Economic Implication of Iphone5 - Case Study Example

Economic implication of Iphone5 The launch of Iphone5 has led to some economic implications, majorly, within the United States. It is argued that the new Iphone will lead to a growth in the economy and Gross Domestic Product (G.D.P). This paper seeks to look into the economic implications of Iphone5 in depth. Economic implication of Iphone5 Introduction Iphone5 was launched in October 2012; this phone is a superior Smartphone, which precedes the earlier version, Iphone4. The Iphone5 is a fourth generation model which promises fast access in the usage of the internet; that is, streaming of videos (Worstall, 2012). It was desired that, with the launch of Iphone5, an estimated 3 billion dollars would be channelled into the United States economy by the end of 2012. In spite of this contribution by Iphone5, the expected economic growth of the United States is to be within a weak rate of 2-2.5% between the periods of October to December 2012 (Rushe, 2012). With the release of Iphone5, an estimated pre-order sale of over two million units was recorded, using these records, apple hoped to sell more than forty million units by the fourth quarter of 2012. With such deliberations, it is evident that Iphone5 has played a great role in improving the economy in different ways. Positive impact of iphone to the economy With these kinds of figures, it is obviously noted that apple is growing together with its products, which is a good sign of the economic growth of the United States. It is projected that the sales of Iphone5 could end up boosting the United States economy (Worstall, 2012). Iphone5 would produce an estimated 3.2 billion dollars in the fourth quarter, or 12.8 billion dollars annualized, which would end up adding 0.33% to the GDP growth in the last quarter of 2012, even when previous Iphone generations are kept at a solid pace. During the last Iphone4 launch, which was virtually around the same time as that of Iphone5 in 2011 (Agarwal, 2012). The overall sales within the launching month outperformed the expected expectations. Iphone sales occur either in retail stores or on-line. Over half of the 0.8% core retail sales increase, manifested during the sale of Iphone4 occurred in two main categories: online and computer, and software sales (Rushe, 2012). These combined, resulted in the largest monthly increase to be recorded by apple. This incremental growth over the fourth and third quarter sales at the stores, if credited to Iphone, would have resulted in a growth of 0.1% to 0.2%-point to fourth quarter growth (Curwen & Whalley, 2010). This portrays an upward trend as compared to the growth that was portrayed when the Iphone4 was launched. This trend helps illustrate the fact that Iphones are affecting the American economy positively (Worstall, 2012). Apple strives to develop innovative and groundbreaking technology, which supports the consumers even in the stagnating and a weak economy of the United States. Apple strives to consistently produce products that are better than their previous ones and those of their competitors too. Apple has a big future together with Iphone5 which also reflects a positive future for the United States economy (Rushe, 2012). This positivity may be seen from the fact that, with recent updates on the Iphone5, which include an upgrade in Chinese language recognition with a comprehensive Chinese dictionary. These upgrades will aid apple to fully penetrate the Chinese markets. This will enable them access an additional potential users amounting to nearly 120 million who could end up adding an additional 30-40 billion dollars in sales (Worstall, 2012). Although Iphones are manufactured overseas, most of the prices paid on purchase of these gadgets add value domestically in relation to advertising, profits, retailing and wholesaling, which end up being counted as part of the G.D.P (Agarwal, 2012). The retail price of the new Iphone is estimated to be around six hundred dollars. Out of this money, two hundred dollars is to cover for the importation cost while the remaining four hundred is used to calculate the G.D.P by the U.S government (Rushe, 2012). In addition to Iphone sales, the arrival of the new product will end up spurring demand for chargers, new phone cases and other accessories that are relevant to the functionality of the phone. These demands end up increasing the amount of money that is collected through Iphone sales (Curwen & Whalley, 2010). Iphones impact on the economy is well illustrated in the stock market. Shares owned by apple are up 74%, this is after rising 1.39 dollars after the launch of Iphone5 (Rushe, 2012). On that