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Here’s the primer for Apple’s super-hot keynote (we can but hope)

Tim Cook Apple Keynote

Hello it’s Ewan here. Ahead of the upcoming Apple’s September 9th keynote, I’ve asked mobile commentator Roland B. to give us a look ahead and a bit of context. Over to you Roland…

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Perhaps the most anticipated date in the mobile industry calendar, Apple’s September 9th event could also be the most important one in the company’s recent history.

Love or hate Apple, each year the industry follows the build-up obsessively in an attempt to predict the features and capabilities of each new iPhone. And deservedly so, because Apple is one of the few companies that can redefine how we use our devices and what they can do for us. This is what makes the annual iPhone event so special, and why Apple needs to seriously impress.

[quote]“Later this year, we’ve got the best product pipeline that I’ve seen in my 25 years at Apple” – Eddy Cue, SVP. [/quote]

Apple must not only satisfy consumer demand for larger phones but also demonstrate that under CEO Tim Cook’s leadership it can still innovate and create new product categories that will drive growth, especially in emerging markets like China where rising affluence puts the iPhone in reach of a larger audience.

This time around, several things signify something bigger than usual – the venue has changed to the higher-capacity Flint Centre for the Performing Arts in Cupertino (where the original Mac was unveiled by Steve Jobs 30 years ago), and a countdown clock has appeared on Apple’s website. These facts have stoked the rumour mill about the products that may be announced this Tuesday. Adding to the speculation is the surprising number of fashion journalists and bloggers who received invites (with the cryptic tagline “Wish we could say more”), and the construction of a mysterious two-storey temporary building besides the main auditorium. Is it a post-concert venue (U2 have denied the recent tie-in rumours)? or a full-scale mockup to demonstrate a smart home command and control system (based on HomeKit) or even health monitoring wearables? Perhaps all this does indeed suggest that Apple will finally be announcing the fabled iWatch…

A record-breaking but tumultuous year

Before considering what may be unveiled on Tuesday, we need to look back over the last 12 months to understand the direction Apple may take in future.

Last autumn, Apple proved that the iPhone still has enduring appeal with consumers who want a high-end smartphone. The launch weekend alone broke all previous records with 9 million sold; despite this, the plastic iPhone 5c was widely perceived as a failure because it didn’t satisfy market demand for a “low price” entry model. Yet somehow, it still made the top 3 best-seller list on every major American mobile operator until at least November 2013, and fulfilled its aim of providing a desirable handset using the previous generation technology at a lower price point.

Amidst all the doom-and-gloom and predictions of impending failure, on the whole Apple’s unit sales and profits tell a different story. Since the original iPhone was launched in 2007, sales have rocketed from just 1.4 million annually to over 150 million in 2013. And Apple has reportedly ordered up to 80 million iPhone 6’s ahead of this year’s launch in expectation of more blowout quarters. However, this kind of momentum is hard to maintain: iPad sales seem to have plateaued recently, and if the new iPhone receives anything but a stellar reception then Apple may struggle to continue increasing sales by double digits each quarter.

Apple Yearly Unit Sales

Apple has also managed to hang on to a respectable profit margin of around 20%. Although not as high as the 2012 peak of almost 30%, it is fairly cyclical based on investments in new technology and tooling required for each successive generation of iPhone – particularly for the two-yearly major updates that we’ve seen so far.

Just about the only manufacturers making a profit are Apple and Samsung – others such as HTC and LG have continued to struggle even though they have launched some of the most appealing and powerful smartphones. Apple’s bottom line is undoubtedly helped by their staunch principle of making high quality, high-end products that people are actually willing to pay for. And once you’re tied into the Apple ecosystem, it’s increasingly hard to leave.

Apple Quarterly Profit Margin

This year has also seen Apple under pressure not only from its mobile rivals, but the financial markets amid concerns of dwindling market share (although not profits) which is steadily being eroded by Android handsets (mainly Samsung, HTC and LG) and homegrown Chinese brands such as Lenovo and Oppo. Last week, Comscore put iOS market share in the US at 42.4% and Android at 51.5%. Microsoft finished a distant third with just 3.6%. While these numbers don’t tell the whole truth and don’t necessarily reflect the picture worldwide, it’s hard to argue against the fact that Apple remains the most lucrative platform for developers despite a smaller share.

