and they don’t shop for new ones until their old contracts are over. So the iPhone that the 4S needs to present a compelling upgrade for is the 3GS, not the 4. And the iPhone 4S absolutely smokes the 3GS. It’s crazy better than the 3GS. 2009 3GS buyers who skipped the iPhone 4 — which I’m guessing are most of them — ought to be delighted by the iPhone 4S.

We saw the same criticism with the iPad 2 — that it wasn’t a compelling upgrade for existing iPad owners. In a way, those critics are right — the iPad 2 is not a compelling upgrade. But it wasn’t supposed to be — Apple expected iPad 1 owners to keep using the iPads they already own. Normal people don’t replace $600 gadgets annually — and they rightfully expect their $600 gadgets to remain useful and relevant for more than 12 months.

A Massive Wednesday

This coming Wednesday, 12 October, is going to be one of the biggest software release days in Apple’s history. Probably the biggest. Think about it: iCloud goes live, iOS 5.0 is released, Lion gets a 10.7.2 update to support iCloud, iTunes (for Mac and Windows) gets an update to support both iOS 5 and iCloud, the iOS iWork apps get an update to support iCloud document storage, Find My Friends hits the App Store, and probably a few more that I’m not remembering. Oh, yeah, Cards, the greeting card app and mailing service.

Tim Cook’s Numbers

The gist I got from Tim Cook’s state-of-the-company portion of the event is this: Apple has enormous growth opportunities in front of it. He claimed 24 percent of U.S. retail PC sales go to the Macintosh now,¹ and he recalled how that’s up from “the low single digits” not too long ago. But he reiterated that as good as a number like 24 percent looks for the Macintosh historically, that still leaves 76 percent of the market for growth. Also worth noting, I think, is that Apple is eating into that 76 percent of the market from two sides now. With the Mac at the high end, and with the iPad at the low-price portable end.

With the iPhone, Cook chose to talk about Apple’s share of the worldwide handset market, not smartphone market. All phones are eventually going to be smartphones, so Apple rightly sees 95 percent of the current market as room for growth. Recall too, the 2007 iPhone introduction, when Steve Jobs’s humble stated goal for the iPhone was a mere 1 percent of the overall handset market.

In short, Tim Cook is playing offense, not defense, and he clearly has a very detailed plan.

There are many, I think, who see Cook’s near-term priority as defensive — that he’s been handed the keys to a great and fabulous machine, and he must focus on not slipping. Not to lose what the company has fought so hard to obtain. But Cook is talking about growth. About Apple not being in a precarious position — at a peak of success it needs to defend — but rather about Apple finally having achieved a solid, stable foundation — financial resources, design talent, engineering prowess, and traction in the mass market — upon which it can consistently thrive.

The Other Cloud

This wasn’t the first no-Steve Apple product announcement, and it obviously isn’t going to be the last. The vibe was different, yes, but still distinctly Apple.

It’s hard not to feel a lump in your throat, thinking about Tim Cook’s state of mind walking on stage to start the show, knowing that his friend and mentor was nearing the end of the line. No one in attendance knew, but Apple’s executives did, and in hindsight that explains a certain glumness that pervaded.

What occurred to me while Phil Schiller was delivering the most important part of the event, the reason everyone was there — the iPhone 4S — is that in a way this event was more purely Apple-y than any I’ve ever attended. Steve Jobs’s charisma and personal brand are so enormous that they rival those of the company itself. The company was not the man and the man was not the company, but Steve Jobs was bigger than life. Jobs had his own gravity well, beyond that of Apple’s. Steve was and will always remain beyond Apple. Guys like Schiller, Cook, Cue, and Forstall come across as decidedly of Apple.

I like the roles they’ve created. Cook is competence personified — he sees the big picture, understands the details, and sees how all the pieces fit together. Forstall is the face of iOS. Cue is the face of iCloud and iTunes — and there is something to be said about a man who is clearly taking responsibility for a major new initiative in an area where Apple has had spotty, at best, results in the past.

And Schiller, I think, is the guy who stepped into the hardest job on stage. He’s the best presenter in the company, the smoothest and the sharpest. In baseball, the best overall hitter on a team generally bats in the third spot in the lineup — that’s the spot where he’s most likely to drive in runs ahead of him, and most likely to get on base and score himself as a run batted-in by the hitters behind him. Schiller is now Apple’s three-hitter. He’s not the host of the show, that spot remains with the CEO. But Schiller’s the guy who unveiled the multi-billion-dollar baby, the iPhone 4S. Cook replaced Jobs as chief executive, but it’s Schiller who had to replace him as chief product pitchman. I say he nailed it — especially given what we now know.

