Apple Shows Off 2 New iPhones, One a Lower-Cost Model

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CUPERTINO,Calif. -- Apple has grown too big for just one iPhone.

That is why Apple is releasing two new iPhones this month instead of just one, including a cheaper model aimed at less wealthy countries where new Apple phones have been desired but out of reach because of their price.

Philip W. Schiller, Apple's senior vice president of worldwide marketing. said the new phone was "more colorful than anything we've made before."

The lower-cost model, the iPhone 5C (the "C" for color) comes in a plastic case and has the same features as the now-outdated iPhone 5. The fancier model, the iPhone 5S, comes in aluminum and includes a faster processor and fingerprint sensor for security, among other features. The iPhone 5S costs $200 with a contract, and the iPhone 5C costs $100 with a contract.

Both iPhones will be available in the United States, Japan and China and other countries on Sept. 20. Apple announced a partnership with NTT Docomo of Japan, but not a highly anticipated partnership with China Mobile, the biggest carrier in China. It will be the first time Apple has been able to release its phones at the same time globally.

Along with introducing the phones to a full house of about 300 members of the media in its Cupertino headquarters, Apple also scheduled satellite events in Tokyo, Berlin and Beijing, where it rebroadcast the product event for journalists in those countries.

Investor reaction was muted. Apple's stock price finished the day down about 2.3 percent.

The new iPhones represent a strategy shift for Apple.

For years, Apple has offered multiple flavors of each of its products, in different shapes and sizes and for different prices. It offers many different Mac notebooks, multiple desktop computers, several different iPods and two sizes of iPads.

Until now, Apple has held off on releasing multiple versions of the iPhone, its best-selling product ever. Why?

Timothy D. Cook, Apple's chief executive, recently said that each different iPod model had a reason to exist, like the iPod Mini, a tiny iPod that did not have much storage. The miniature media player turned in surprisingly strong sales, attracting athletes and people who listened to music occasionally. The classic iPod, with more storage, eventually shifted to become a music player for hard-core audio fans who wanted all their albums on one device.

"The Mini proved that people want something lighter, thinner, smaller," Mr. Cook said at a technology business conference in May. "My only point is that these products all served a different person, a different type, a different need."

Clearly, Apple thinks there is a reason for a cheaper version of the iPhone to exist. With its profit growth slowing, and smartphone sales surging in countries like China, India and Russia, the cheaper iPhone is targeted at what analysts call "aspirational consumers" in those countries -- the top 10 to 20 percent who are slightly uncomfortable about spending more money on a fancy brand, but might be convinced at the right price.

Apple especially hopes to be big in China, now the largest smartphone market in the world, where the company is being beat by Chinese manufacturers of low-cost smartphones running Google's Android software system. Yet, sales of Apple products in China were down 4 percent in the second quarter compared to the same period last year.

Apple was careful to not make the iPhone 5C sound cheap. It emphasized that many key parts were made of a high-quality polycarbonate material, and underneath the plastic is steel reinforcement. And Apple added networking parts that make the phone compatible with global cellular networks.

"When you pick up and hold the iPhone 5C for the first time, you're going to be blown away by the quality of it, and how rich and rigid it feels in your hand," Mr. Schiller said.

At full price without a contract, which is how many overseas carriers make people pay for phones, the iPhone 5C costs $550 -- only $100 less than the iPhone 5S. That is far higher than the $300 to $400 range that many analysts expected.

The more expensive phone, the iPhone 5S, will be the first Apple device to feature a processor called A7, which processes information more quickly than the previous one. It also includes a chip called M7, a processor dedicated to sensors that detect movements, which will enable the iPhone to support smarter health and fitness apps. The iPhone 5S comes in three different metallic colors: silver, gold and dark gray.

The iPhone 5S's fingerprint scanner, located on the physical button below the screen, is the biggest difference between the new iPhone and the previous one. It is made of a sapphire crystal on the outside, with a steel detection ring and a the fingerprint sensor underneath. An iPhone owner can simply touch the button to bypass the phone's lock screen, instead of adding a passcode.

Other new features of the iPhone 5S include improved battery life of 10 hours talk time, or 250 hours on standby. It also has an improved camera.

Along with the new iPhones, Apple announced that a major upgrade for its mobile software system would be available Sept. 18. The software, iOS 7, introduces thin typography and more vibrant colors. It removes textures that made some apps mimic real-life objects in the previous operating system -- the leather in the Calendar app is gone; and the shelves in the iBookstore app are no longer wood-grain.

Some investors have worried that Apple has lost its ability to innovate since the death of the visionary Steven P. Jobs, and the new iPhones' addition of colors and a fingerprint sensor might not persuade them otherwise. But Laurence Isaac Balter, the chief market strategist for Oracle Investment Research, which has clients that own Apple shares, said he thought the iPhone 5C was just a stopgap for Apple so that it could take in more sales while it worked on more compelling products, like a television and a connected wristwatch.

"We need to let Apple go after their market share and then bring in innovation for the next wave," Mr. Balter said.

Apple's showcase was a stark reminder of how fast the tech industry can change. Just seven years ago, before Apple introduced the original iPhone, the company was still a relatively small player.

It was the tech industry's also-ran, a company that nearly went bankrupt in the 1990s and had a lot to prove. Even after introducing blockbuster hits like the iPod and the iMac, its premium computers still had a tiny sliver of the PC market. But every iPhone released in the last six years has been so popular that people have camped out in lines just to buy one.

The addition of a cheaper iPhone raises the question of whether Apple will introduce a third model. The company has reportedly been experimenting with an iPhone with a larger screen, similar to the bigger smartphones offered by its main rival, Samsung Electronics.

Milton Pedraza, chief executive of the Luxury Institute, a research firm, encouraged Apple to take that route and market a bigger iPhone as a higher-end model. A big-screen iPhone could be catered to Apple's customers who are getting older and wealthier, and it would protect the company's status as a luxury brand.

"Lots of people need a bigger screen," Mr. Pedraza said. "Their vision is going, and their fingers are not as dexterous. Duh."

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This article originally appeared in The New York Times.


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