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THE $1,000 PHONE: The huge problem Apple must solve before it launches the new iPhone

iphone gold 6 plusGeorge Frey/Getty Images

  • Analysts are highly optimistic about the next iPhone, which is expected to be a radical reset of the entire line.
  • It’s the 10th anniversary of the device, so there’s a huge amount riding on it.
  • It may cost £1,000 in the UK and $1,000 in the US — sums many shoppers would balk at.
  • These are significant challenges Apple needs to overcome.

Apple is gearing up to launch what may well be the most hotly anticipated smartphone ever.

2017 is the 10th anniversary of the unveiling of the original iPhone. Smartphones and mobile apps have since transformed business and the global economy — propelling Apple to become the world’s most valuable company.

But as the iPhone turns 10, the pressure is on Apple to deliver a genuinely new, innovative phone. People want to see Apple launch a significant new device after several years of merely incremental improvements to iPhone. Rumours are swirling that the California tech company plans to release a special, high-end iPhone alongside the expected “7s” refresh this year, with augmented-reality features.

The prevailing mood among analysts is positive. Some are giddily expecting a “super-cycle” — a massive, record-breaking year for sales, driven by the ever-increasing numbers of older iPhones in the wild that need upgrading and by a particularly compelling product offering this time around.

So a lot is riding on this. And a lot that could go wrong. From pricing risks to hardware costs, Apple has to get several crucial calculations just right.

A radically new design would push up Apple’s costs, squeezing its margins. Apple could protect its margins by raising its prices. Some people think a new, high-end iPhone could retail for over $1,000. (Apple tends to sell its products at about the same number in dollars and pounds, which would make the price £1,000 in the UK). That may restrict sales and would make the rest of Apple’s iPhones look like cheap deals by comparison.

The price of failure is steep. The Apple Watch, for instance, was supposed to open a new category of consumer wearables, but the devices have appealed to only a small niche.

No one wants the Apple Watch of phones.

Business Insider spoke with Gene Munster, a prominent Apple analyst turned venture capital investor at Loup Ventures, to discuss the risks facing Apple this autumn.

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Apple is facing a crisis of salesmanship

Apple haters have always made the case that the company’s massive success is as much the product of marketing and salesmanship as it is any kind of technical innovation.

Maybe they’re right. Whatever else Apple cofounder Steve Jobs was, he was the consummate salesman. Maybe the original iPhone could have sold itself back in 2007, but Jobs’ legendary introductory event definitely helped.

But the world has changed. As smartphone innovation seems to have plateaued, the tech giants of the world, notably Google, Microsoft, and Facebook, have doubled down on machine learning and artificial intelligence — the trendy technology that’s making for smarter, more personalized apps and devices.

It’s a big, necessary step for the industry. Thanks to smartphones, tablets, smart TVs, home voice assistants like the Amazon Echo, and all our other kinds of gadgetry, we’re generating more data than ever before. The promise of artificial intelligence is a way to sift through the noise and always find exactly what we need, when we need it, on whichever device we’re using.

This means that Tim Cook’s Apple is facing a unique and unprecedented marketing challenge as it heads into Wednesday’s much-anticipated iPhone 7 launch event, where the company is expected to announce a new phone that’s only a minor improvement to the existing iPhone 6S.

iphone 7Apple

With the hardware unexciting at best, that means that the onus will be on Apple to prove that the iPhone is differentiated from Google’s ever-improving Android elsewhere. Namely, it must prove the upcoming iOS 10 operating system has game with the new machine learning trend and it will bring intelligence to the whole iPhone.

How do you sell customers on something they don’t even know they’re using? Perhaps more importantly, how do you do it when the world is convinced that Apple is far behind the rest of the market? With Google nipping at Apple’s heels with each new Android release, these questions are only growing in urgency.

Media blitz

For Apple, the peril is twofold.

First, Wall Street is afraid that we’ve reached peak iPhone sales, and it’s all downhill from here. Second, customers and analysts alike are concerned that after years of same-same iPhone releases and the failure of new products like the Apple Watch and iPad Pro to light the market ablaze, Apple’s ability to innovate has peaked, too.

That’s why Apple’s PR machine spent much of August in overdrive, with top company execs including Tim Cook, Eddy Cue, and Phil Schiller giving interviews to Fast Company, The Washington Post, and Medium’s Backchannel.

In each interview, the content may have varied, but the message was always the same: If you think Apple’s glory days are behind it, think again.

The coded message is: Apple is not behind in new technologies like machine learning.

Tim CookApple CEO Tim CookREUTERS/Stephen Lam

Instead, Apple execs explained to Steven Levy at Backchannel that there is indeed an “Apple brain” on every iPhone and iPad that learns from user behavior. Apple sees it as part of that overall, signature Apple-just-works experience, rather than a total revolution.

“It’s a technique that will ultimately be a very Apple way of doing things as it evolves inside Apple and in the ways we make products.” Apple Senior VP Phil Schiller told Steven Levy at Backchannel.

