IFA 2013 - Apple Betting on New Open Market Strategy
At IFA, Europe's largest consumer electronic show in Berlin, we heard that Apple -- not an exhibitor at the show but on everybody's mind -- is getting only mixed feedback for its upcoming iPhone 5S from leading European carriers and distributors, but sources believe Apple is betting big-time on success for its cheaper iPhone 5C in the open market.
iPhone 5S Not Perceived as Game Changer
While Apple Inc. did not participate in Europe's biggest consumer electronics show, IFA Berlin, the vendor's name came up in most interviews with leading carrier and distributor channel sources due to the expected launch of new iPhones. So far, European sources' excitement for the iPhone 5S and iPhone 5C were very limited. "We think there is not much innovation going on with the 5S," said the manager of a large distributor. Attendees from large European carriers had similar views. "We think this is not a game changer, and Apple will have a hard time to get their momentum back up," said one carrier contact.
Another carrier said Apple has to convince consumers through software to buy its new flagship device, as there are not many hardware changes expected compared to its predecessor model, the iPhone 5. Sources at IFA do not expect the new iPhone 5S to have a different wholesale price than the iPhone 5 (in line with findings in OTR Global's Sept. 3 note) but said they were surprised they still didn't have clarity on shipment dates so close to launch. "We still have no idea when we will get the 5S into our stores," said the head of a European MVNO.
iPhone 5C Only Going to the European Open Market?
Interestingly, carrier and distributor contacts at the show had different opinions about the launch of the iPhone 5C (supposedly a cheaper version of the iPhone 5S). While network operator contacts said they believe the 5C is only targeting the North American and Chinese markets and do not expect to see the 5C in Europe due to lack of interest, distributor sources at the show said the 5C will be available in Europe. According to sources, Apple has changed its strategy and will use the 5C for a massive push into the open market, rather than to carriers, to be less dependent on orders from network operators. Similar to Apple's move in India, where the vendor shifted its iPhone supplies from Indian carriers to large distributors like Redington India Ltd. (Redi IN) and Ingram Micro Inc. in 3Q12, European sources expect that Apple will increase its sales channels with the open market to gain share.
Carrier sources said they do not believe the iPhone 5S will have NFC technology (See OTR Global's Aug. 26 note) but believe the expected fingerprint sensor will be used for access technologies like access to a computer, a door or a car or as an ID to enter a show, conference or corporate environment. Sources say it remains unclear whether Apple will use an embedded secure element chip to support encryption for these access applications. "We tend to believe they will just use software to enhance security for these applications," a carrier contact said.
WHAT: IFA Consumer Electronics Show
WHERE: Berlin
WHEN: Sept. 6-11
WHO: Almost 1,500 exhibitors on 145,000 square meters of floor space attracting around 240,000 visitors
