Apple still betting that punters will pay more for latest iPhone

By the time Apple chief executive Tim Cook took to the stage on Tuesday, there was very little that he could tell the waiting crowd about the new iPhones that they hadn't already read about online.

Everything from the colourful casing on the iPhone 5C to the fingerprint reader on the iPhone 5S had already been discussed in detail online, with speculation on the new features at fever pitch by the time invites for the event began circulating.

But that didn’t stop Apple fans from following every detail online as it unfolded.

"The business has become so large that this year we're going to replace the iPhone 5. And we're going to replace it with not one, but two new designs. This allows us to serve even more customers," Cook said, before handing over to vice-president of worldwide marketing Phil Schiller to unveil the new designs.

New departure
This year's launch was a new departure for Apple in a number of ways. It's the first time that Apple has launched two iPhones at once, for a start. And it's the first time that the company has acknowledged that there may be a need for more than just last year's model for those seeking a more affordable iPhone.

Enter the iPhone 5C, a more colourful, budget friendly option; that “C” stands for “colour”.

It’s not quite as budget as iPhone watchers may have been hoping, and, as Apple executives talked about the device, they were careful to steer away from the notion that the 5C was a cheap phone.

Referring to the “incredible technology” inside the iPhone 5C, Schiller was talking up the “more fun”, colourful design.

“A few of you might have seen some shots on the web. And that’s cool, because everyone’s really excited about it,” he said.

“When you pick up and hold the iPhone 5C for the first time, you’re going to be blown away by the quality of it, and how rigid and great it feels in your hand.”

Apple chose its words carefully when discussing the 5C. Schiller praised the “hard-coated polycarbonate” casing that, according to designer Jony Ive in the accompanying video, is “unapologetically plastic” and seamless. Inside is a steel reinforced structure that also functions as part of the antenna system. Much was made of the design and how it fit in with the new iOS7 software in the keynote.

The changes to the iPhone 5C are almost all skin deep. On the inside, the 5C is practically the same as the iPhone 5. It has an A6 chip and, although the front facing camera has been bumped up to HD standard for FaceTime calls, the rear camera remains the same eight megapixel version that was seen in the iPhone 5. A higher capacity battery will also be a welcome addition for users.

Differences
There is enough to set the two phones apart, both in looks in performance. The "gold standard in smartphones", the iPhone 5S has an A7 chip, a system on a chip and, for the first time, a 64-bit chip has been used in a smartphone, Apple's Schiller told the crowd on Tuesday.

“I don’t think the other guys are even talking about it yet,” he said. That 64-bit will give the iPhone 5S a power boost, giving it up to twice the CPU and graphics performance architecture so it can run apps and games more quickly than ever before.

“We all want great performance in our devices. It’s hard to remember the old days when performance meant big processing cards and graphic cards, power supplies and fans; that defined computing performance,” Schiller said. “But thank God we’ve moved beyond that. Now customers want great performance that you can fit in the palm of your hand.”

The iPhone 5S was a great leap forward in performance, he said.

Processor aside, the iPhone 5S got some extra features that the iPhone 5C did not, most notably the fingerprint scanner. The TouchID scanner will allow users to bypass lock codes and passwords to gain access to the phone and buy items from Apple’s App Store and iTunes on the mobile device.

It is also trying to appeal to the health conscious consumer and tap into the growing trend for lifestyle apps on mobile devices. The M7 motion coprocessor uses data from the accelerometer, gyroscope and compass, with new CoreMotion APIs inside iOS7 that will use the M7 data and allow programme makers to create better fitness and activity apps.

The first to take advantage of that is Nike. The company is coming up with a new application called Nike+ Move aimed at encouraging athletes to stay active throughout the day, tapping into Nike's proprietary Fuel points system.

Investing in better camera technology isn’t something that’s unique to Apple; most of the smartphone makers have realised that consumers are using that miniature camera built into their smartphones a lot more these days, and consequently, they expect more from it. The 5S is getting enhanced camera capabilities, with a new five-element Apple-designed lens with a wider 2.2 aperture sensor that has a 15 per cent larger active sensor area, and with bigger pixels that Apple says will make a better picture – letting in more light, providing less noise and a better colour range. A new burst mode has also been added.

“Most of us just want to take a picture, and have the iPhone take a better picture for us,” Schiller said.

The 5S will appeal to those consumers who want the latest and greatest iPhone. The 5C, meanwhile, will capture the segment of the market who still want the iPhone but aren’t willing to shell out top dollar for it.

No 'atomic event'
But Apple was also not as aggressive on price as some investors had hoped.

“Many investors were hoping for that one single atomic event where they got aggressive on pricing,” said Gene Munster, an analyst at Piper Jaffray. “Instead, in Apple’s own way, they think they can accomplish their goal – gaining market share – without blowing up their margins.”

Analyst at Forrester Research Sarah Rotman Epps said Apple was walking a tightrope between growth and profitability. But she noted that higher off-contract prices for the devices meant Apple is still betting customers will pay more for the iPhone.

"They aren't trying to compete for the bottom of the market," she said.



Head-to-head: The iPhone 5S vs the iPhone 5C

iPhone 5S
Material: aluminium.
Colours: silver, grey, gold.
Capacity: 16GB, 32GB and 64GB.
Chip: A7, 64-bit architecture. M7 motion coprocessor.
Display: 4-inch Retina display, 1136x640 resolution, 326 ppi.
Camera: 8 megapixels with 1.5µ pixels, F/2.2 aperture, Sapphire crystal lens cover, True Tone flash, new backside illumination sensor, five-element lens, burst mode.
Video: 1080p HD video recording, 30 fps, True Tone flash, Slo-mo video.
Software: iOS7.

iPhone 5C
Material: polycarbonate with a steel frame that acts as an antenna.
Colours: white, pink, yellow, blue, green.
Capacity: 16GB and 32GB.
Chip: A6, 32-bit.
Display: 4-inch Retina display, 1136x640 resolution, 326 ppi.
Camera: 8 megapixel, F/2.4 aperture, sapphire crystal lens cover, LED flash, new backside illumination sensor, five-element lens.
Video: 1080p HD video recording, 30 fps, LED flash.
Software: iOS7.