CPSC203 2008Fall T20 Group A

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iPhone: Apple Bites into the 'Smartphone' Market

Group Members:

  • Jeffrey Major-Hansford
  • Brandon Cacatian
  • Vuk Filipić
  • Liang Sun
  • Stephanie Keay



The iPhone represents Apple Computer Inc.’s (Apple) entrance into the increasingly important ‘Smartphone’ market; Smartphones being a recent technological innovation that combines various functions that were once only available in multiple devices. Smartphones are cell phones, Personal Digital Assistnats (PDAs) and hand held computers all in one. Although many companies have products that qualify as Smartphones the mostly uncontested leader in this field has been Reasearch In Motion’s (RIM’s) Blackberry. However, Apple’s iPhone release, just under a year ago, generated new hype and excitement over the entrance of a strong contender to RIM's dominance. The year since its release has seen an updated version and an unflagging interest in this new product. In 2007 it was named Time Magazines Invention of the Year. It is undeniable that the iPhone has made a large splash in the Smartphone market, it appeals to a variety of users, has incorporated new technology and has allowed for Apple to increase its presence on today's technology market. The questions that need to be examined are the hows and whys of this new tech phenomenon.




The iPhone’s most distinctive feature is its 9cm liquid crystal display, HVGA glass capitiave touch-screen. A capitative touch screen is a touchscreen panel that is coated with a transparent material that conducts electrical current across the sensor. When a finger touches the screen it creates a voltage drop. An electrode pattern printed along the edges of the screen determine the x,y coordinates of the point of contact and that information is transmitted to the computer. This screen is used to power the vast majority of the iPhones features including its virtual keyboard, which was a controversial replacement of the mechanical keyboard found on most PDAs. Another important development that Apple has used in the production of the iPhone is the screen’s multi-touch capabilities. This allows the user to manipulate the data on the screen, scrolling through files or long lists aswell as zooming in and out on text or images, through the use of two fingers. The iPhone has a 480x320 which it uses to display its various other feature including video playback.

All inputs for the iPhone are controlled via the touchscreen except for three side buttons, one a sleep/wake button, a volume button and a ringer on/off button.

The display responds to three differet sensors. First, a proximity sensor which shuts off the display and touchscreen when the device is held against a person's face. This serves to save battery power as well as ensuring that there are no inadvertent inputs from a user's face. Second, an ambient light sensor. This adjusts the display brightness which also serves to save battery power as well as aiding the user by becoming more visible in low light situations. Third, a three axis accelerometer. This senses the orientation for the device and alters the screen according to what position the user is holding the phone in. Many of the applications available on the iPhone support both vertical and horizontal browsing.


The iPhone comes with a built in rechargeable battery that cannot be replaced by users Apple claims that this battery can be used for up to 8 hours of talk time, 6 hours of internet use , 7 hours of video playback, 24 hours of audio playback. It is also capable of up to 250 hours (more then 10 days) of standby time. This is comparatively more, they claim, than other ‘Smartphones’ as well as many available MP3 players, citing on their website comparisons to the Nokia n95, the Samsung Blackjack, the BlackBerry Curve, and the Palm Treo 750.


Originally the iPhone was released with two options for internal storage. All solid state flash drives options were a 4GB or an 8GB model. In February of 2008 Apple introduced a 16 GB model and discontinued the 4GB. The iPhone contains no memory card slots or any other method for expanded storage.

Computing Power

The iPhone has Computer Processing Unit (CPU), which runs at 620 MHz manufactured by Advanced RISC Machine. The Graphics Processing Unit (GPU) is a Power VR MBX Lite 3D. The iPhone runs with 128 MB of DRAM memory.


The iPhone has a built in 2.0 Megapixel camera.


Safari Web Browser source: http://www.apple.com/iphone/features/safari.html

Operating System

With the introduction of the iPhone Operating System (iPhone OS), Apple has single-handedly redefined the 'Smartphone' by incorporating a highly sophisticated experience for the user. As apple advocates, the iPhone "combines three products in one — a revolutionary phone, a widescreen iPod, and a breakthrough Internet device with rich HTML email and a desktop-class web browser". The technology used in iPhone OS runs a full version of the operating system found on Mac computers (Mac OS X) but is optimized to run on the iPhone. It is based on the Mach kernel employed in Mac OS X and uses the Darwin foundation. This software uses less than half a GB of total storage space on the iPhone, leaving the user with plenty of space for additional music, pictures, videos, and any other storage needs.

