Apple Goes Max, Mini, and All-In on 5G

Bottom Line

Apple updated its iPhone line with new processors and 5G, which should help Apple compete in China, where 5G matters to consumers, and should jumpstart 5G adoption globally, where 5G matters to carriers. The iPhone 12 mini keeps the starting price point around $700 and provides the first premium small smartphone in years. Rivals will likely respond with small premium Android phones next year.

The HomePod mini is still not competitive with smart speakers from Amazon and Google in terms of price or capability, but at $100 with perceived privacy benefits, it will finally give Apple’s HomeKit an installed base to grow from.

Analytical Summary

What We Got

  • Apple announced the HomePod mini ($99), four new iPhone 12's ($699 - $1099+), and charging accessories. For reasons I don’t understand, prices vary by $30 depending on carrier/unlocked status.

  • The 6.1” iPhone 12 and iPhone 12 Pro are available next week, while the smallest (5.4” iPhone mini) and biggest (6.7” iPhone Pro Max) don’t ship until mid-November.

  • iPhone pricing stayed roughly the same (the iPhone 12 jumped by $100, but the iPhone 12 mini slotted into the $700 price point behind it).

  • Every iPhone 12 – even the iPhone 12 mini – has an OLED display, UWB, and 5G. In the U.S., where all three national carriers have mmWave deployments, the new iPhones include mmWave 5G support.

  • Verizon got the biggest marketing push at the launch, but AT&T is being the most aggressive with a free iPhone offer.

What We Didn’t Get

  • No iPhone 12 has a fast-refresh display.

  • The very best camera sensor and optics are found only on the iPhone 12 Pro Max, not the regular iPhone 12 Pro, making the iPhone 12 Pro a hard upsell from the regular iPhone 12.

  • Apple did not launch an Apple Silicon Mac (still expected later this year), an updated Apple TV, Studio headphones, or UWB Tags. AR Glasses are still in the labs as well (those are not seriously expected to ship this year, and possibly not next year, either).

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iPhone 12 x 4

The iPhone 12 comes in four different sizes, so people who have long wanted a premium small phone now have that option, and consumers who didn’t think that the 6.5” iPhone 11 Pro Max was big enough can now get an even larger 6.7” iPhone 12 Pro Max. The iPhone SE was designed to hit a price point and open the iOS ecosystem to emerging markets (and U.S. teens). The iPhone 12 mini is designed to offer a premium device for people whose hands have not evolved as fast as smartphone screen sizes. Android vendors will almost certainly respond with premium small phones of their own in 2021.

All the phones have faster processors, better graphics, improved cameras, and 5G, but the biggest changes that consumers will notice right away are the lack of a charger in the box, magnetic wireless charging (which opens up interesting accessory concepts), and 4x improved drop resistance thanks to a new Corning glass and ceramic layer. The physics of glass – or whatever this material is – are such that any increased shatter resistance is likely in conflict with scratch resistance. YouTubers will be testing both attributes as soon as the new phones hit shelves.

The lack of a charger is going to be exacerbated by the fact that Apple is including a cable with the new iPhones, but not the cable consumers expect. The cable in the box has a Lightning connector for the iPhone 12 end, and USB-C for the charger side. This is a forward-looking cable, but it is not compatible with the USB-A chargers from previous iPhones. People with existing Lightning cables and USB-A chargers can continue using them with the new iPhone for slow wired charging, but everyone else will at least need to buy a USB-C charger ($19 from Apple). Android vendors already offer even-higher-wattage charging; it is a safe bet to assume that some will start adding magnetic connectors and dropping in-box chargers next year. In the meantime, accessories vendors are going to be rushing new iPhone 12 magnetic chargers for the desk, the nightstand, and the car, and trying to sell them without full retail distribution during a pandemic.

All the new iPhones feature high resolution, high brightness OLED displays with full HDR/HLG/Dolby Vision capabilities, even the iPhone 12 mini. None have fast refresh displays. This could be a cost-cutting measure to offset the inclusion of 5G, or it could simply reflect Apple’s need to order 50 million displays at a time. Either way, it gives Apple’s competitors a clear technical point of differentiation. It is unlikely to prevent many existing iPhone owners from upgrading to an iPhone 12, but Samsung, Huawei, OnePlus, and Xiaomi will try to make the most of it in their marketing.

