My thanks to Kirk Burgess for providing this transcript:
Horace Dediu interview on CNBC Asia Cash Flow show – 10th September 2013
Chloe Cho (CNBC): Take us through what Apple is exactly trying to do?
Horace Dediu: Well, this is the first time in the six years of this competition in the smartphone market that Apple has broadened its portfolio. We have seen only a single product launch every year–this is very unorthodox in the industry. Normally each competitor [ranges] dozens of devices. Apple’s entry has been asymmetric from the start, and now in its sixth year we are expecting to see, finally, a broadening perhaps into two separate products. The question will be whether [there will be] a significantly lower price point for the so-called 5C and whether that will change the average selling price overall for the portfolio. The average selling price has been remarkably steady, and remarkably high, typically around $600 for the duration of this products life. Something, again, unprecedented. My expectation is the new price point will be quite a bit lower than $600, starting with about $450, it might drop a bit further, [which] would cause the overall price range to come down as we have seen with the iPad; [where we] also had a price erosion happen as the smaller version came out.
Q: Horace, do you think they have got the timing right? Should they have done this a little bit earlier when the market wasn’t so saturated and filled with cutthroat competition?
A: Indeed, I think. As I said, as a product with six years in the market it’s a bit late; I expected this to happen last year. I think a lot of the momentum that has been lost in the past year in terms of sales growth has been because of the lack of low end. To note also will be whether they indeed expand their carrier footprint. We are expecting something new in Japan and possibly China Mobile. There is a second announcement happening with a few hours delay in China. This is again the first time that has ever happened.
Q: Horace, do you think they didn’t move down the value chain fast enough largely because they didn’t have a deal with China Mobile?
A: Well that’s always a good question whether they are driven more by carrier channels or are they driven more by consumer market expectations. I think it’s a bit of both. We do have this hybrid approach where they continue selling this older product for one or two years after the new product is launched–so the 4 and 4S are still available while the 5 is being ranged. This strategy is hybrid I say because this isn’t truly a low end product, it is a stale product that is being put out there. This [strategy] may be driven more by consumer demand, not so much what operators are asking for. With the 5C we might be looking at a solution for operators in particular.
Q: Horace, how much do some these incumbents like Apple and Samsung need to be worried about Microsoft approaching their space?
A: I believe Microsoft will not be competitive in the near term. I don’t think [during] the next year we are going to see a very impactful entry from Microsoft. What Microsoft is likely do is lower prices significantly on Nokia’s portfolio and their pipeline as it is. That might cause more pressure on the pricing, but the problem has been that consumers have not really been taking up the Windows Phone platform very aggressively. It has been somewhat successful in Europe but not taking off elsewhere. I think Microsoft will be in an integration mode with the Nokia assets into 2014, but I would expect in a year from now we might see some new entry product that would be exciting. I think 2-3 years down the road we might see something from Microsoft that would excite consumers as well.
Q: There has been a lot of focus on which companies have a more integrated house, Apple or Samsung. In light of the fact that they are having to move into lower price points, in your view which is doing the better Job, Apple or Samsung?
A: Well Samsung is a great industrial enterprise and they are doing very well by broadening as much as possible their portfolio, even before the smartphone race started for them, which was in 2010, they were known for being one of the most prolific product creators out there. They actually had over 100 different mobile phones, not smartphones, just regular mobile phones that they would range, and Nokia were extremely concerned by this pressure they were getting from Samsung.
What they have seen since 2010 is the same thing, except with smartphones, and so they’ve been really prolific and covering the spectrum of price and screen and every other possible variant that could be made. I think however that Samsung hasn’t got a software platform under its belt. They could become a software player by taking over some of the control of Android as we have seen Amazon do, and thus really establish themselves as a platform player. They are doing so to some degree with the “Gear” product, and they might be doing something like this by launching their development conference this year.
But they aren’t yet a platform player whereas Apple is, but then again we just don’t know what the politics of Android are with respect to forking it by an OEM as large as Samsung.