User Interface

Apple has incorporated a remarkably user friendly interface on the iPhone. Relying on the touchscreen technology, the iPhone utilizes Multi-Touch control to involve the user in direct interaction with the iPhone. The Multi-Touch feature allows the user to control virtually everything on the screen through the use of their fingers. Scrolling through media files in the iPod, browsing the internet, writing text messages, and making calls all literally become a matter of touching, tapping, pulling, pushing, and pinching the screen for the user. A simple layout in the home screen allows the user to easily access a number of applications by tapping them with their finger. Also, the apps can be rearranged by simply holding down on the app with your finger, waiting for all of the apps to start wobbling, then sliding the app to the position you want. For added convenience, the iPhone allows for up to nine customizable home screens to organize apps into. As well, the home button, located below the screen, allows the user to easily return to the home screen after opening up an application.


The iPhone includes a phone which supports caller ID, visual voice-mail, and SMS text messaging. As well, users have the ability to start a call conference or to switch between calls. With the visual voice-mail feature, the user has the ability to view their messages in a list and select which messages to play without listening to the preceding messages. It runs at 2G quad-band through GSM/EDGE networks, and 3G tri-band through UMTS/HSDPA for enhanced call quality and faster data transfer speed.

On-Screen Keyboard source: http://www.apple.com/iphone/features/keyboard.html

Apple has also included an iPod touch into the iPhone with the ability to sync the iPhone through iTunes. The iPhone also makes use of the Genius feature to create playlists from songs in the iTunes library that go good together. With the iPod feature, the iPhone uses the touchscreen technology by allowing users to scroll through media by sliding their finger across the screen. As well, the three axis accelerometer feature is used by tilting the iPhone on its side to open up a Cover Flow sequence. By scrolling through the Cover Flow sequence, users choose an album from which to play their music. Taking advantage of the 3.5-inch widescreen display, the iPhone offers video viewing in widescreen compatibility and supports .m4v, .mp4, and .mov file formats. Also, by tapping the screen, users are presented with on-screen video controls for easy video navigation.

Internet Device

Combined with 3G broadband data speed, iPhone OS offers users a relatively fast internet connection virtually anywhere via cellular network. As well, Apple provides an option for an even faster internet experience on the iPhone through local Wi-Fi connectivity. By incorporating the Safari Web Browser, Apple argues that the iPhone possesses "the most advanced web browser ever on a portable device". The Safari application offers a web browsing experience on the iPhone virtually identical to that of a Mac or PC running the Safari Web Browser. In addition, Safari has a built in search bar for Yahoo! and Google, as well as the ability to bookmark web pages. A virtual, on-screen QWERTY keyboard appears when the user is prompted to type in information. By tilting the iPhone onto its side, the three axis accelerometer senses the movement and turns the screen to allow web browsing in landscape mode.

Software Updates

Apple provides free software updates to the iPhone via iTunes, with the latest version being the iPhone 2.2 Software Update. Updates resolve many of the issues that users are facing with their iPhones, as well as install new security patches. Also, updates enhance many of the features already on the iPhone and can introduce new features to the iPhone.


With the thousands of applications that are available for the iPhone many things can be done with the touch of your finger. There are many different categories which the applications are grouped in. To name a few there are games, social networking, entertainment and finance. With all the new technologies that the iPhone has these apps can use all of them.

Included Apps

When you first take your iPhone out of the box Apple does include a few apps for you to play around with:

Phone – This app allows you to make calls, hold your contacts and store your voicemails.

Mail – Allows you to send/receive emails.

Safari – Allows you to browse the web with either your cellular network or a Wi-Fi connection.

iPod – Here you can listen to music, podcasts and audiobooks or watch movies.

Text – Allows you to send and receive SMS text messages.

