Analysts: 3G iPhone may reach users by midyear

Users may see an iPhone with 3G technology in the next six months, a financial analyst said Monday, citing waning inventory of Apple Inc.'s current iPhone and the increasing demand in Europe for 3G products.

IPhone shipments are likely to be weak during the March quarter, and inclusion of third-generation technology in the phone could ensure that Apple meets its target of shipping 10 million iPhones in 2008, Citigroup analyst Richard Gardner said in a research note on Monday. 3G is a high-speed wireless communications standard that provides broadband Internet capabilities to cell phones and mobile devices.

An iPhone upgrade to include 3G technology could help Apple forge more relationships with carriers as it builds a European presence. "We believe that lack of 3G has been a significant headwind for iPhone in Europe, where 3G is already pervasive," Gardner said.

During meetings with Citigroup, Apple reiterated its plan to introduce the iPhone into additional European countries and Asia by the end of 2008, Gardner said.

In a December report, Shaw Wu, an analyst at American Technology Research Inc., said that a 3G iPhone would likely ship in the middle or the second half of this year, after network coverage and battery life issues are addressed.

During the iPhone rollout in the U.K. last year, Apple CEO Steve Jobs said that 3G chips were "power hogs," but he also noted that he expected to see better battery consumption this year. Chip vendors, including Broadcom Corp. and ARM Ltd., are developing power-efficient 3G mobile chips with multimedia capabilities.

3G is still not widely deployed in the U.S., Wu wrote in a report. Apple could possibly position the new iPhone as a high-end smart phone, with the current iPhone being shipped as a more mainstream product, Wu said.

Apple's 3G plans in the U.S. could get a boost from AT&T Inc.'s announcement last week that it is expanding its 3G wireless coverage to 350 major U.S. markets, including all 100 of the largest cities.

Until the iPhone becomes available in more countries, unlocking figures will remain high. But as iPhone's presence expands, "most consumers will prefer to use iPhone on the network with which Apple has a relationship -- only then can they take advantage of innovative features such as visual voice mail and ongoing software updates," Gardner said.

Up to 35% of all iPhones sold since the device's launch in June have been unlocked and sold in countries where Apple does not yet have a formal relationship with a wireless carrier, Citigroup's Gardner said.

There has been plenty of speculation surrounding the release of a 3G iPhone. Last year, Jobs and AT&T CEO Randall Stephenson separately said that a 3G iPhone was coming in 2008, though the exact date is shrouded in secrecy.

Copyright © 2008 IDG Communications, Inc.

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