Apple is under pressure. iPhone sales decreased from 108.7M units in the first half of 2015 to 91.6M units in the first half of 2016. There has never been a situation like this since the launch of the first iPhone. The Apple event on September 7th will partially unveil their mid-term strategy…
The company can no longer hide behind macroeconomic excuses and they now claim that competition has hugely increased, especially from Chinese players. That’s reflected by Huawei showing impressive 20% growth in 2016 and potentially reaching 120M units by the end of the year, which is beginning to steal Apple’s thunder. Even Apple’s nearest rival, Samsung, seems to have better momentum, powered by good sales of its S7 flagship.
Maybe it’s time for Apple to show what it is capable of?
Coming months should be turbulent for Apple
The waiting is huge… and the upcoming new iPhone appears to be more of an update rather than a makeover. Indeed, assuming the rumor mill is correct, the overall look of the iPhone 7, or perhaps the iPhone 6SE, is going to be extremely similar to the 6/6S. The main visual differences will be new colors, tidier antenna lines. The identifiable differences will be the removal of the 3.5mm headphone jack, bigger storage capacities and new cameras, with a larger lens on the smaller model, and dual cameras on the larger one. Those aesthetic refinements could arouse some disappointment for many people. Make no mistake, by adding dual cameras, Apple will greatly increase the image quality and the type of shots, fulfilling expectations of many photographers. This is also a brilliant marketing strategy to increase the average basket and margins on the larger model. The thing is, we are simply expecting something more disruptive from them to bring growth.
The new iPhone release will not show the new sensing technology we were talking about (See: The next step for Apple is not what you think). Yet, we may prove correct over a longer timeline. Indeed, Apple may have start to save time to fully develop their new technology by mimicking Intel’s strategy of going from a “Tick-Tock” to a “Tick-Tock-Tock” processor evolution model, jumping from a 2-year to a 3-year cycle.
One hypothesis could be that Apple may delay the true innovation something around the second week of next January and may unveil a new iPhone early in 2017 as they did for the first iPhone. Remember January 9, 2007? Steve Jobs came on stage to present what would become one of the greatest technological successes of all time. Approaching the 10th anniversary, we think that Apple has something big planned for their iconic iPhone, which has earned half of the company’s revenue since 2011. This could be the ideal time to start a new era.
New sensors to boost the market?
In our last report, “Sensors for cellphones and tablets 2016”, we gave our vision of past and future technological evolution of sensors in the highly competitive and valuable smartphone market, which is now worth $450B. The smartphone market may now have completed its first evolution phase, facing low interest from consumers and flattening sales in the main regions worldwide after years of insane growth. Sensors, and especially MEMS devices, were at the heart of this revolution, giving previously unsuspected capabilities to our phones. From 2007 to 2014, the number of sensors went from 5 to 13 per smartphone, and we expect this number to grow to 19, even 20 sensors in 2021.
Sensors bring the magic to the market, making people willing to buy new devices and get new abilities. We think that they can start a second phase of evolution, opening new use cases or enhancing existing ones.
The market for sensors in cellphones and tablets will reach $13B in 2016 – and that still offers a lot of opportunities
As we describe in our report (more), we believe that Apple will use 3D sensing technology either in its front facing cameras, or with a dual lens setup, or with an additional 3D image sensor. It has been in Apple’s DNA for 35 years now to innovate on the Human-to-Machine Interface side of computing. There is no way the recent advances in this field have not been fully taken into account by the famous Cupertino-based company. Its recent purchases, Linx, Metaio and more recently Faceshift, show that they have been working on the generation and usage of 3D imaging technology for a few years. From Yole’s point of view, the timing is right in terms of technology. Currently, many players can offer the right sensors, including: Apple, ams, STMicroelectronics, SoftKinetic/Sony, PMD/Infineon, or Heptagon. Apple has also acquired Maxim Integrated’s former fab in San Jose, California, and set up a team in Grenoble area, the French equivalent of Silicon Valley. These moves make us think that Apple is preparing a huge step forward, to use the next generation of sensors and cameras to capture the 3D space surrounding iPhone users. This innovative offering will provide Apple with a much-needed sales boost. We think that by leveraging 3D sensing technology it is now possible to transform the live video call experience in FaceTime and other Skype lookalikes. Being able to remove the background, morph your own face to share on social media or create avatars for roleplaying games, to look into the eyes of the caller while eventually using a VR headset has the potential to be truly transformative.
Another perfect example supporting this assumption is the huge impact of Pokémon Go, an augmented reality (AR) app for iOS and Android devices. This game has achieved unprecedented viral popularity worldwide, but there have been numerous reported cases of the user experience varying widely depending on the presence and quality of the gyroscope sensor or the lack of 3D perception of our smartphones. The emergence of AR apps and 3D perception brings new opportunities to show what technology can offer people. People will clearly see the impact of the quality of their gyroscope on their user experience. In the same way, 3D cameras will directly show their true value. We estimate that a large part of the market is still under-exploiting the value sensors can add. There are too many synergies with the sensors in Apple’s portfolio for them not to be investigating this one.
The smartphone industry is in transition, and the leader is wavering
We might be wrong with our assumptions, but this is clearly an opportunity for Apple to again outdistance its rivals. Otherwise, it could be an opportunity for a talented Chinese OEM to take the lead. Samsung will not deviate from its strategy of mimicking Apple and is more focused on the front-end operations such as display, memory, and systems-on-chips. Some Chinese brands, like Oppo, Xiaomi and TCL, are still in a low-cost fabrication business model, therefore offering few innovations to attract customers, monitoring Apple constantly as an innovation leader. Huawei seems to be the only one with the dynamism, freedom and rapid execution to make bets on innovative, albeit risky, paths with that could be particularly effective. With saturation of the smartphone market, increasing sales for the incumbent players will become extremely difficult and the only way to go might be to renew the smartphone use case significantly. We are at this cathartic moment when we should see the full innovation potential of those so-called technology companies.
Authors: Guillaume Girardin & Pierre Cambou from Yole Développement
Source: Sensors for Cellphones and Tablets 2016 report
In a global cellphone and tablet industry worth over $550B, sensors commanded US$12.2B in 2015, with 9.5% CAGR forecasted for 2015-2021.
Key features of the report: MORE
– Market forecast in $US, units, of systems sold through 2021
– Market forecast in $US, units, and wafer shipments of sensors through 2021
– Roadmap for technology evolution and future developments
– Estimated 2015 player market share by market segment
– Detailed application market forecasts through 2021
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