Calendar – This app can sync to your computer to keep track of events. Alerts can be set to remind you of upcoming events.

Photos – Here you can view photos taken with your iPhone or that were transferred from your computer.

Camera – Equipped with a 2.0 MP camera photos can be taken with ease.

Youtube – Here you can watch videos from the youtube website.

Stocks – Keep track of your stocks with this app.

Maps – This app lets you see maps of whatever location you want. This is where GPS is used.

Weather – Lets you know the current weather conditions for any city.

Clock – Here you can view the time for cities of your choice. Stopwatch, countdown timer and alarm are also within this app.

Calculator – Either a simple or scientific calculator at the tip of your fingers.

Notes – You can write down things before you forget them with this app.

Settings – This is where you can fix all the iPhones settings to your liking.

iTunes – You can download songs here straight to your iPhone.

App Store – Download apps from here.

Contacts – Store contact information with this app. You can sync all your contacts back to your computer.

Third Party Apps

Apple announced that they will allow third parties to develop programs for the iPhone. This means that developers can see what the market is looking for and develop an app to help solve the consumer’s needs. At first there was a mixed reaction to this decision since developers could easily program a virus or a hack into one of their apps. Apple does keep a very close eye on all the apps submitted by developers. Once an application is submitted Apple has the decision on whether they think the app is reasonable or if it might put consumers at risk.


You can download apps from just about anywhere. Using Wi-Fi or your cellular network you can download apps. Once you find one that you are looking for you can download it, install it and it can be used right away. Another way would be to go onto your computer and use iTunes to browse through the apps and download them. Once that is done you can sync your iPhone to your iTunes. Some apps are free while others do cost a bit of money.


With all the new apps and updates that people make, it’s easy for them to get out of date quickly. Whenever there is a new update to an app which you have already downloaded you will be notified and you can download the latest version without further cost



The term “Usage”, refers to the buyers and users who help build up the iPhone’s publicity. This contribution to its popularity is the reason Apple’s iPhone has cornered a fair share of the “Smartphone” market. As well, the company sought to expand into the mainstream market, furthering both profit and exposure of the iPhone as a cellular device, media player, and data storage in one. However, it takes rather much effort on Apple’s part to successfully promote the phone so that it appeals to a wide range of users. Several factors also play a part in considering the main, or target demographic. The rich features included in the iPhone by Apple, most notably the GPS and 3G capabilities, were imperative in setting a suitable price in which Apple would both make an outstanding profit without losing consumers due to the high price. According to Digital Live Media, a survey concluded that the early buyers of the iPhone fit into these several categories: 58% had completed college. The average age of the buyers was 31. 43% were situated in either New York or California. This meant that Apple successfully appealed to a wide, and leaning slightly towards a younger age range. The appeal of the iPhone lies in its versatility and ability to be customizable and usable for a large age range. The majority of the buyers had completed college, likely those who had bought the iPhone for use themselves, in business or as an entertainment device. The age is not the teenage market demographic but rather those who had either recently finished many years of college studies or had finished quite some time ago and become oriented with the business and marketplace. A combined large percentage lived in the two American cities most notable for their ability to stay ahead of the times and to latch on to newfound gadgetry often as soon as it became released. Apple's innovations were marketed to this group in order to appeal to technophobes and the modern, trendy urbanites.

Line-up for an iPhone outside an Apple store on 59th St. And Fifth Ave., New York.


The iPhone is likely to be directed towards those who are trend- and/or technology conscious. This often ranges from pre-teens to adults, those who are technologically forward and are familiar with the internet, e-mail, text messaging, and music players. Apple’s success in dominating the music/mp3 player market has been an endless stream of media propagation. This area is likely the basis of Apple’s research for a target market. According to the 13th bi-annual teen survey conducted by Piper Jaffray & Co., which was conducted in 11 cities across the United States and Canada, 82% of the 600 teens surveyed owned some form of the Apple iPod. This familiarity with an Apple product seemed to translate into awareness of other Apple products, with 84% familiar with the iPhone itself. However, the survey results showed that 25% of teens would shell out the needed funds in order to gain ownership of an iPhone. This presents a problem for Apple, as teens are the ones who seem to influence the style and fashion market with their tastes, and yet for many, it is difficult to afford the iPhone at the price it has been offered for. Therefore, Apple encouraged exposure towards the adult demographic, particularly businessmen and women who sought capability and ease of access, as well as convenience. At a hefty sum of $649.99 in Alberta, it would only make sense that Apple would stress the importance of appeal to certain demographic backgrounds and wealth in order to maximize profit.

