LETTER FROM AMERICA: iPhone sales rescue US GDP again — but it may be the last time
LAST week, I did my bit to give the US’s anaemic gross domestic product (GDP) a lift, or so JPMorgan analysts would have me believe. How did I do this?
I bought an iPhone 5.
The analysts say the release of the iPhone 5 could increase annualised GDP growth in the fourth quarter between 0.25% and 0.5%. They base this on Apple selling 8-million of the devices in the US between this month and December. That may prove a conservative premise. Estimates put worldwide sales in the US and eight other countries at between 5-million and 8-million over the past weekend alone.
JPMorgan assumes the landed cost of an iPhone 5 when it arrives from China is about $200 and that the retail price, or the price paid by mobile operators who subsidise purchases in return for two-year service agreements, is about $600. The $400 margin represents value added in the US and therefore counts towards GDP.
If Apple sells 8-million here by the end of the Christmas season, it will have added $3.2bn to fourth quarter GDP, boosting the quarter’s annualised growth by one third of a percent.
The iPhone 5 significantly reduces the chances of the US GDP growth slipping below 2% in the coming quarter, JPMorgan’s number crunchers think.
To sceptics they recommend a look at the effect of the iPhone 4S’s launch this time last year. That model, which introduced the world to Siri, may have helped improve core US retail sales nearly 1%, adding as much as 0.2% to fourth quarter 2011 growth. Sales of the iPhone 5 are expected to be much stronger. How long will this pattern keep repeating?
My iPhone 5 arrived on Friday, exactly as promised by my mobile operator, Sprint, when I placed the order on Tuesday.
What emerged from the box was an impressive piece of minimalist sculpture, reminiscent in miniature of the monolith in Stanley Kubrick’s 2001: A Space Odyssey, but likely to be a lot less disruptive.
Indeed, aesthetics aside, I must confess to being a little underwhelmed. Thinner, faster and with a sharper camera and slightly longer screen than its predecessor, the new handset mostly does better what the earlier models have done well, but doesn’t do much more. And maps it now does a whole lot worse.
Could Apple have reached its apogee and be on the cusp of becoming another Microsoft, still hugely profitable but no longer at the cutting edge of innovation?
Joe Nocera, one of the sharpest business commentators around, wrote in the New York Times on Saturday that Apple’s decision to replace Google’s highly evolved mapping application with its own not-ready-for-prime-time version was a "canary in the coal mine" warning that the company was starting to lose the plot in the absence of Steve Jobs.
Apple has decided that the new operating system for its mobile devices, iOS6, shall not play nicely with Google products — and not just maps. This is in line with the company’s patent infringement suits against Samsung and Google’s Android operating system on which most Samsung mobile devices are based.
To some, Apple’s resort to litigation and copycat applications is a sign that, without Jobs, the company may be starting to coast, either because it is short of disruptive new ideas, or because it lack s the relentless, take-no-prisoners drive to turn seemingly impossible ideas into reality.
Technologically, Samsung-Android devices, and the apps being written for them, have caught up with and in some cases are overtaking Apple’s offerings. Even at the high end they are less costly, and offer features including the significantly bigger screen consumers increasingly seem to want. In global smartphone market share, Samsung enjoys a commanding lead, 32.6% to 16.9%, according to research firm IDC.
Apple is the world’s most valuable company, worth $660bn and trading at more than $700 a share when the market closed on Friday, because its products inspire a cult-like excitement and so can command premium prices.
With the magician gone, the magic could fade pretty fast if the chief differentiator between an iPhone and a Samsung handset that does the same things for $100 less is a pretty aluminium case.
To keep on winning, Apple has to do more than defend its turf against rivals. It has to keep taking consumers breath away. The iPhone 5 achieves that only partially. No company can keep doing it forever.
• Simon Barber is US country manager for Brand SA.
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