10
years of the iPhone: How Apple changed the way we communicate
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10 years ago, the best phones were made by Nokia and Blackberry. It is only ironic that at CES last week TCL showed off the first phone that's not made by Blackberry and yesterday Nokia announced the 6, which is the first Nokia branded phone that's being made by a company called HMD international. Nokia and BlackBerry essentially don't make phones anymore and if one must pinpoint a singular reason that they don't make phones anymore is because ten years ago, the late Steve Jobs took to the stage at MacWorld 2007 and proclaimed “today, today Apple is going to reinvent the phone." It was the iPhone, and since that day, it has been the basis of what we, essentially call a smartphone -- a candy bar slap of plastic or metal, with a full glass fascia punctuating a full touch screen interface.

As he went about announcing the phone, Jobs tantalised the audience and teased them with the possibility of three products, before revealing that he was talking about only a single product.

“A widescreen iPod with touch controls, a revolutionary mobile phone and a breakthrough internet communications device," said Jobs describing the device, in what many believe to be the greatest keynote of all time.

Back then Nokia's best phone was the N95 and BlackBerry was going great guns with its full QWERTY keyboards and class-leading enterprise email. Microsoft was also making a version of Windows which was tailored for touchscreen devices, to be used in conjunction with a stylus. In his keynote, Jobs systematically went about demolishing the status quo and explaining why phones of the time were broken.

"The most advanced phones are called smartphones. So they say. They typically combine a phone plus some e-mail capability, plus they say it has the Internet. It's sort of the baby Internet, into one device, and they all have these plastic little keyboards on them. And the problem is that they're not so smart and they're not so easy to use," he said.

Jobs pointed out that the big problem with phones was that they had these hardware user interface elements like a full QWERTY keyboard which couldn't be modified for specific applications. He argued that a touchscreen was the way forward but not with a stylus, as they were easy to lose, but instead, the best pointing device for the phone would be our fingers.

Today, every smartphone has a full touch interface, using multi-touch technology which Apple popularised with the first iPhone and iPod touch.

Even Google which was developing Android at the time was building something that was like BlackBerry, but it halted development and turned Android into something that's closer to iOS on the iPhone.

Over the last ten years, the competition may have caught up, but the iPhone remains the pinnacle of what is expected of a mobile computing device.

“iPhone is an essential part of our customers' lives, and today more than ever it is redefining the way we communicate, entertain, work and live,” said Tim Cook, Apple’s CEO on the 10th anniversary of the iPhone. “iPhone set the standard for mobile computing in its first decade and we are just getting started. The best is yet to come," added Cook, who was Apple's Chief Operating Officer in 2007.

Cook became CEO of Apple in 2011 after Jobs resigned owing to his illness. Jobs had been suffering from cancer for more than half a decade and soon after resigning, Jobs passed away in October 2011, ironically, a day after the launch of the 5th iPhone — the iPhone 4s.

Over the years, the iPhone business has grown by leaps and bounds and as of now, it is bigger than Microsoft, which for many years has been viewed as Apple's arch rival.

Despite this, in the ensuing years, Apple's competition has caught up and 2016 marked the first time in the history of the iPhone that the pace of growth went into the negative.

This has mostly come from competition powered by Google's Android operating system — this includes new phones under the Blackberry and Nokia brands.

The guiding light for the modern computing experience

The iPhone remains the benchmark for what one expects of a smartphone. Features that have found their way in an iPhone have become standardised features across smartphones, even cheap smartphones. In some cases, rumours of an impeding feature in an iPhone prompts other manufacturers to preempt.

Back in 2008, when Apple added the app store to the iPhone, third party stores existed for Nokia's Symbian OS, BlackBerry's BBOS and even for Microsoft's Windows Mobile. But back in 2008 there was no mobile app economy per se, at least not the way it exists today. Apple literally built it with the App Store.

In 2016, App developers on Apple's App Store earned $20 billion; a significant increase of 40 percent from 2015.

“2016 was a record-shattering year for the App Store, generating $20 billion for developers, and 2017 is off to a great start with January 1 as the single biggest day ever on the App Store,” said Philip Schiller, Apple’s senior vice president of Worldwide Marketing.

This number is impressive when you consider, the Google Play store caters to even more users. Mary Meeker's internet trends report for 2016 indicates that Apple only has 16 percent of the market share and but thanks to the premium price of the iPhone, Apple dominates the profits of the smartphone industry.

"We estimate the global smartphone industry realised total operating profits of US$9.4 billion during Q3 2016. Apple dominated and captured a record 91 percent share of all smartphone profits worldwide. Apple's ability to maximise pricing and minimise production cost is hugely impressive and the iPhone continues to generate monster profits. Huawei, Vivo, and OPPO are the next three most profitable smartphone vendors globally this quarter, but they are still a long way behind Apple," said Linda Sui, Director at Strategy Analytics in November 2016.

Apple's influence on the market goes beyond the app store. Back in the day, most smartphones were made from plastic and an industrial version of plastic called polycarbonate. With the iPhone 4, it introduced an industrial design which incorporated metal and glass. Today, metal and glass can be seen, even on phones that cost less than $100.

These days, most technology majors talk about machine learning and artificial intelligence as the next frontiers. On mobile, Apple was the first to jump on the boat with its Siri virtual assistant that debuted with the iPhone 4s. Now, an argument can be made that Apple has done little to use that lead, but the fact of the matter is that Apple was the flag-bearer and was soon followed by Google, Microsoft, Amazon, and Facebook. Now, every big tech firm has a virtual assistant of their own.

Apple's chief rival in the smartphone space - Samsung has in fact acquired a start-up called Viv which was founded by the folks who created the Siri assistant for Apple.

