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This Missing Feature Could Dent Apple's iPhone 11 Sales

By Harsh Chauhan – Sep 17, 2019 at 5:39PM

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The new iPhones don't have 5G.

The latest Apple (AAPL -3.00%) iPhones have arrived. The Cupertino giant claims they're faster than before, thanks to the A13 Bionic processor; will last longer; and can shoot better pictures, because Apple has finally caught up with the triple-camera trend. What's more, potential buyers of the iPhone 11 lineup will have new color options to choose from.

But Apple chose to skip one really important feature that would have ensured that the iPhone 11 is relevant at a time when sales have been plunging: fifth-generation wireless technology (5G).

The iPhone 11, shown in six different colors

Image source: Apple.

No 5G yet

The lack of 5G is not surprising. Apple's spat with Qualcomm (NASDAQ: QCOM) made it late to the 5G party and Intel's reported shortfalls in developing 5G modems could have been another factor that forced Apple's hand. While Apple finally settled with Qualcomm, it was too late to tap the chipmaker's Snapdragon X50 5G modem, so there was no way Apple was bringing 5G to its customers in 2019.

Apple bulls might defend this move, noting that 5G isn't prevalent yet, but the availability of 5G will probably be much better this time next year, when the next-generation iPhones are out.

So while it wouldn't have made sense for Apple to push for the inclusion of 5G tech in the iPhone 11 just to score some brownie points on the marketing side, it's now fallen behind by a year on the smartphone technology curve.

Competitors aren't waiting

Apple's primary rivals have already rolled out 5G-capable smartphones, and more are on the way. Qualcomm said earlier this year that its 5G chip is being designed into 30 smartphones, which means there will be several devices that customers looking for 5G capability might buy instead of the iPhone 11.

Samsung's (OTC: SSNLF) Galaxy S10 flagship and the Note 10+ 5G are two premium offerings that customers can consider if they're looking to upgrade to a 5G device. The Galaxy S10 5G starts at $1,299, though buyers can get up to $450 off by trading in their old phones; the Note 10+ 5G carries a similar price tag. And for anyone looking to buy a slightly cheaper 5G phone, the Samsung A90 5G, priced at around $827, may seem like a good deal.

The iPhone 11 Pro and the 11 Pro Max start at $999 and $1,099, respectively; that means that an additional investment of $200 to $300 will get you a 5G-equipped flagship, allowing you to future-proof your smartphone. That extra investment would make sense, as users are holding on to their smartphones for longer periods.

Market research company Kantar Worldpanel reports that Americans upgraded their phones after an average of 24.7 months in 2018. Back in 2016, that number stood at 22.7 months. A similar trend was seen in other countries.

If Cupertino adds no cutting-edge innovations to the iPhone in 2020, there's a good chance that customers won't upgrade to its devices next year -- as they might have already bought 5G-enabled devices from its rivals. Moreover, Apple shouldn't forget that Samsung is likely to refresh its flagship lineup in early 2020, which would give potential smartphone buyers all the more reason not to buy the iPhone 11.

What's more, market research firm IDC estimates that sales of 5G devices will ramp up to 123.5 million in 2020 -- for 8.9% of all smartphone sales. Apple isn't yet prepared to take advantage of that opportunity, while the likes of Samsung and Huawei are already on the 5G bandwagon.

IDC predicts that "2019 will remain a challenging year for iPhone shipments ... mostly due to market maturity as well as a lack of 5G devices. However, Apple is likely to deliver 5G handsets later in 2020, which will pick up iOS volumes slightly as it will have an edge over other vendors with a better understanding of 5G market conditions for a much more planned launch."

So don't be surprised if Apple's share of the smartphone market drops further in the coming quarters.

Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool owns shares of INTC and Qualcomm and has the following options: short September 2019 $50 calls on INTC, short January 2020 $155 calls on Apple, long January 2020 $150 calls on Apple, short January 2020 $155 calls on Apple, and long January 2020 $150 calls on Apple. The Motley Fool has a disclosure policy.

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