Test-driving iPhones in a Schaumberg Apple store.

Hardware Appeal

Apple’s development of the iPhone’s hardware allows the technical specs to be attractive but at the same time maintaining a maximum size (for style and aesthetic purposes). A satisfactory battery performance must be achieved, in order to please the usability-conscious, often business-oriented, consumers who research its functionality before its purchase. A highly innovative advancement made by Apple in developing its recent products, is the touch-screen capabilities as demonstrated by the iPod Touch and the iPhone. This allows quick access, literally the phrase “everything at your fingertips”. It appeals to all variety of ages in that it was developed for non-specific use but to appeal for all users who would be utilizing the iPhone.

Software Aspect

Apple has developed a software platform that allows multiple areas of interest to be accessed directly from a single cellular device. It seeks to combine functionality and style at the same time, appealing to the younger consumers who use it as a means of communication and information, social networking, entertainment tools, and as a music player. Its appeal to youth lies in that it allows endless possibilities for keeping in touch, and multiple applications that are either basic in smartphones but with increased quality, such as a camera, or innovative applications that generate interest within the demographic, such as direct-download Stores accessible from the iPhone’s main menu.

User-Generated Applications

Apple’s decision to introduce user-created apps translates to an invitation for users of all ages, genders, and races to customize their iPhone. This feature allows consumers of all ages, genders, and race to tailor their iPhone to their particular needs. Particularly useful and attractive for those who only use the iPhone as a means of business-related communication and information, or users who prioritize entertainment and networking, this generated a sense of greater and more widespread appeal. The incorporation of user-generated content allowed freedom of expression and gave inclusion to a variety of consumers, perhaps including minority demographics that Apple would otherwise not attract.

Market Performance


Boost in Popularity

The iPhone is a remarkable device with it being as popular it is. In its first full quarter of sales, the iPhone has already climbed past Microsoft’s entire lineup of Windows Mobile smartphones in North America. That puts the iPhone ahead of smartphones running Symbian, Linux, and the Palm OS, but behind the first place RIM BlackBerry. The figures mesh with retail sales data already reported by NPD, which similarly described the size of the US market with a 27% chunk bit out by Apple’s iPhone. Last month, after Apple beat its announced goal of selling a million iPhones by the end of September a couple weeks in advance, Dan Frommer of Silicon Alley Insider announced that Apple was convolutedly “below plan” for meeting its 90 day goal in 74 days, and figured that Apple would only be able to sell about half of its longer term 2008 goal of 10 million phones. A month later, Frommer is now pointing out that Apple has 27% of the US smartphone market.

Combined with the fact that iPhone users consistently report high satisfaction ratings, Apple’s early strong entry will mean that the iPhone will sail into the winter quarter with hot word of mouth advertising. Existing buyers purchased the iPhone based on its advertised features; iPhone users are now talking to their friends about it, which will result in snowballing sales. According to market research by Changewave from last month, RIM’s popular Blackberry was the only other mobile besides the iPhone with more than 50% of its customers reporting they were very satisfied with their phone. Apple earned a very satisfied rating from 82% of its users, up from 77% in August. Oppenheimer said Apple has “already surpassed our goal of 10 million iPhone sales in calendar 2008,” but that claim must include some October sales. Adding the reported sales of the first three quarters of 2008, I get 9.3 million iPhones. At the rate iPhones are selling, Apple probably hit 10 million about a week or so ago.

