Will the iPhone 5S Hit This Summer?

The Wall Street Journal is reporting that Apple (NASDAQ:AAPL) is spooling up its production operations for the next generation iPhone, to be released in the second quarter of this year, according to sources. The news could indicate a summer launch for the refreshed model. Congruently, the company is lining up its manufacturing contracts for the cheaper iPhone model that might be released later this year, the sources said.

An Apple spokeswoman declined to comment on the matter, but the timing lines up with analyst predictions that the new iPhone would arrive around the summer months.

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Apple has been under more pressure than it has in the past. Historically, Apple has had no problems commanding a premium for its products, but recent trends have seen consumers starting to favor cheaper devices. Large gains in popularity for Samsung (SSNLF.PK) and swelling numbers of other smartphone entrants have added pressure to margins and are spreading profits across a range of devices, the Journal said.

“There isn’t really any major differentiator between the players at this phase,” said Neil Mawston, an analyst at research firm Strategy Analytics. He says in order to cope, Apple needs to take a page from Samsung and launch more products, and faster.

“The panacea is to transform the industry with a revolutionary design,” Mr. Mawston said. Until then “you have to do the traditional business school implementations like manage costs and move quicker than rivals.”

Significant changes to the internals of the refreshed phone have not been made clear, but typically, the company will add a faster processor and an improved camera to start. A new iOS is also expected to make an appearance around the same time, according to other sources.

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Despite the analysts’ warnings that the iPhone needs a cheaper sibling to remain competitive (and in markets like India and China, that is a very valid point), Apple’s program of dropping the price on older models upon the release of an updated one offers a cheaper alternative as is, without compromising the build quality or needing a new product line entirely. Once the 5S is released, users will be able to pick up an iPhone 5 for less — effectively making the 5 the less expensive option.

Here’s how Apple finished trading Wednesday:

Screen Shot 2013-04-03 at 5.37.18 PM

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