While much of what Apple (AAPL) announced about its fall 2020 iPhone lineup was already reported, its Tuesday event did pack a few hardware, software and pricing surprises.
As expected, Apple revealed four new iPhones at its event: The 5.4" iPhone 12 Mini and 6.1" iPhone 12, and the 6.1" iPhone 12 Pro and 6.7" iPhone 12 Pro Max. All four phones contain 5G radios, OLED displays and an A14 Bionic SoC, with the Pro models also sporting a third rear camera, a stainless steel frame, and a LiDAR scanner (useful for AR apps, camera autofocus and low-light photos).
Also as expected, Apple unveiled a smaller/cheaper HomePod speaker: The $99 HomePod Mini. It's promised to deliver a premium music-listening experience, while also supporting an intercom feature for homes with more than one speaker and the ability to recognize the voices of different household members.
Here are some initial thoughts on what Apple announced:
1. 5G Remains Overhyped...But Apple's Approach to 5G Does Stand Out
I've felt for a while that in terms of its impact on smartphone upgrade rates, 5G has been overhyped. While most consumers would undoubtedly prefer to have a 5G phone than a comparable non-5G phone, things such as display, camera and battery life improvements have arguably remained bigger selling points in the absence of a proverbial killer app for 5G (i.e., a popular smartphone app or feature for which 4G networks are inadequate).
I think this might generally hold for the iPhone 12 line as well: Camera improvements (more on them shortly) and/or the chance to get a bigger and better display might do more to convince many owners of 2017 and 2018 iPhone models to upgrade than something that lets them load web pages and download videos and music tracks moderately faster than 4G phones allow them to.
But with that said, Apple did do a couple of things with its 5G implementation that allow it to stand out and potentially yield a better user experience.
First, the company says it rewrote its entire software stack -- from iOS to its apps, firmware and software frameworks -- to optimize it for 5G, something that it claims allows many apps to benefit from 5G speeds without drawing more power than they would using a 4G radio. Second, Apple added a "Smart Data" mode that allows apps that don't need 5G speeds to use 4G networks to conserve power.
None of this is the same as having a 5G killer app to market, but it does give Apple some unique 5G-related selling points.
(As an aside, iPhone RF chip suppliers Qualcomm (QCOM) , Broadcom (AVGO) , Skyworks (SWKS) and Qorvo (QRVO) have to be pleased with the large number of sub-6GHz 5G bands supported by the iPhone 12 line, with Qualcomm also presumably giving a thumbs-up to Apple's decision to support mmWave 5G networks on all U.S. iPhone 12 models).
2. Apple's Camera Work Remains Impressive
The iPhone 11 and 11 Pro's camera improvements -- from higher rear camera counts, to a revamped front camera, to the addition of machine learning-powered features such as Night Mode and Deep Fusion -- appear to have had much to do with the phones' stronger-than-expected reception.
The iPhone 12 line's camera improvements should also turn some heads. Notable ones include:
- A revamped wide-angle (26mm) camera that has a 7-element lens, takes in 27% more light and has a 47% larger image sensor.
- The extension of Night Mode and Deep Fusion to all of an iPhone's front and rear cameras. Previously, Night Mode only worked with the wide-angle camera, and Deep Fusion, which takes 9 shots in rapid succession and "fuses" their output to create a single, optimized image, only worked with the wide-angle camera and the iPhone 11 Pro's telephoto camera.
- Better optical image stabilization.
- Smart HDR 3, which improves upon the HDR capabilities of prior-gen iPhone cameras to bring out more details and optimize white balance, contrast, color, etc.
- Support for Dolby Vision HDR video recording (a first for a smartphone camera).
Given how often a typical consumer uses his or her smartphone cameras, and how often the photos and videos taken with those cameras shared via social media and/or messaging apps, having an arguably best-in-class smartphone camera experience is a pretty big deal.
3. Apple Appears to Be Passing on Higher Component Costs for the Standard iPhone 12
Last year, Apple gave the standard iPhone 11 a $699 starting price -- $50 less than the starting price given to the iPhone XR a year earlier.
But this year, it's giving the standard iPhone 12 an $829 starting price ($799 for AT&T (T) and Verizon (VZ) subs), while charging $100 less for the iPhone 12 Mini. On the flip side, the iPhone 12 Pro and Pro Max feature the same starting prices as what the iPhone 11 Pro and Pro Max carried a year earlier ($999 and $1,099, respectively).
The cost of including 5G radios and OLED displays -- neither of which are found in the standard iPhone 11 -- likely has something to do with Apple's iPhone 12/12 Mini pricing. This decision could impact unit sales some, but it's worth noting that average selling prices have been rising for a lot of consumer tech products lately, as more discretionary spending gets directed towards consumer goods relative to things such as travel and dining.
4. The HomePod Mini Should Sell a Lot Better than the Original HomePod Has
Apple hasn't broken out sales figures for the original HomePod, which cost $349 when it launched in early 2018 and has sold for $299 over the last 18 months. But third-party sales estimates are pretty subdued: Strategy Analytics estimates 2.6 million HomePods were shipped in Q4 2019, up 65% annually but equal to just 4.7% of global smart speaker shipments.
Look for the HomePod Mini, whose $99 price is roughly on par with that of Amazon.com's (AMZN) 4th-gen Echo speaker and Alphabet's (GOOGL) Nest Audio speaker, to move in meaningfully higher volumes.
The HomePod Mini does lack some of the standard HomePod's more advanced hardware features, such as its high-excursion woofer and array of seven beamforming tweeters. But with the speaker still packing a slew of custom-engineered audio components and leveraging machine learning algorithms to optimize music playback, it might still outclass comparably-priced smart speakers in terms of audio quality.
Throw in intercom, syncing and stereo pairing features for homes with multiple units, along with improved Siri capabilities and (in the coming months) support for third-party streaming services, and you have a product that should sell well during the holidays.
5. Taking EarPods and the Power Adapter Out of the Box Could Boost Accessory Sales
Citing environmental concerns, Apple says iPhone 12 units won't ship with either EarPods or a power adapter (a USB-C-to-Lightning cable will be included). One can debate the pros and cons of this move (some iPhone owners definitely won't like it), but either way, it could boost purchases of both AirPods and wireless charging accessories.
Regarding the latter, it's worth noting that all iPhone 12 units are shipping with a MagSafe system that supports 15-watt wireless charging and will allow various Apple and third-party accessories to magnetically attach to an iPhone's back. Apple's MagSafe accessory offerings will include a pair of wireless chargers, one of which can charge both an iPhone and an Apple Watch.
Apple, Amazon, Broadcom and Alphabet are holdings in Jim Cramer's Action Alerts PLUS member club.
