Commentary

Apple Shows Off Smaller iPhone, iPad; Holding Fast On Encryption

Hoping to expand the iPhone’s presence in developing markets, Apple yesterday unveiled a $399 smartphone — the iPhone SE — that has the same camera and processing capabilities of the iPhone 6S but is housed in a 4-inch body. In addition, it showed off a smaller — 9.7-inches — model of the iPad Pro and some lesser accoutrements, such as glitzy straps for the Apple Watch, whose intro price was cut $50 to $300.

Apple CEO Tim Cook also sent the message “I won’t back down” on the company’s refusal to help the Justice Dept. crack the encryption on the iPhone used by the shooter in the San Bernardino terrorist attack in December, as the headline on Jon Swartz’ story for USA Today puts it. 

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“For many of us, the iPhone is an extension of ourselves,” Cook told those assembled in the 350-seat auditorium on Apple’s Cupertino campus. “We need to decide as a nation how much power the government should have over our data and over our privacy.”

Later in the day, the government indicated it may be able to unlock the phone without Apple’s help and was granted cancellation of a court date in Southern California today. The Department of Justice says it will file a report on its progress by April 5.

The government filing “raises more questions than it answers, such as the reach of the government's decryption capabilities,” writes Cyrus Farivar for Ars Technica. “The DOJ doesn't want bad precedent, and I think Apple had the better side in this argument,” Jennifer Granick, director of civil liberties at the Stanford Center for Internet and Society, tells Farivar.

Indeed, the “Row Is Only Just Beginning,” as the headline on Dave Lee’s story for the BBCputs it.

“The overall message from the event was less about the products and more about a broader message of the core values the company wants the public to associate with it,” writes Christina Warren for Mashable. But the show did go on, and the smaller handsets lead most of the stories even if the crowd was more “dazzled” by Liam, a 29-arm robot that disassembles old and broken iPhones.

“Refurbished handset sales have been growing steadily in the past couple of years in developed and developing markets, Ronan de Renesse, lead analyst, consumer technology for the research and advisory firm Ovum, points out in an email.

“Some smartphone recycling companies told us that up to 80% of refurbished smartphone sales are iPhones. It is in Apple’s interest to have those customers purchase a cheaper ‘new’ iPhone SE rather than a refurbished iPhone 5 to gain a stronger hold on iPhone sales and corresponding margins,” de Renesse maintains.

And Wired’s Liz Stinson writes that she “held onto my iPhone 4s longer than any self-respecting tech writer should have,” because she liked how it felt in her hand — perhaps one reason why 30 million people bought 4-inch phones last year, almost 8% of the iPhones sold worldwide, according to Apple.

But the SE’s prospects in the two biggest potential overseas markets, China and India, may be limited by that small size. Although Greg Joswiak, VP of iPhone product marketing, says first-time smartphone buyers in China tend to start off with a 4-inch screen, “it’s clear most Chinese buyers prefer the larger screens — as attested by the rapid growth of popular domestic brands such as Xiaomi and Vivo, which market phones in sizes similar to the iPhone 6 and bigger,” according to a Fortune story based on a Reuters report.

As for India, “the majority of the low-end, $100 phones have a five-inch display,” Neil Shah, research director at Counterpoint Technology Market Research in Mumbai, tells Reuters’ Mari Saito, because many of the consumers who buy them do not own a tablet or laptop. Indeed, only 10% of smartphones sold in December had a 4-inch screen and nearly 70% cost less than $150.

Analysts say the lower-priced iPhone could also appeal to consumers in the U.S. who might otherwise switch to cheaper Android handsets, Tim Bradshaw writes for Financial Times. “In the U.S., Apple’s share of the smartphone market held steady at around 43% last year, according to analyst group eMarketer, compared with Android at 52%.”

CCS Insight analyst Geoff Blaber observes: “Pricing is the most significant component of these announcements. Apple will always prioritize margins but we’re seeing Apple price more aggressively across all products and categories.”

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