What's Apple most likely to do?
The safest bet on the future of Apple's iOS hardware: a continuation of what it has been doing. That is, conservative but significant updates of the company's existing devices.
This assuredly includes a new iPad 5 with the slim, light form factor and reduced display margin of the existing iPad mini released last fall. Better audio, better WiFi, more storage and faster chips are also all safe bets for the next generation iPhones and iPads.
It's not much of a guess to say Apple will deliver at least a doubling of Ax chip performance across the board for its existing iOS product lines. Apple (and all of its fellow ARM-licensees) essentially double SoC performance in their chip designs every year, and GPU speeds have been accelerating even faster.
Recall that the iPhone 4S was over twice as fast as the 4, despite being yawned at as "boring" by many of the same crowd that cheered for Samsung's Galaxy S4, which itself is also "only" twice as fast as the model it replaced.
Every iPhone has also shipped with software capable of taking real advantage of that new processing power. This is particularly evident in the Camera app, where the 4 debuted HDR, the 4S made it much faster and added additional processing features, and the 5 added Panoramas and further accelerated and embellished image and video processing.
How about bolder changes in product categories?
Beyond the expected faster hardware and new software features to take advantage of it, Apple is also rumored to be working on a lower priced iPhone and possibly one with a larger screen.
It wouldn't take much to make the iPhone 4S cheaper; chips, screens and other components are always dropping in price as manufacturing refinements help bring down production costs. Apple is also investing up to $9 billion this year in production upgrades to accelerate this trend.
Creating a larger screen iPhone would definitely appeal to a certain demographic, but it's not clear what additional new revenues this might generate. On the other hand, it would definitely create the appearance that Apple is copying Samsung and other Android makers, even if there's nothing really novel or proprietary about increasing screen sizes.
But what about entirely new form factors, such as a rumored watch running iOS? On one hand, the concept of wearable iOS devices (like a watch that provides a connected, secondary screen that's easy to consult for checking messages and other notifications while your phone remains in your pocket) are both sensible and have some precedent behind them.
Apple's "fat" 6th generation iPod nano toyed with watch features over two years, and the company even offered a variety of custom watch faces (below) for it up until last fall, when it killed the product and replaced it with a "stick" iPod nano that resembled a smaller iPod touch, albeit without the apps and other features of iOS.
Apple may have terminated the nano-watch concept simply because it wasn't popular enough, but dead products have returned to life as iOS devices at least twice before.
Steve Jobs killed Apple's first pad, the five year old Newton MessagePad in 1998. Its death was attributed to various things, including its limited popularity and a dramatic grudge against John Sculley (although Jobs didn't also cancel Sculley's QuickTime or PowerBook out of similar, supposed bitterness).
In reality, the MessagePad and its Newton OS were moderately successful, and had even attracted third party licensees, including Motorola, which sold a wireless version of it named the Marco. Maintaining the unique Newton platform had become an expensive distraction for Apple however, so Jobs terminated it to focus attention on Mac OS, in particular the transition to Mac OS X based on technology from NeXT.
Twelve years later, Apple had not only turned the Mac into a serious business but had spun off iOS to power its new smartphone, enabling Jobs to successfully reintroduce the iPad as a new ARM-based tablet running the company's modern mobile platform.
During that period, Apple again partnered with Motorola to announce its ROKR phone capable of working like an iPod to play iTunes songs. After it failed to take off, Apple launched its own iPhone two years later, based on a new, mobile version of OS X that came to be called iOS.
So it certainly wouldn't be unthinkable for Apple to introduce a new iOS watch product one year after taking its embedded iPod nano watch off the market (although this time, it doesn't seem likely Apple will be partnering with Motorola in any fashion to do so!)
Mitigating the risks of failure and distraction
At the same time, there're are a couple significant problems looming for iWatch. The first one is that Apple still doesn't like distractions. Unlike its peers, it doesn't ship hundreds of different products to see which ones might garner any attention. Apple is incredibly selective about introducing new models of its products.
Additionally, unlike the smartphone or tablet markets, there's currently no overwhelming sense that a new watch would necessarily sell in mass quantities. More than just being a distraction, if Apple were to launch an "iWatch" with great fanfare only to see it flop, it would have a tremendously negative impact on the company's image.
While Apple has suffered through a series of tepid or negatively received launches of free services (including MobileMe, Ping and Maps), it has experienced very few hardware flops since the G4 Cube and Xserve (2007's iPod HiFi is a notable one, and actually more of a fizzled dud than serious flop). That makes introducing a new category of iOS hardware a rather risky proposition.
There are two alternatives available for branching out into new hardware, and Apple has already performed both with relative success. One is to soft launch a new product (like an iWatch or other wearable devices) as a "hobby," as it did with Apple TV.
Apple's chief executive Tim Cook speaks of Apple TV as "a string it keeps pulling to see where it leads," indicating that its a strategic direction without a clear business model. It initially didn't sell that well, and while sales have improved dramatically, it's still treated as a "hobby" despite having leading market share.
This was certainly a lot savvier than Google's arrogant launch of Google TV, which had Eric Schmidt grandly projecting in 2011 that it would be installed in half of all shipping televisions by the next summer. Instead, the product spectacularly flopped, and a large part of its flatulently embarrassing deflation was related to all the hot air pumped into its launch theatrics.
Google can shrug off such failure thanks only to flawgic, which credits the company with "at least boldly trying" every time it throws in the towel on a very expensive experiment. Apple can't do that and still continue to collect the revenues and profits it's grown accustom to earning.
