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  • Can a “Late” iPhone Upgrade Hurt Apple?

    May 19th, 2011

    It’s easy to become complacent about Apple. You know, for example, that the iPhone has received upgrades in June or July each year from 2007 through 2010. So it was only natural to expect a similar upgrade this year, although there are now growing indications that it’s not going to happen. Instead, the talk now suggests there won’t be a new iPhone until September, perhaps coinciding with the release of a revised iPod lineup.

    But how do we know such a thing? Therein lies a tale.

    You see, except for first-ever products, such as the original iPhone, or perhaps a new OS release, Apple rarely announces a major product upgrade much before you can actually place your order. The reason is that sales of existing product would simply dry up, and Apple would be left with loads of unsold inventory. That doesn’t look good on the bottom line, nor to the investment community.

    Instead, in the weeks prior to the release of a new model, the production lines will slow. Now this sort of thing isn’t signaled by any official announcement. It all comes in the way of reports that supposedly originate from one source or another close to the manufacturing plants, and leaked to the tech media, usually an Apple-related rumor site. A second development is the inability to order the current model, or a sudden backorder situation, where shipments are delayed a few days or weeks. That’s something that might happen with a new model, but not necessarily with one that’s been out for a while, where you expect decent supplies to be available.

    While I realize you shouldn’t take rumors as gospel, it’s also true that such reports are often correct. Within a few weeks after existing inventories begin to run dry, Apple will announce the new model. Whereas an iPhone, iPad, or iPod will still usually garner a special press event, most Mac hardware upgrades, other than the OS, barely merit a press release.

    So that returns us to the iPhone. If Apple planned on a new model in the June or July timeframe, the production lines would already have geared up to produce decent quantities of the successor. Instead, the stories still speak of a possible initial production slowdown.

    But that’s part of the equation. Apple has done something important that appears to be an admission that the arrival of the next iPhone is still a few months away, and that’s last month’s release of the long-delayed white iPhone 4. Now it doesn’t matter why it took so long, although it was mostly due to problems with the manufacturing process that wouldn’t have prevented a lesser consumer electronics company from releasing the gadget anyway. But Apple insists they want to adhere to a higher standard.

    More important, if a new model is only a couple of months away, it would make no sense whatever to make the white iPhone available after all this time. Why not wait until the iPhone 4GS, iPhone 5, or whatever it’s going to be called, and produce a white version of that model? Indeed, the latest issue of Time magazine has a back cover ad featuring, you guessed it, the white iPhone 4, entitled “Finally.”

    Well you get the picture.

    The real issue is why would the next iPhone be delayed, and the answer is that Apple shouldn’t be expected to follow timetables created by outsiders. Implying there’s a delay is primarily an invention of the media. If there is truly a delay, perhaps it has taken longer to complete the design of the new version, or perhaps the problems caused by the massive earthquake in Japan have made it more difficult for Apple to get ahold of critical parts in the quantities they need.

    The other question is whether iPhone sales can be hurt because you have to wait two or three months more for the next version, and that’s difficult to say. In the last quarterly conference call with financial analysts, COO Tim Cook was still saying that Apple could barely keep up with existing demand for the iPhone 4. They arrival of the white version might also satisfy pent-up demand from an unknown number of customers who sat on the sidelines.

    I don’t pretend to know the final answers, but it’s also important to consider what the next iPhone would be like. If it’s truly an iPhone 4GS, it would mean that, from the outside, the changes would be relatively minor, similar to the enhancements that were added when the iPhone 3G was replaced by the 3GS. Internally, Apple would likely add the A5 dual-core processor, the same one now featured in the iPad 2. Some published reports suggest increasing the five megapixel camera’s resolution to eight megapixels, and perhaps making other internal refinements. Perhaps it will be a world phone, which could be activated on either a CDMA or GSM network. It’s even possible Apple is redesigning the antenna system to be less susceptible to that alleged “Death Grip.” The ongoing criticisms, however wrongheaded, by Consumer Reports, have to hurt, even if the possible sales impact seems minimal.

    More to the point, Apple is likely going to avoid LTE (4G), the next generation network, this year, if you consider Cook’s statements about problems with current chipsets. Apple was late to the game with full 3G support too, lest we forget. But it will take another year or two for a large number of potential customers to even have LTE in their cities, so Apple has the luxury of time.

    Meanwhile, if iPhone 4 demand remains high, a supposedly delayed release of a new model shouldn’t be a serious problem. Then again, the rumors may be wrong, and there may yet be a new iPhone on tap for this summer.



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