Continuing Success of iPhone

Within one year, approximately 3.2 million units have been sold worldwide since its release on January 11, 2007. Apple is expecting to sell 10 million units by the end of 2008 with the release of the 3G. The iPhone has become dominant in the mobile phone market with such a successful sales record. With the iPhone being introduced to other nations on August 22, 2008, Apple has been able to offer the iPhone around the world. Apple is hoping to reach 1% control of the world cell phone market by the end of 2008. As of October 21, 2008 the New York times has reported that the iPhone has sold over 6.9 million units worldwide this 4th quarter and is still reaching its goal of 10 million units by the end of 2008.

The iPhone will be a dominant phone in the cellular industry for years to come. What will be next for Apple to expand on might include a bigger screen or different models. Apple plans to release three versions of their iPhone, the first being a 4GB model, priced at $299, and the second, an 8GB model retailing at $399 (down from an original price of $599)and $499 for the 16GB model. (Jobs, S., January 2007, Mac World San Francisco 2007 Keynote Address). These prices are both based around a two year contract with US mobile phone network supplier, Cingular. Oppenheimer said Apple is now selling the iPhone 3G in 51 countries, with the number expected to increase to 70 by the end of the year. Apple has 3,100 iPhone distribution points in the United States and over 30,000 worldwide.


Jeffrey Major-Hansford











Vuk Filipić

1. http://en.wikipedia.org/wiki/IPhone Retrieved December 4, 2008

2. http://en.wikipedia.org/wiki/IPhone_OS Retrieved December 4, 2008

3. http://www.macworld.co.uk/ipod-itunes/news/index.cfm?newsid=16927 Retrieved December 4, 2008

4. http://www.apple.com/iphone/features/ Retrieved December 4, 2008

5. http://www.apple.com/iphone/features/multitouch.html Retrieved December 4, 2008

6. http://www.apple.com/iphone/features/homescreen.html Retrieved December 4, 2008

7. http://www.apple.com/iphone/features/phone.html Retrieved December 4, 2008

8. http://www.apple.com/iphone/features/ipod.html Retrieved December 4, 2008

9. http://www.apple.com/ipodtouch/features/music.html Retrieved December 4, 2008

10. http://www.apple.com/iphone/features/safari.html Retrieved December 4, 2008

11. http://www.apple.com/iphone/features/wireless.html Retrieved December 4, 2008

12. http://www.apple.com/iphone/features/keyboard.html Retrieved December 4, 2008

13. http://www.apple.com/iphone/softwareupdate/ Retrieved December 4, 2008

14. http://ca.tech.yahoo.com/reviews/phonespdas/digitaltrends/article/545 Retrieved December 4, 2008

Brandon Cacatian











Stephanie Keay

1 Digital Life America, iPhone Buyers Analysis.

2 Piper Jaffray Completes 13th Biannual 'Taking Stock With Teens' National Study of Teen Shopping Behavior and Brand Preferences.

3 Piper Jaffray News Release Content.

4 Rogers Wireless, iPhone 3G phone plans.

5 Most high school students are already aware of Apple's iPhone device, with a significant number saying they're interested in forking over the $500 to call one their own.

6 iPhone Demographics and Six Degrees of Separation from the Source.

7 Apple iPhone Direct-Download App Store.

8 Apple iPhone Features.

9 Apple iPhone Technical Specifications.

10 Fans line up for release of Apple's cheaper ($199), faster (3G) iPhone.

Liang Sun

Apple iPhone Already Leads Windows Mobile in US Market Share Q3 2007 Retrieved November 22, 2008

An analysis and Market Value Forecast of Apple’s iPhone Retrieved November 22, 2008

Apple trying to keep up with iPhone demand Retrieved November 22, 2008

iTunes for Windows 7.4: Video, iPhone, and DRM-Free Music Support Retrieved November 22, 2008

The iPhone Reaches Out to the PC Retrieved November 22, 2008

iPhone Grabs 27% of US Smartphone Market Retrieved November 22, 2008

Symbian OS | The open mobile operating system Retrieved November 22, 2008

AppleInsider | Apple on track to sell 25 million iPods this quarter Retrieved November 22, 2008

UnWired! Rick Farrow, Metasploit, and My iPhone Security Interview Retrieved November 22, 2008

Heise Online – Industry attacks iPhone sales strategy Retrieved November 22, 2008