Apple is using the camera system, not just screen sizes, to differentiate between the regular and Pro iPhone 12’s, with further enhancements on the iPhone 12 Pro Max from the regular iPhone 12 Pro. Apple used this strategy in the past when the iPhone Max had OIS (optical image stabilization) and the others models didn't. Apple is also introducing a new ProRAW format for the iPhone Pro later this year that preserves some of Apple’s computational photography. However, most consumers buying the iPhone Pro Max simply want the biggest iPhone they can get; they will benefit from the optical zoom much more than the ability to change color balance in post-production. The new Pro models also feature LiDAR, which can provide detailed depth information. Apple first implemented LiDAR on the iPad Pro because it is useful for a handful of enterprise use cases and gives software developers an AR platform to build on today while AR glasses remain in the labs. The practical benefit of LiDAR for consumers is that it enables faster autofocus and depth, especially in low light.

The ability to shoot and edit video in 4K 60fps in Dolby Vision applies to all the new iPhones – and is simply remarkable. It should be noted that Dolby Vision footage will not play with full HDR intact on Samsung televisions due Samsung’s unwillingness to pay Dolby a licensing fee. It is past time that Samsung give up that fight.

A Watershed moment for 5G

Samsung, Motorola, and others led the way with 5G support early, but Apple is never first to new network technology, and in most geographies it lost nothing by waiting this time, either. There are two markets where 5G is already driving handset purchase decisions: South Korea, where Samsung is king, and China, where Apple has been under pressure from Huawei. The inclusion of 5G on every iPhone 12 model should give Apple a big boost in sales in China.

Apple often drives broader industry trends, and the arrival of 5G iPhones is a watershed moment for carriers today. It will matter to consumers more over time. In markets with mid-band 5G like China, Europe, and parts of T-Mobile USA’s coverage, consumers will get noticeably faster connection speeds, though latency improvements won’t materialize for a while. In markets with low-band 5G networks like the rest of the U.S., consumers may be frustrated by relatively slow speeds, but this is unlikely to hurt Apple directly. The new iPhones are compatible with all 5G standards being deployed today and several frequencies not yet in use, but it remains to be seen if today’s iPhones will be certified on tomorrow’s networks.

Verizon was featured early and often at the iPhone 12 launch, and it is almost certainly paying Apple for the privilege, either directly or with huge guaranteed orders. Verizon wants to tie U.S. consumers' perception of 5G to Verizon, which could backfire if consumers figure out that Verizon’s brand new DSS-based low-band 5G network isn’t any faster than 4G. It might even be slower; we’ll have to see. Of course, consumers never figured out that AT&T’s 5Ge network was just 4G LTE, so Verizon is probably fine. Verizon does have the largest mmWave 5G deployment, which offers truly stunning speeds in places that were hard to find before the pandemic and simply don’t matter during one. While Verizon was the only carrier mentioned at the launch, AT&T is the first to offer the iPhone 12 for free to new or existing customers. The terms are not onerous, requiring a trade-in of an iPhone 8 or better, but they are long, effectively locking consumers into an unlimited plan for 30 months of bill credits.

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HomePod mini

Apple kicked off the Hi, Speed event with a new, smaller, less expensive, and decidedly more spherical HomePod mini speaker. Apple certainly hopes that the spherical $99 HomePod mini will be compared to the $99 Amazon Echo, and not to the $49 Amazon Echo Dot. All of these speakers are spheres with improved audio quality; the Echo is about the size of a large cantaloupe, while the Echo Dot and HomePod mini are more like small grapefruits. The critical differences are not in audio output – that is only one thing that consumers use their smart speakers for – but versatility and privacy. Amazon’s Alexa and Alexa-compatible smart home ecosystem is so far ahead of Siri and HomeKit that even Apple’s claims that Siri can now answer 20X more queries is unimpressive. Apple noted that HomePod will soon support Pandora and Amazon Music along with several other music services. Spotify was conspicuously absent. Consumers do have more privacy concerns about installing Amazon and Google into their homes, and Apple will lean heavily on that messaging. Like the new iPhones, the HomePod mini also has an embedded UWB chip, and that could help Apple have a clearer idea of where users are in the room.

Apple hopes that a significantly lower price will be enough to entice consumers to dive further into the Apple ecosystem. This is not unreasonable: Apple Music has over 60 million subscribers – possibly a lot more – and the iOS installed base measures over 1.5 billion. The HomePod mini should give HomeKit a base to grow from. However, Apple is badly behind, and the HomePod is still mainly a small voice-activated music speaker, not a smart speaker that plays music. Even a successful HomePod mini launch is unlikely to dent Amazon’s market position.

To discuss the implications of this report on your business, product, or investment strategies, contact Avi at avi@techsponential.com or +1 (201) 677-8284.

IoT, Home Entertainment, Smartphones/Computing, AIAvi Greengart