The Stores

Cook spent a significant amount of time in his opening segment talking about the company’s retail stores, showing off flagship new stores in Shanghai and Hong Kong. I think it’s impossible to overstate the importance of Apple’s retail business. The growth in stores — both in the number of outlets and the size and architectural prominence of the flagship locations — is a physical manifestation of Apple’s market share growth in device sales. Luxury retailers have long done this. Think about brands like Tiffany, Gucci, Hermès, Louis Vuitton. Their retail stores are physical manifestations of the brands. But Apple’s brand of luxury is mass market luxury. Apple’s stores are crowded. They’re bustling. They’re loud. And they’re inclusive, not exclusive.

None of Apple’s rival companies have any sort of physical real-world relationship with customers like Apple does. Google, Amazon, Samsung, HTC, Dell — we interact with these companies only via our screens, or in generic big-box retail stores like Best Buy. Microsoft is flailing in its attempts to mimic Apple’s retail effort, but they at least seem to recognize that Apple is using its retail stores to build a tangible emotional relationship with millions and millions of people.

Speaking of Google

I can’t help but see Siri as Apple’s first attack in the direction of Google’s crown jewels: search. Apple mentioned and promoted two partners for Siri’s knowledge back-end: Yelp for locations, and Wolfram Alpha for encyclopedic information and as a calculation engine. Every Siri query that’s answered by Yelp or Wolfram Alpha is a query that might otherwise have been answered by Google. The more people use Siri, and the more non-Google data sources Apple adds to it, the less iPhone users will use Google search.

In my hands-on time with the iPhone 4S after the event, I made several queries that Siri couldn’t answer. When that happens, Siri offers to search the web for your query. When you agree to that, you shoot over to Mobile Safari — where, if you haven’t changed your default search engine, you’ll be looking at Google search results. But that’s outside the Siri experience. It’s way less fun. It’s a nice (and obvious) way for Siri to punt on queries it can’t help with, but it’s not really part of Siri. Maps, I believe, is the only built-in Siri service that engages Google on the back end. Siri isn’t so much competing with Google search as trying to stake out new territory beyond Google search.

The Free 3GS

Another new pattern: the expansion of the iPhone product line down to free-with-a-contract pricing. Apple did this not by creating a new “low-end” model, but by keeping the 3GS around for another year. This move seems so obvious that I’m disappointed in myself for not having predicted it. Operations wise, the 3GS doesn’t just use cheaper components, but because Apple has been making it for two and a half years, they’ve surely streamlined the manufacturing process.

The truth, of course, is that free-with-a-two-year-contract is a bad way to buy a phone. If your monthly bill is $70 a month (which in my experience is low), that’s about $1700 after 24 months. The difference in total cost of ownership between a free 3GS and a $99 iPhone 4 or even a $199 iPhone 4S is negligible. But that’s not how consumer pricing psychology works. An awful lot of people see “free with a contract” as just plain “free”. And who knows how many new-to-the-iPhone users might be tempted to enter the store by the “free” 3GS but walk out with a new iPhone 4 or 4S after comparing them side-by-side.

The 3GS might also do well in the prepaid markets around the world. The race is on to convert the entirety of the non-smartphone handset market into smartphone users.

The New 4S Camera

When Phil Schiller spoke of Apple targeting the dedicated point-and-shoot camera market with the 4S, I think that’s one of the cases where Apple was stating the plain truth of its intentions. I.e., that this is not marketing hyperbole. iPhone 4S photos don’t look like SLR photos, no, but they do look like photos from a “real camera”. The post-event hands-on demo area was well-lit, but it was indoors, and the side-by-side results of the same photo taken with the 4S and my old trusty iPhone 4 were dramatic. More sensitive, more detailed, sharper, and less noisy.

And best of all: faster. Two knowledgeable sources emphasized to me this week that Apple applied enormous engineering resources on shaving every possible tenth of a second from the 4S’s picture-snapping time. I’m an amateur camera nerd, but I haven’t bought a new dedicated pocket-sized camera since I bought a Ricoh GR-D in 2007. At this point I’m not sure I’ll ever buy one again.

Now, to be clear, I don’t think the 4S camera is as good, image-quality-wise, as my Ricoh. And my Ricoh, as I said, is four years old. But I think it’s in the ballpark, and the convenience advantage is preposterously in the iPhone’s favor. Also worth noting is that I spent about $800 on the Ricoh. Most pocket-size cameras cost about $200, and I think the iPhone 4S can go head-to-head with low-price cameras even putting the issue of one-less-gadget-to-carry convenience aside.

Siri is very cool and I’ll bet it’s something we’re actually going to use, not just something that demos well. And the A5 does make everything snappier, just like it did with the iPad 2. But it’s the camera where I suspect the 4S will most stand apart as an upgrade over the no-S iPhone 4.