Analyst: 3G iPhone Concerns Overdone

by , 11:15 AM EST, December 17th, 2007

One of the biggest complaints about Apple's iPhone is that it uses EDGE for data transmission instead of the faster 3G technologies. American Technology Research analyst Shaw Wu thinks those concerns are overdone and misplaced.

Mr. Wu thinks that, despite the hype behind 3G, the technology isn't widely deployed and network coverage can be spotty. He said "While there are a decent number of 3G phones (about 10 to 15 percent) being shipped, the untold reality is they utilize the much more prevalent 2/2.5G wireless infrastructure most of the time."

Production costs and power consumption are still big stumbling blocks for 3G, too. 3G components would add about US$15 in incremental costs to the iPhone compared to the 2.5G EDGE technology used today. That cost needs to be reduced before more companies, including Apple, widely adopt the technology.

3G can reduce battery life by 35 to 40 percent. Apple isn't interested in reducing the iPhone's run time, so manufacturers will have to improve that before the company considers replacing its EDGE chips.

Despite today's drawbacks and misguided concerns, Mr. Wu thinks Apple will be ready to introduce a 3G iPhone in the second half of 2008. "We believe by then, the network coverage, price points, and battery life issues will be better addressed," he said. "Should Apple decide to ship earlier, it will likely be positioned as a high-end smart phone and allow AAPL to re-position the current 2.5G iPhone as a more mainstream product."

Mr. Wu is maintaining his "Buy" rating and US$210 target price for Apple's stock. Apple is currently trading at $187.41, down 2.95 (1.57%).

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