New iPhone 5S Could Raise the Bar for Smartphones

By now you've probably heard Apple launched two new iPhones yesterday, the 5S and the 5C. The long-rumored devices were equipped as expected but analysts gave the lower-end 5C a thumbs-down due to its higher-than-expected price tag and lack of broad appeal to emerging markets.

Many reports have described the new higher-end iPhone 5S as an incremental upgrade but I think it could prove to be a key indicator whether the smartphone market will embrace fingerprint-based authentication. It uses technology Apple gained when it acquired AuthenTec for $356 million last year, which lets users unlock their phones and make purchases on the iTunes App Store, instead of using passwords.

The phone's new Touch ID apparently doesn't let users authenticate to other sites but I would imagine the company is waiting to see how users accept this new feature and iron out any kinks before broadening its use. Should users widely embrace this form of authentication on smartphones, I would expect to see all of the other players rush to add similar features. It would naturally spread to tablets as well.

Apple's new iPhone 5S also sports a vastly improved camera, which will put it in competition with camera offered on Nokia's new Lumia 1020. The sensor on the iPhone 5S is improved and 15 percent larger, the phone supports more pixels and sports a new ƒ/2.2 aperture. The camera also has an improved LED-based flash. The new ARM-based A7 CPU doubles the speed of the iPhone and it's the first based on a 64-bit processor.

As I noted, the 5C is intended as a lower-cost unit and while it will be available in the U.S., analysts are banking on Apple breaking into emerging markets with it. Unlike previous units, the 5C is made of plastic rather than aluminum -- and lacks some of the newer features in the 5S such as the improved camera and Touch ID.

The $99 price tag (with a two-year contract), though half the cost was higher than most analysts expected and not scaled down to the extent anticipated and doesn't appear targeted at emerging markets, according to analysts, who noted it will compete with the newly priced iPhone 5. "The market placement was different than our prior expectations," wrote Piper Jaffrey analyst Gene Munster in a research note. "Previously we thought the 5C would be a lower end phone to address emerging markets like China and India."

Apple also didn't announce an anticipated partnership with China Mobile to offer a lower-end iPhone. "We believe that based on the pricing of the 5C ($549 unlocked), the phone is only a replacement for the 5 instead of downgrading the old device, and still plays in the higher end of the market," Munster wrote.

As for the 5S, Munster, a noted Apple bull, also believes Touch ID could pave the way for a broader payments offering. "We view security as the biggest hurdle in offering a successful payments platform and the biometric feature may be able to address that in iOS 8," he noted.

Do you see fingerprint-based authentication becoming the mainstream on all smartphones? Would you like to see it replace passwords? Feel free to comment below or drop me a line at [email protected].

Posted by Jeffrey Schwartz on 09/11/2013 at 9:09 AM