In my previous post, I argued that the best Android phones have finally caught up to the iPhone in technology and quality, and that investor apprehension about the iPhone falling behind may be what’s driving the drop in Apple’s stock price.
I’ve gotten some good responses, and there are certainly multiple ways I could be wrong. But I’ve been thinking about one that no one mentioned: what if smart phones just can’t get much better? In that case it would be just as difficult for the iPhone to fall behind as it would be for it to regain its lead.
I mean, it’s hard to imagine what I would even want to do with a handheld device that the iPhone 5 and Nexus 4 aren’t capable of. At this point, a higher-resolution screen or better-quality camera would have almost no impact on user experience. And if they got much thinner they’d be hard to even hold on to. The one transformative hardware innovation that I’m aware of is flexible screens, and it seems like Samsung is already ahead of Apple in that department. Actually, the faster release cycle of Android and Windows phones, and the fact that manufacturers like Samsung aren’t betting the company on every model, means that the next major hardware advance is almost certain not to show up in the iPhone first.
The few other things that I can think of are futuristic sci-fi functions that are held back by research progress and not hardware (like real-time audio language translation, for example) or high-bandwidth applications that are more a function of network capacity. The phone itself seems to have gotten about as good as it can get.
But my friend Max just offered some advice to Microsoft that makes a lot of sense to me:
I think the market would love to see a “laptop-replacement smartphone” coupled with solid but not overbearing cloud support. If the current top of the line smartphones are sporting 1GHz quad-core processors and 1GB of RAM, it’s only 2 generations before they have as much compute power as my current-generation laptop.
Such a laptop-replacement phone would work like the vaporware Ubuntu phone, but with the twist that when it’s docked to a 24″ monitor and bluetooth keyboard, it could run a proper version of Microsoft Office. A Windows Phone, which could work with sandboxed apps in smartphone-mode, and work as an effectively open device in desktop-mode, would be a fantastic seller. Just think: a small-screen optimized version of Outlook running in smartphone-mode, and a big-screen version when docked. That might even slow the corporate mass-migration to Google Apps. Do that with any of the major apps a user might be interested in: browsers, Windows Media Player, navigation, word processing, etc. You could even use, gasp, the same codebase, assuming all the views are properly separated from the models and dependency-injectable, blah blah. A product like this could revolutionize the way we think about personal computing again, open up a new revenue stream for the company, and make their phones actually relevant in the market.
There’s an obvious trend towards convergence in all three major OS families: iOS and Mac OS X, Android and Chrome (OS and browser), and Windows Mobile and Windows 8. All three — Apple, Google and Microsoft — have their own cloud storage products that fit with this convergence, although they all seem to be trailing outsiders like Dropbox and Amazon in the cloud department.
The question is, convergence to what? I think the logical future is a product like Max describes: a phone that you can simply dock into a keyboard, monitor and power supply, and it becomes a full-fledged computer. There would be both fixed desktop-style docks with big monitors and portable laptop-style ones, and tablets that are essentially just a dumb touch screen with a slot in the back for a phone.
If this is where we’re headed, I think Apple’s at a disadvantage for another reason: they’re primarily a hardware company, and convergence and the cloud are all about minimizing and commodifying hardware. The average computer user now has two or three devices — a phone, tablet and laptop — that are largely redundant in terms of the guts of the hardware. You rarely use more than one at once, but you’re paying to have all three available all the time. And Apple is at the top of all three categories.
If all those $200-800 tablets and $500-2500 laptops are replaced by $100-300 “shells” that you just snap your phone into, then it doesn’t take a genius to see that hardware manufacturers are in trouble. And no hardware manufacturer has more to lose than Apple, with their premium pricing and fat margins. One of the readers who emailed me about that previous post said that they’re currently making $370 in pure profit on every Mac they sell (!).
This means Apple has much less financial incentive than Microsoft or Google to push for a true laptop-replacement phone — so if that’s what the next big innovation is, it’s another way they could fall behind.