very day, the stock market closed with apples shares at 700.09 dollars. The gain in the stock market value, which culminated in 278 billion dollars in 2012 exceeded the total market value of Microsoft, 261 billion dollars. The launch of Iphone5 led to an increase in retail sales that grew by 1.1% in September, which was contrary to economist’s prediction, which they placed at a growth of 0.7% to 0.9% (Worstall, 2012). This boost was driven by a 4.5% increase in sales of electronics at electronic retailers. These gains were attributed to the launch of the Iphone5. Also, it is believed that the Iphone5 can bring about a difference in the United States economy by improving interest rates and the dollar to pound exchange rate (Rushe, 2012). Iphone5 is also having an impact on the economy through various industries, which contribute to the manufacture of Iphone phones (Seligman, 2012). Companies that supply components to Iphone made profits which reflect as positive economic gains, these companies include, Fairchild Semiconductor, Qualcomm and Avago that do supply components to apple, LG display, which supplies in-cell touch screen panels; Samsung Electronics, which do build apple’s custom processors and LG Innotek, which supplies camera modules (Worstall, 2012). Iphone5 will benefit the economy in that; it comes with new data plans which will end up squeezing money from the subscribers due to its fast speed when it comes to data (Curwen & Whalley, 2010). The fast speed is by virtue of the Iphone5 being a fourth generation network, this enables for fast video streaming which culminates in more profit. These profits are reflected on the economy. Due to its high speed, more people will end up acquiring it leading to more money being collected by apple (Worstall, 2012). The Iphone5 has applications that utilize more data in their running thus more money being used to run the phone which ends up boosting the economy in one way or another (Curwen & Whalley, 2010). Negative implications of iphone5 to the economy As much as the launch of Iphone5 has led to a growth in the economy of the United States, it has also led to some phone companies being pushed out of the market due to the competition brought about by the launch of Iphone (Krugman, 2012). Additionally, those bound to make loses are window based pc makers. This is due to the fact that, Iphone being a smart phone is able to do that which a pc could do, thus dampening pc related growth prospects. Some analysts point out to the fact that people do buy Iphones with money that would have been spent on other things, meaning that the GDP boost will be limited (Curwen & Whalley, 2010). Conclusion As much as it may be said that Iphone5 put some companies out of business, its economic contribution far outweighs the said demerit. With the growing demand for quality smart phones like apple’s Iphone5, the market is bound to see more of these phones which are becoming better with time and advanced in technology. This increase will culminate in the growth of the economy and G.D.P of the American nation. However, the impact of the gadget may seem to be a minute in the eyes of many people but there are much of economic benefits associated with the use of the gadget, both directly and indirectly. With such deliberations, it is apparent that Iphone5 have more positive impacts to the economy than the negative impacts. References: Agarwal, N. (2012). From the JIBC Editor-in-Chief. Journal of Internet Banking and Commerce, 17, 2: 1-4. Seligman, L. (2012). Sales of iphone5 could boost GDP. The National Journal, 1, 1: 1-5. Curwen, P & Whalley, J. (2010). Mobile telecommunications in a high-speed world: industry structure, strategic behaviour and socio-economic impact. Farnham, Surrey; Burlington, VT: Gower. Krugman, P. (2012, September 13). The iphone stimulus. New York Times. Retrieved on 23rd Nov 2012 from http://www.nytimes.com/2012/09/14/opinion/krugman-the-iphone- stimulus.html Pogue, D. (2012, September 18). The iphone5 scores well, with a quibble. New York Times. Retrieved on 23rd Nov 2012 from: http://www.nytimes.com/2012/09/19/technology/personaltech/apples-iphone-5- scores-well-with-a-quibble-review.html?pagewanted=all&_r=0 Rushe, D. (2012). iPhone 5 sales could see Apple boosting US economy, says JP Morgan economist. Retrieved on 22nd Nov 2012 from: http://www.guardian.co.uk/business/2012/sep/11/apple-iphone-5-boost-us-economy Worstall, T. (2012). Apples iPhone 5 Is Worth More Than The Efforts Of The Federal Reserve. Retrieved on 22nd Nov 2012 from: http://www.forbes.com/sites/timworstall/2012/09/15/apples-iphone-5-is-worth-more- than-the-efforts-of-the-federal-reserve/ Read More