Apple’s fundamental iPhone 5 problem

Tomorrow, Apple will unveil the “iPhone 5” — which could be called the iPhone 5, the new iPhone, or something else — and 18 months of rumormongering and tall tales will briefly stop as everyone digests the reality of the “iPhone 5.” Of course, by tomorrow afternoon, the blogosphere will again teem with iPhone rumors, this time for the “iPhone 6,” as well as for new iPads, both the 8-inch “iPad Mini” and standard 10-inch variety.

A year ago, we saw the same intense speculation and fan fiction for the “iPhone 5” that turned out to be the iPhone 4S. The immediate reaction was severe disappointment, as the fantasies that had circulated throughout the Web for more than six months turned out to be just that: fantasies. There was a brief backlash against Apple in the blogosphere and Twitterverse, but the iPhone 4S became a huge hit and got strong reviews.

Apple may not be so lucky this time.

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The iPhone 4S’s glow wore off by spring 2012, when the “iPhone 5” rumors hit high gear again. Strong competing smartphones such as the Samsung Galaxy S III and Galaxy Note grabbed more attention — and iPhone 4S sales stalled as the anticipatory slowdown in iPhone sales began months earlier than usual due to the rumors. Until the iPhone 4S, Apple typically got a nine-month buzz around each new model, while competitors got a month or so max, even for well-received products such as the Galaxy Nexus and Motorola Droid Razr.

That short honeymoon is actually the norm for the phone industry, which is why major providers such as Samsung, Motorola, and HTC announce new models every few months, then we quickly forget most of them. Apple does one a year, a beacon we look to for 12 months. But that pace may not work so well given the constant rumormongering that both delays new purchases and creates a fatigue around the iPhone phenomenon. On the other hand, by delivering multiple smartphones each year Apple would sink into the sea of announcements, trading the fatigue effect for a short pop easily lost with all the others. I don’t know the answer to this dilemma.

Another uncomfortable truth is that fewer recent iPhone models are actually that revolutionary, and the mismatch each year between what Apple delivers and what the rumor mill fantasizes creates a huge expectation gap that’s growing corrosive. We saw that last year in a dramatic way as almost none of the rumored features came true.

This year, the rumors have been as persistent but generally not as fantastical. We’re all expecting a larger screen (the iPhone’s current 3.5 inches is simply too small, and 4 inches is the new bare minimum), an LTE 4G radio (which has to fall back to 3G in most of the country), and perhaps a new dock connector — that’s pretty much it. I’m sure we’ll get other refinements, perhaps to the camera or audio (subscription-based streaming music à la Spotify is the current rumor). It’s possible we’ll see a new type of sensor or, less interestingly, an NFC chip, and possibly changes to the two-year-old industrial design that debuted in the iPhone 4. So far, these obvious updates are nothing to write home about.

I think it’s safe to say that the new iPhone is likely to be a collection of nice improvements on par with the competition, distinguished mainly by its signature look and its superior iOS. Yet even with the diminished levels of fantasy in this year’s rumors, there’s been a huge, persistent message that something magical will be unveiled tomorrow. The mismatch’s corrosion effect may recur this year.

The likely, hardly magical changes to the “iPhone 5” mirror the evolution of iOS, where the pace of innovation and change has slowed as the mobile OS has matured. To put it charitably, iOS 6 is a subtle set of enhancements to iOS 5, based on what Apple describes on its website. iOS remains the best mobile OS, but it now has credible competition. The iPhone’s advances also seem to have slowed on the hardware side, letting competitors — notably Samsung’s Galaxy S III — take on a lasting mantle of leadership the iPhone used to monopolize.

It’s of course possible that Apple will stun us all tomorrow. The company both strongly protects its secrets and engineers fake leaks, as well as misdirects the rumor mill with leaks of concepts under exploration that naive bloggers report as if they were actual products. Perhaps some of the current “iPhone 5” rumors are diversions, and we will in fact be surprised by the real thing. But the iPad 2 in spring 2011 and the iPhone 4 in spring 2010 were the last Apple products to truly surprise us on announcement day — it’s not a guaranteed occurrence.

Whatever is unveiled tomorrow, the underlying issue remains: The intense focus on iPhone (and iPad) rumors is shortening the product’s time in the sun, creating a boom and bust cycle for Apple. For users, that may not immediately matter — most people upgrade their smartphone every few years, skipping one to three generations each time. Apple has enjoyed huge financial success despite that — it now accounts for 77 percent of the mobile industry’s profits, even with the slower iPhone 4S sales — because so many new customers have come on board and stuck with Apple essentially forever.

But that customer base is getting saturated in the United States. In big growth markets such as China, the iPhone is not the draw it is here, as strong Android competitors provide an alternative U.S. consumers did not have in the early smartphone era.

Even if Apple’s profits are not affected because of virgin demand in the developing world, the establishment of a regular boom and bust cycle could lessen its ability to steer both the mobile industry and the larger user community as it has been able to for several years. Let’s not forget that the iPhone and iPad were truly revolutionary, and key advancements such as iOS 4’s management APIs enabled the whole BYOD phenomenon that has reshaped businesses’ mobile strategy and often led to a broader rethink of user technology strategy (aka the consumerization of IT).

Neither Android nor Windows Phone have had anywhere near that impact, and Research in Motion’s BlackBerry stopped enjoying that kind of influence a decade ago. How Apple addresses what seems to be a slower pace of dramatic innovation as mobile platforms get more mature — and how it deals with the corrosive effect of all rumors all the time — will matter more to everyone in the long run than any one product announcement.

This article, “Apple’s fundamental iPhone 5 problem,” was originally published at InfoWorld.com. Read more of Galen Gruman’s Mobile Edge blog and follow the latest developments in mobile technology at InfoWorld.com. Follow Galen’s mobile musings on Twitter at MobileGalen. For the latest business technology news, follow InfoWorld.com on Twitter.