Back in 2013, when Apple introduced the iPhone 5s, it introduced Touch ID. In 2014, it introduced Apple Pay which worked off Touch ID. Now even a phone like the Xiaomi Redmi 3S which costs just Rs 7,000 has a fingerprint scanner. All this has happened in a span of 3-4 years.

Between 2015 and 2016, there were numerous instances of the industry following rumours of what Apple intended to do. Dual cameras became mainstream on phones and we also saw instances of phone manufacturers willing to drop the headphone jack from their devices, just because Apple was doing so.

It remains to be seen whether these were the right moves, but the fact remains that the industry follows Apple lead.

A rough road ahead in emerging markets

Apple's towering success in the smartphone space has meant that business has more or less become commoditised. It resembles the PC business. As per Mary Meeker's internet trends report of 2016, global shipments of smartphones have declined drastically. Growth has gone down to 10 percent in 2016 as opposed to 28 percent.

As the iPhone is a premium product its penetration in developing markets like India is almost negligible.

"Apple's smartphone market share has halved from 4% to just 2% in India during the past year," said Woody Oh, director, Strategy Analytics in August 2016.

In China, which is a massive market for Apple it has fallen behind the likes of Huawei, Vivo, Oppo, and Xiaomi. Apple only commands 7.1 percent of the market in China in Q3 2016 as per the latest report by IDC. Its market share fell by 34.1 percent in a year, but this report was filed before the launch of the iPhone 7. Regardless, such a dramatic drop is not a good indicator.

Apple views India as its next big growth market, but cracking India is not easy. Apple doesn't manufacture its phones in India which means that tax is high,in turn leading to a situation where India is one of the most expensive places in the world to buy an iPhone.

In the US the iPhone retails for $649 for the 32GB unlocked model. A rough conversion to Rupees means the price is around Rs 45,000, however, in India the phone is sold for Rs 60,000.

For it to manufacture the phones in India, it needs a components ecosystem to be in place, which is just starting to brim up. In India, it doesn't even have its iconic Apple Stores as Indian law stipulates that a single brand owned store should sell products which have sourced at least 30 percent of the materials locally. The iPhones are fully manufactured in China at Foxconn's factories and designed by Apple in California.

To reduce the base price of the iPhone, Apple tried selling refurbished phones which were cheaper. This move was squashed by the Indian government.

What the future lies ahead

Apple is said to be working on many things, but the common view is that the iPhone isn't a groundbreaking product the way it was a couple of years ago. It is now a product that has been refined to death.

In 2016 when Apple launched the iPhone 7 which looked identical to the iPhone 6 from 2014, critics were fast to jump on the fact, that Apple was losing its fabled design mojo.

But one can expect Apple to have a massive makeover for its 10th anniversary. A new design is a given but more than that Apple's investments in machine learning should pay dividends.

Already, with the iPhone 7, Apple is using machine learning in its camera and photo experience. The photos app uses computer vision technology to identify what is in an image, making it easier to search and on the camera, machine learning is used to fuse two images into one enhanced image. In fact, on the iPhone 7 Plus which has two cameras, machine learning is used in the portrait mode. Computational photography, could be the next frontier of imaging on the iPhone.

It is easy to predict that in tandem with iterative advances in hardware, Apple could use its advances in artificial intelligence to make a smarter iPhone. Apple has also opened up Siri to developers which should make it ambient across the experience.

It has become very serious about AI and recently its scientists even published a paper on their advances in the space of computer vision.

Over the last few years, Apple's services business has grown quite steadily. In India, for instance, Apple has opened an office in Hyderabad which is focused on the development of Maps. One should expect Apple to offer a more localised experience to its customers — not just in India, but across the world.

Apple has traditionally built experiences that have scaled across markets. This strategy normally works in hardware scenarios, but when you talk about software and services, they have to be localised. Apple has done that well in China and India could be the next big bet, due to the sheer scale of the market.

Virtual and Augmented Reality are two spaces that Apple hasn't invested in yet. Tim Cook has already talked about augmented reality. "We are high on AR for the long run," Cook said during an earnings call in 2016. "I think AR can be huge."

"Augmented reality will take some time to get right, but I do think that it's profound. We might … have a more productive conversation, if both of us have an AR experience standing here, right? And so I think that things like these are better when they're incorporated without becoming a barrier to our talking. … You want the technology to amplify it, not to be a barrier," he added.

But for a proper push in this space, Apple should enhance the screens on the iPhones and elevate the sensor hub on its gadgets.

Apple has already made some big acquisitions in this space - PrimaSense was acquired in 2013, Metaio was acquired in 2015 and Apple even accrued Faceshift, the company behind the real-time motion capture technology in Star Wars. Apple has even hired computer scientists from Oculus and Magic Leap, two companies which are big in the VR and AR space.

It also has technological building blocks in place for its current products. For instance, the wide colour display on the iPhone 7 and the dual camera system which can gather stereoscopic data and can create depth maps are essential to a differentiated AR experience.

Even its wearables — the Apple Watch and AirPods are spatially aware, which is a prerequisite for an AR experience. The AirPod has the W1 chip which is a wireless chip tied together with two optical sensors, beam forming microphones, an antenna. The Apple Watch has GPS and an accelerometer.

Even the iTunes Store and App Store seem like ideal Trojan horses for Apple to deploy a wealth of content for a push into AR.

Apple is also said to be working on a driverless car, but that project seems to be sometime away. In the nearer future, the iPhone will remain the most important thing at Cupertino. How important it is and for how long depends on the innovation Apple brings to the table. AR and AI could be the two things that help it to further the needle from a mobile computing point of view.

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