Again, to decode that message for Apple’s investors and customers: We’re ahead of the curve on machine learning, but even if we weren’t, it would be okay, because we’re still Apple, and we still build the best stuff.

The Siri solution

In a way, Apple is right on track.

Investors and your average consumers don’t care so much about the technology that goes on behind the scenes, so much as they like new, shiny experiences. It’s as true for Apple as it is for Microsoft, Google, Facebook, Amazon, or anybody else, really.

But that just underscores the struggle of selling the stuff that machine learning makes possible.

Many of the coolest things it enables, from a technical standpoint  — better app recommendations, facial recognition in photos, speech recognition, fraud prevention and security — are nifty and useful, but also the kind of things you tend to only ever notice when it doesn’t work.

siri in ios 10 wwdc 2016Apple

Which is why you’ve heard so much from Apple about the Siri voice assistant and the new smarts that she’s getting in iOS 10. It’s something Apple can’t hammer on hard enough: This is the proof that we’re not behind in machine learning. This is the thing you can use every day to make your life better.

It remains to be seen if the souped-up Siri will be enough to reverse user behavior, given that surveys have found that 70% of iPhone users use her only sometimes or rarely.

Ultimately, though, it doesn’t matter if she wins the world over or not. Siri, with her new smarts, becomes what’s essentially a mascot for the so-called Apple Brain, more so than she already is.

She’s the most tangible example of what machine learning can do, even if she’s not necessarily the best or most useful.

amazon echoAmazon

The exact same factors are going into Microsoft’s Cortana, Amazon’s Alexa, and the forthcoming Google Assistant, too.

So don’t be surprised if Apple starts talking up Siri as better than all other smart assistants. And don’t be surprised if Microsoft, Google, and Amazon all fire back. Because really, what they’re trying to prove is who’s the most intelligent, artificial or otherwise.

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This Could Be The Most Detailed Look Yet At iOS 8, Apple’s Next Major iPhone Update

The next version of iOS is expected to usher in a significant overhaul to Apple’s mobile ecosystem that include new fitness-focused features, improved iCloud integration and some tweaks to Apple’s native apps.

Previous reports have provided some insight as to the types of changes we may see in iOS 8, but Mark Gurman of 9to5Mac has just shared a slew of new details.

Apple is referring to iOS 8 by the internal codename Okemo, according to Gurman. The change will largely focus on updates to existing apps rather than refreshing the software’s appearance. It could be the iOS update that brings Apple Maps up to par with Google Maps, 9to5Mac reports. The updated Apple Maps app in iOS 8 will feature clearer labeling and improved notating of bus stops and public transportation stations.

As Gurman reported in the past, the improved Apple Maps will come with support for public transportation directions and will utilize more-reliable data. It sounds as if Apple plans to address many of the primary criticisms that have plagued its transportation app since it launched with iOS 6.

 

Iphone 5 Apple Maps

REUTERS/Beck Diefenbach

 

 

Apple is also reportedly considering breaking iTunes Radio off into its own separate app as part of its iOS 8 update. iTunes Radio is currently a tab in Apple’s existing iTunes app, but separating it into its own app could help it to compete with the likes of Pandora, Spotify and other streaming services.

A less noticeable but still noteworthy addition to iOS 8 could be support for voice-over-LTE-support. Gurman writes that “carrier sources” have told him the next generation of iOS will be able to process calls over the same network in which data travels. Typically, if your phone is receiving a 4G LTE signal, it will process the call over 3G. Essentially, this means call quality may improve a bit with iOS 8.

Apple may also clean up the notification center in iOS 8. Currently, the drop-down menu divides alerts into Today, All and Missed tabs. The next-generation software could streamline this into just the Today view to make for a more simple viewing experience, according to Gurman.

The company is reportedly testing a new version of CarPlay, the feature that lets you run your iPhone through your car’s dashboard, that can connect to your vehicle wirelessly. The current technology requires you to connect via a Lightning dock connector. Speed is expected to improve across the entire operating system, but Gurman specifies that Apple could be testing a system that could enable the camera to snap faster photos.

 

 

Apple is likely to debut the next major update to its iPhone software at its annual World Wide Developers Conference in June. Although WWDC is still about two months away, we’re already getting a clear picture of what to expect from iOS 8.

Previous reports have suggested the iOS 7 successor will come with a new app called Healthbook which can track your steps, count burned calories, and monitor blood sugar among other fitness-focused features. Apple is also expected to tighten iCloud integration with its OS X desktop software by releasing Text Edit and Preview apps for the iPhone. An update to the iPhone’s messaging app could also let you automatically erase message threads. The next iteration of iOS could allow apps to interact with one another, creating a tighter overall user experience. For example, you may be able to automatically share photos to your preferred social networks without having to do so manually if this feature makes it to the final build of iOS 8.

From what we’ve heard, iOS 8 isn’t shaping up to be  radical update like iOS 7, but it will bring a few new and noteworthy tweaks that could improve the experience across Apple’s native apps.  

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