R "Ray" Wang, Constellation Research Principal Analyst & Founder joins Yahoo Finance's Akiko Fujita to break down the latest announcements out of Apple's iPhone event.
AKIKO FUJITA: Ray Wang, he is the Principal Analyst and Founder of Constellation Research, and he's got all eyes on that Apple event. A number of new iPhone 12s announced today. At the very top of the line, we're talking about $1,099 phone there, and of course, the big development here, Apple's first 5G phone. Ray, it's good to talk to you. Let me just get first get your thoughts on what you heard out of that event.
RAY WANG: You know, I was really excited, because what we saw was 5G come to life in the US. There's about 360 to 370 million phones up for replacement in the super upgrade cycle, and I think if you're looking at all price points, there's something for you on the iPhone, and that's what was exciting. From the Mini, all the way to the Pro, these are some really action packed phones. It's not just about being faster, it's about the capabilities and the camera and the video, which is why a lot of reasons people use this, and it's also because of the new chips. Apple has been able to go from software to silicon and actually drive down the cost structure and deliver more, which is really interesting. So this isn't like a regular small upgrade on the iPhone, this is a super upgrade.
AKIKO FUJITA: And, Ray, so let's talk about that upgrade in terms of going from 4G LTE to 5G, because there's a lot of skepticism out there about whether, in fact, it is an upgrade when the 5G networks aren't necessarily ready for primetime here in the US. You saw Hans Vestberg, the CEO of Verizon, which of course, is our parent company at the event today. You know, I'm curious what you make of his presence there, especially Tim Cook essentially addressing some of those concerns and skeptics to say, look, we've got a partner right here, a carrier that is rolling out that 5G. Those speeds will be available to consumers.
RAY WANG: Yes, so we've always been talking about why hasn't Apple released 5G earlier? Why haven't they released 5G earlier? They've been spending a lot of time with the carriers, and by spending time with the carriers, it's everything from not using a 5G signal when you only need an LTE signal, from being able to optimize on the 5G bandwidth to do multiplexing and get different types of streams at the same time. The carriers have pretty much been working with Apple and all the different markets to figure out what is going on so that they can optimize the signals as rollouts go out. The other piece that's interesting thing is the MIMO, or the millimeter wave pieces, that are available in the US which allow you to get around dense buildings and dense areas, and so there's been a lot of thought in terms of what that 5G looks like.
Now in terms of rollout, the carriers all have a lot of work to do. It's a very expensive role to get 5G everywhere, but they're sharing towers. They're working with each other to be successful there. And more importantly, they're starting to actually, you know, use more efficient 5G networks, and there's capabilities there with each of the carriers to be able to optimize bandwidth usage.
AKIKO FUJITA: What do you make of the price point in all of this? You've got upwards of $1,000, so $1,099 for the iPhone 12 Pro Max. On the lower end, we're talking about $700. There's been a lot of talk about this super cycle that's coming for a lot of those consumers who've been waiting for this new iPhone to be launched. Are those price points likely that set that cycle in motion?
RAY WANG: I don't think it's the price points that's going to set them in motion. What's interesting is the prices remain the same. There isn't the normal increase that you'd see after each release, but what we are looking at is really the offers that are being provided by the carriers, to see what Verizon does for trade-in, what AT&T does for trade-in, and what T-Mobile does and Sprint does for trade-in, because that's going to be interesting to see what that adoption looks like. And from what our understanding, there might potentially be some very interesting trade-ins that make it very easy to upgrade to the next iPhone.
AKIKO FUJITA: Let's talk about the other device that we saw today unveiled, and this is the HomePod Mini. We're talking about $99 for that. What's the market for Apple on this particular device when there are already competitors on the market from the likes of Google and Amazon?
RAY WANG: It's a great point, right? We're talking about a $36 billion TAM by 2025. This is an area where everyone's competing heavily, but it's not because of the smart speakers, it's really because of the virtual assistants. It's about what you can do to be able to, you know, start the process around home automation, and the big barrier has been price point. And so the majority of these homes smart speakers have been $99 or less, and so it looks like Apple has been paying attention to say how can we create a high quality home speaker smart speaker to play in this role? And more importantly, it's not that, it's also when you think about virtual assistants, Apple's in a dead heat with Alexa in terms of usage followed, you know, followed by what's going on on the Google Home side. And so there's a battle for not just the virtual assistants, the smart speakers and home automation, Apple pretty much just said, we're going to double down and get into this space with a price point that customers like, and so features like the ability to intercom, features like the ability to have profiles across the, you know, across the house, I think those are things that are going to endure people to this, and it could be the stocking stuffer for the year.
AKIKO FUJITA: And very quickly, Ray, just looking at the stock move here, Apple off of its lows in this session, but still down about 3% right now. On the back of all these announcements, is this just a case of selling the news, or do you think investors are disappointed with the news that came out today?
RAY WANG: I don't think they're disappointed with the news. I think they're just selling on the news, because the run up to up against Monday was pretty high, and so I think, but long term, when we start looking at the sales and orders post November and also the services, there's a pull through on services people forget, so it's going to be not just the number of phones, not just the number of watches, but it's also going to be the number of HomePods and other devices that are going to carry that through.
AKIKO FUJITA: OK, Ray Wong, Constellation Research Principal Analyst and Founder, great to talk to you today. I appreciate your time.