Apple is a luxury good with mass appeal

Analysts were rooting for Apple to go low end with its iPhone 5C. Instead, Apple decided to price it pretty high. It was not ready to tarnish its premium brand. It should not and it will not. On the contrary, it seeks to extend its premium brand. The hiring of Burberry CEO takes the game to a whole new level:

Apple Hires Burberry CEO in Tim Cook’s Best Decision Yet

Now think about the iWatch project. It's not going to be something dueling with Samsung's pathetic Gear. It's going to be a fashion item. It's going to be a Michael Kors watch with mass appeal. Design, design, design.

She is wicked smart.

Oxymoron Nobel prize in economics

The economics Nobel has been quite controversial in recent years. Today's announcement is utterly strange: Eugene Fama is known for his Efficiency Market Hypothesis which has never been tested affirmatively, and its influence has waned because of massive market failure in the last financial crisis. Yet, he is awarded the prize at the same time as Robert Shiller, who is known for various works that demonstrate, among other things, that market is not efficient or bubble prone!

And, Lars Hansen, known for developing some testing techniques, in between these two?

Debt ceiling deal illusive， Reid may hold the card

Facing an imminent debt ceiling deadline with dire consequences of US default, no deal yet seems likely to emerge on time.

Every single proposal from the House and Senate Republicans has been shot down by the White House or the Senate. Obama and Senate majority leader Harry Reid have been holding firm. To see where the deal dynamics is headed, it's important to understand why they're doing what they're doing: holding firm.

Reid: Soft-spoken, combative Obama partner vs GOP

Obama Hard-Line Debt Stance Rooted in Anger Over '11 Impasse

With public opinions shifting against the House Republicans over the government shutdown, who is going buckle first? 

Melt up

So we see futures are all pointing up, perhaps a deal out of the Washington gridlock is in the work?

This is all good:

Ignore all the noises.

But what's the signal? The yield curve still upward sloping? And slowly flattening?

Why Obama stood firm

In the meeting with House Democrats on Wednesday evening, Mr. Obama held firm to his stated intention to negotiate with Republicans only after the government is reopened and the debt ceiling is raised. He told Democrats that if he gives in now, Republican demands would be endless. “The only thing not on their list is my own resignation,” he told Democrats, according to a lawmaker in the room.

Looks like Mr.Obama has learned his lessons dealing with the GOP. 

For the full report, see 
As Pressure Mounts, House G.O.P. Weighs Short-Term Debt Deal

iPhone 5S: The new frontier

So, Apple announced two new iPhones on Sept.10: the colorful version of iPhone 5 (i.e. iPhone 5C) and the much improved more powerful iPhone 5S.

Nearly everyone was expecting iPhone 5C to be the cost effective device to compete in the emerging markets like China. Wall Street was disappointed when it learned the off-contract pricing: $550 to start with. It's even more disappointed when the two current Chinese carriers offer iPhone 5C at RMB 4488 (about $730), and there was no China Mobile deal.

Analysts downgrades followed. AAPL was down 5.5% following a 2% decrease. iCahn swooped in to buy more.

The market was obsessed with market share, even though Apple's ecosystem continues to grow. Apple's share has been shrinking because the low end has been growing like weeds at zero profit. This is mostly because of the aggressive strategies from Samsung, Lenovo, Xiaomi, enabled by the free Android OS. Most analysts were expecting Apple to join the cut-throat "pissing" contest at the low end.

Well, Apple appeared to have refused the temptation. It chose to stay at the high end, even in China. That doesn't mean the prices for iPhone 5C won't come down. I think between subsidies and discounts, the effective prices for iPhone 5C would come down quite dramatically in China over the next couple of quarters. But that probably won't happen until iPhone 5S has gone on sale for some time.

5S is where the market should focus on. It's the new frontier of the smart phone.

"Most forward-thinking."

"Desk-top class" architecture with 64-bit A7 chip.    

What do they all imply?

Here are some good discussions, among all the noise:

Apple positions itself for the coming convergence of mobile and desktop.

2015: 64-bit ARM chips in iPhone 5S serve up taste of Intel-free future for Apple.

The iPhone 5S-Class.

iPhone 5C pricing makes perfect sense.

(a balanced take after the 10% dive)

The iPhone 5C: Cheap Plastic Case, Not a Cheap Price — and That’s the Point.

(Interview with Cook, Ive, Federighi)
We're not in the junk business.

Ticket to the next generation of the internet.


Apple tops Google and Coke in brand valuation.


The market impact of 64-bit A7.


iPhone 5C is great marketing for 5S.

iPhone 5C: Deepening the conversion

Earlier this month, a report from AllThingsD compared first-time smart phone buyers versus seasoned buyers, across phone makers including Apple and Samsung.

This picture is the key result:

It shows that iPhone is attracting close to 50% buyers among those who have owned a smart phone previously, a comfortable leading position. But among the first-time smart phone buyers, not so much. The reporter put it in a rather negative light. We think it's not so bad.

Today, a CIRP report shows that 20% of iPhone users switched from Android phone users, whereas only 7% of Samsung phone buyers switched from iPhone. This helps to explain the picture above: Apple is very good at converting experienced smart phone users who want and can afford a better phone.

Given the proliferation of Android phones, which has been pushed by makers from Samsung to HTC to LG to Huawei to Lenovo to Xiaomi and others at cost or below cost, what would be the best strategy for Apple to deepen its conversion?

Is it better to use the older versions of iPhone, or is it at the point that Apple can do better with a new lower-cost iPhone? The answer is probably the latter.

Ever since AllThingD broke the "news" on August 10 that Apple is going to announce both iPhone 5S and iPhone 5C on Sept. 10, 2013, the rumor has been widely repeated and the expectation has set in. Today, Wall Street Journal claimed to have confirm it. If this is true, Apple has clearly decided that a lower-cost new iPhone is the way to deepen the conversion. This is both timely and an important strategic departure. We can see the following advantages of launching a new and lower-cost iPhone.

1. iPhone 5C would work hand-in-hand with the strategy of partnering with China Mobile.

2. It creates a high-end destination point for the group of low-budget users who cannot afford iPhone 5 or iPhone 5S, but would like to have the iOS experience. This is probably based on the recognition that there emerges two broad group of smart phone users: those at the high end and those who are more cost sensitive. Apple wants to be the high-end destination for both groups.

3. iPhone 5C is using the iPhone 5 spec, and newer technologies than iPhone 4. This helps to compete with other cheap phones that have newer form factors and technologies.

4. Apple can better control the costs with a new design. And possibly more importantly the new design allows a substantial differentiation from the flag-ship design, so that it serves to extend the iPhone brand but not cheapen it.

5. With this, Apple can continue to enjoy saving part of the education costs for first-time users and keep a healthy margin for its iconic device, extending the brand as well as the iOS ecosystem.

The media are too focused on market shares and seldom ask if a bigger market share makes sense at all if all it does is making sales but not profits. With the iPhone 5C out soon, it seems what competitors have done at the low-end is little more than preparing an educated customer base for Apple to convert.

Could it be that simple? We'll just have to wait and see.

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Here are some survey results since the new iPhones were launched.

More iPhone buyers switching from Android this year than in 2012