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Is there a market for I-Phone in Asia ?

Apple just launched its mobile phone in Asia. I won’t extensively comment on the technicality of the phone, neither will I comment in its look. I am sure that – like most Apple products – we will all agree that the iPhone looks good and will surely be very user-friendly. However is a phone the next big innovation that will bring Apple to the next level of true consumer goods manufacturer and that will cement the company as Wall Street’s darling?

Apple just launched its mobile phone in Asia. I won’t extensively comment on the technicality of the phone, neither will I comment in its look. I am sure that – like most Apple products – we will all agree that the iPhone looks good and will surely be very user-friendly.

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However is a phone the next big innovation that will bring Apple to the
next level of true consumer goods manufacturer and that will cement the
company as Wall Street’s darling?

Since Apple recently dropped the word “Computer” from its name, we can
assume the company sees Consumer Electronics as the next route to
sustained organic growth. The global iPod sales are still healthy with
2006 sales up 35% from 2005 but plateau is looming down the road. Apple
needed a “new iPod”, we got the…iPhone.

Why the i-Phone is not really such an innovative product:

– Most key features available on the iPhone are already available on
the market: MP3 player, Camera, Video, Conference calls, Emails, Web
browser. The camera boasts a 2MB picture capacity. This was already
available two years ago. Most high-end phones now offer 4MB++. To be
truly innovative the phone should have been Voip-ready with Skype or
G-talk.

– The operating system is not open source which means hoards of free
programmers and fans will not be able to build free plug-ins and find
new ways to use the iPhone a la Mozilla. Let the users deliver
innovation and correct bugs!

– The design is very déjà vu. Though thicker, most O2 phones have a
similar look, and so does the LG KE850. The Multi-Touch interface will
delight fans of the usually easy-to-use Apple interface and will annoy
clumsy users with big fingers (like me) and/or clean-screen freaks. To
protect the usually fragile Apple screens, a sliding cover/keyboard
should have been provided. I am not a ‘metrosexual’ and would prefer to
sacrifice good look over usability.

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– The iPhone memory capacity is still limited to 4GB, 8GB, 16GB
compared to what it could offer. It feels like Apple is using leftover
flash memories from its iPod stock. To be truly innovative and
disruptive the iPhone should have been equipped with 20GB+, somewhere
in between the “small” and “large” iPods.

– The new i-Phone2 is now 3G. Great….Here is something new!

– Not for the office. Can’t type email messages like on a Blackberry
(well at least not at the same speed!) and to make matters worse the
i-Phone lacks data encryption. The i-Phone will not make its way to
most boardrooms soon.

– No third party software and applications – the iPhone comes as is.
This means Skype and Gtalk can not be self-installed. The likely
scenario is an iTunes-like platform where owners will have to pay a
small fee to download and install third-party software.

– Even the name is not new and not innovative. iPhone? Why not
iTelephone, iCall, iThis and iThat? iPod is a great and innovative name
but iPhone sounds really too obvious. On top of that it has been
“borrowed” from Cisco which had also launched a few months before Apple
a set of phones named… iPhone!

Frankly there is little innovation in the iPhone, if any it is
incremental at best and surely not very disruptive. It is truly
beautiful, but it is not disruptive per say. It will not send tremors
in the mobile phone world. Apple’s commercial magic remains centered on
borrowing existing technologies, magnifying them, packaging them into
stylish design and creating best of the class marketing buzz. That’s
all. It has worked in the past very successfully. It may work again.

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So will the iPhone be successful in Asia?

Steve Jobs promised to sell 10 million units in 2008. This is probably
a conservative number as 6 million units have been sold so far. The
iPhone will sell well. No other consumer electronics manufacturer has
reached the same level of ‘Brand Coolness’ as Apple. Many have tried
and…are still trying. The iPhone will be a status icon, just like the
iPod.

However Asia is not Europe and the US. Consumers are a lot more
tech-driven and early adopters than western counterparts. Apple brings
to Asia something “cool” but nothing neither really new nor already
available in Asia for a while. Apple can forget about submerging Japan
and Korea with its phone. The markets remain quasi-locked to outsiders.
India and China may be the biggest mobile markets in the world but few
will want to pay USD 200-300 for a phone. That leaves Apple to focus on
smaller markets like Hong Kong, Taiwan, Singapore, and Australia to
boost global sales.

Will the same iPod predator-free environment apply to Apple’s iPhone?
This is not likely, especially not in Asia where Samsung has reached
its very own new cool status. Apple has switched from a relative Blue
Ocean Strategy to deep-dive into a shark infested Ocean. Walking into
well-armed Nokia and Samsung’s territory may not be Apple’s best move.

Damien Duhamel

Managing Director Asia Pacific

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www.kae.com

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