Part of the issue for Android software developers is fragmentation – there are so many versions of Android running on smartphones that have a wide variety of screen sizes and hardware capabilities, that iOS is often the more straightforward (and lucrative) choice. Apple is quite rightly proud of the high rate of adoption of iOS 7, a trend that will surely continue with iOS 8.

Apple and Android Platform Versions

Health, Wearables and Beats Audio

Throughput the past year, Apple has made a number of key hires that suggest Apple is planning to enter the health and wearables space.

The first of the high-profile hires broke last year when Tim Cook announced during its Q2 results that Angela Ahrendts, the former CEO of Burberry, would be joining Apple as head of retail replacing John Browett. She was just one of many executives with experience in fashion, wearables and fitness, and is widely credited with transforming Burberry’s retail outlets into high-tech, modern stores.

Another luminary Apple snapped up from the fashion world was Paul Deneve, CEO of Yves Saint Laurent, who was brought onboard to work on “special projects” followed in July by Patrick Pruniaux, Vice President for sales at luxury watch maker TAG, and more recently the well-known Australian designer and personal friend of Jony Ive, Marc Newson.

Apple Health AppIn an uncharacteristic move, earlier in 2014 Apple purchased the fashionable audio company Beats Electronics for $3 billion – a surprise acquisition that provided a head start on improving its streaming music service (against competition from Spotify, Pandora, Rdio and Napster) and an immensely popular “cool” headphone brand. Also joining Apple were the two company founders – music mogul Jimmy Iovine and Dr Dre.

It seems clear that Apple is placing more emphasis on fashion and design in its forthcoming product strategy. A fitness or health-based wearable doesn’t now seem that far-fetched an idea, and coupled with the new Health app and developer tools (demonstrated in April at Apple’s World Wide Developer Conference) and collaboration with healthcare providers like the Mayo Clinic, a wearable device that monitors your fitness could be just around the corner.

What to expect at the Apple event on Tuesday

There have been so many supply chain leaks recently that there are probably few real surprises left in terms of the iPhone 6 hardware. However Apple did manage to keep a lid on many of the rumours surrounding its World Wide Developer Conference in April – for example nobody expected a new programming language (Swift) and a new low-level graphics programming model called Metal (which gives developers more direct access to the hardware to create better graphics).

On Tuesday, we can guarantee that at least some of the following will be confirmed:

  • A new look 4.7 inch and possibly a 5.5 inch iPhone 6 in three colours and 16/32/64/128 GB
  • An NFC (or iBeacon / Bluetooth / WiFi / TouchID) payment system that ties into Passbook
  • A faster A8 CPU with a smaller 20 nm die process and 20-30% speed improvements
  • Improved graphics (latest PowerVR chipset from Imagination Technologies)
  • Faster 802.11ac WiFi support and the latest LTE chipsets
  • A sapphire (or sapphire laminate) screen and increased resolution
  • iOS 8 release with a demonstration of new features (“Continuity” support with Macs and iPads)

The new hardware is ultimately of less importance than how Apple plans to expand its ecosystem and usefulness of the iPhone. An iPhone payment system based on TouchID and NFC could finally make wireless payments an everyday reality. Visa and American Express (and various retail chains in the US) are said to be onboard, and Apple already has a vast database of credit card numbers tied to iTunes accounts.

Perhaps most of all though, there is real excitement about the possibility of a new wearable device and the sense that this event is going to be something special.

But besides all the new technology, we can also look forward to the usual self-congratulatory videos portraying the legions of Apple fans at stores around the world, and soundbites from the iTunes Festival that took place this month. And of course, the now-obligatory Jony Ive video in which he talks about the simplicity, beauty and clever design of the iPhone. There will be whoops and hollers from the crowd, but if the new iPhone delivers the goods and there is indeed a surprise iWatch announcement, the enthusiasm of the audience will be justified.

By Ewan

Ewan is Founder and Editor of Mobile Industry Review. He writes about a wide variety of industry issues and is usually active on Twitter most days. You can read more about him or reach him with these details.

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