|August 28th, 2013|
The first iPhone was amazing for what it could do, but now it's remarkable for what it can't. With ⅛ the RAM, ⅙ the processing power, 1% the network speed, and ⅕ the pixels of the iPhone 5, let alone no video camera or GPS, no one would buy one now. The past six years have seen an innovation explosion in smartphone hardware, but I don't see that continuing; instead the next phase is phones getting cheaper.
If we look at desktop computers we see a preview of this trend, played out earlier and slower. Through the 1980s and early 1990s computers got hugely better, and while this could have come out as lower prices for the same performance people instead were willing to keep paying lots of money for new computers that were much better than the ones before. In the late 1990s and early 2000s computers started to get good enough that more people were willing to accept lower performance for lower cost. Once your computer can browse the web, edit documents, and play movies, how many people need something better?
One additional feature people wanted was portability, and that was a separate market segment. Laptops went through a similar process, starting from very expensive and hitting "good enough" somewhat later, but once they did they ate most of the market for personal-use desktops. There have been occasional hardware improvements such as better battery life and higher resolution displays, but the market has moved into competing on price.
I see smartphones as going the same way. No one has hardware coming up that is amazing enough to get people to pay more. Batteries are getting better, but at this point we have phones that work for most people if you charge them every night. The bottleneck for network speed is mostly the carriers. Real durability would be nice, but the amount people are willing to pay to protect the phone is limited by the cost of the phone. There's Glass which might do to phones what laptops did to desktops, and haptic feedback that would let you feel 3D surfaces on the screen, but those are both a long ways off and may or may not pan out.
When I bought my Galaxy SII two years ago it was about $600: $200 up front and the rest through opaque monthly surcharges. The Nexus 4 is now selling for $200 unlocked. While the Nexus 4 is a better phone, most of the improvement is software and the difference between $600 and $200. You can get dodgy Chinese android phones for under $100 with the same software. The young-technology cycle of slightly decreasing cost and major performance improvements is giving over to the mature-technology cycle of intense cost pressure and slow improvements.
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