Launching something like a watch as an experimental hobby is nearly what Apple did with the previous generation of iPod nano, so it wouldn't be unthinkable for the company to relaunch a new product almost as an accessory, without creating massive expectations that might likely fail to materialize. But there's also an even safer path for new hardware, which Apple has also already explored.
Let somebody else do it
An even easier way for Apple to expand its iOS hardware business would be to take a page from its wildly successful App Store experiment and let third parties try things out, paying Apple a cut for managing their operations with market infrastructure and promotion. That's essentially what Apple has done in the area of speakers since the iPod HiFi was canceled.
Apple doesn't seem to get enough credit for the App Store's success because few observers yet realize what an incredible job Apple did with it. It's not that the App Store is flawless or impossible to criticize; it simply works for its intended purpose. It creates lots of high quality software for iOS, and does so self-sustainingly. Or more accurately, it does so at a significant profit.
Apple did such a great job at implementing and curating the App Store that the industry at large has assumed that it must be really easy to do. Google announced they'd replicate its success even "more openly" and with fewer restrictions and the media ate it up. But five years later, Google Play is still vastly impoverished as a software source, and the rest of the Android markets, including Amazon's, are also still hobbyist outlets that feel like a Ross Dress for Less compared to Apple's Bloomingdales experience.
Palm scoffed at Apple's entrance into smartphones, but then observed its own Palm OS software market collapse into irrelevance. Nokia, Blackberry and Microsoft also operated major mobile software platforms prior to Apple, but their stores couldn't even copy Apple's fast enough to remain open. And new stores they've reopened since, closely following the pattern of the tremendously successful App Store, have also failed to garner much interest.
Apple's App Store is essentially a venture capital fund without the capital. It encourages entrepreneurial experimentation, and rewards the best work with huge exposure to a vast global audience. You get funded only after you deploy your work successfully, making it an intense meritocracy that's really difficult to duplicate from scratch in competition. At this point, copying the App Store is like copying Microsoft's Office suite or Adobe's Photoshop.
The App Store seemingly should have failed due to the catch-22 at its launch of there being both a limited installed base of iPhones and no existing software. That combination of issues has doomed lots of aspiring platforms. But Apple's fledgling store was helped by the fact that Apple itself had created some killer apps (including Safari, Maps and Mail) that were enough to spark interest in the new iPhone even before there was a third party platform for it.
Of course, it also helped that Apple had a half decade of experience with iTunes, curating audio and video content and experimenting with iPod game sales. The conditions were perfectly set up the moment the iPhone was primed to ignite an App Store.
Once having been established, the App Store's success has driven exponential growth. Apple expanded it to the iPad and even replicated it on the Mac. But it also managed to leverage the iOS platform in another way, via its Made for iPhone licensing program.
App Store for hardware
In addition to creating a software ecosystem for iOS, Apple has also launched a hardware accessory ecosystem. From chargers to adapters to speakers and wirelessly connected accessories, Apple's Made for iPhone program essentially duplicates the concept of the App Store for hardware. And as with the App Store, the road toward "Made for iPhone" had been paved by previous efforts to license accessories for iPods.
Given its current licensing programs, Apple doesn't even need to launch a watch of its own. In fact, its retail stores already stock a variety of watches and sensor bands, even "wearables" for your pets. A variety of other health and sports activity devices for everything from running to biking already exist, along with AirPlay speakers and AirPrint printers.
Apple decided years ago that it doesn't need to build printers and cameras. But today, it can not only sell other makers' products, but can in many cases even earn licensing fees in addition to retail profits. While AirPrint is apparently free, AirPlay involves licensing fees to use Apple's protocols. The company also has licensing programs for Lightning (and the previous Dock Connector) and wirelessly connected peripherals.
Apple can even wait in stealth mode, observing what the market finds interesting before buying up the most successful accessory makers and taking their products into high volume production. Or it can continue to host a wide variety of accessory alternatives, each of which offers Apple licensing fees to leverage the value of its platform. That gives Apple a variety of options for entering the wearables business without actually launching an "iWatch."
Future software features for iOS 7
What about the future software direction for iOS? Apple has a series of major initiatives it's developing for iOS, many of which are the offspring of acquisitions, including Siri, Maps and iTunes Match.
There are a number of other smart ideas that Apple has cultured in its App Store petri dish of third party developers that it likely should implement as unique, differentiating features of iOS. Again, there's the question of how to best do this.
Apple needs to be careful to not simply stomp on its developers (or give the appearance of doing so). In some cases, it might make sense for Apple to acquire apps that could be integrated into iOS. Consider Snapchat, based on the simple premise of sharing short photos or videos that expire after a few seconds. Or the walkie talkie style messaging of Voxer.
It's hard to see how either free app will effectively monetize its continued existence on iOS, but both could be rolled into iMessages by Apple to expand iOS 7's messaging capabilities and "stickiness" while at the same time making the platform more differentiated (both apps already offer Android ports).
In other cases, iOS might be better served feeding traffic to partner apps, the way iOS 6 integrates with social networks like Twitter and Facebook, or helper apps for directions in Maps.
There's a lot Apple can do on its own, too. Text services continue to evolve; Apple should continue to develop Data Detectors to highlight and activate relevant data, identifying and highlighting dates, locations, contacts, phone numbers, email and addresses in selected text and providing useful actions for them, depending on the context.
It'd be great to see an AirDrop client in iOS 7 for easy desktop file sharing, as well as iCloud support for email certificates for encrypting and signing emails the same what it automatically encrypts iMessages.
Apple's three iPhone models account for three of the top five cameras in Flickr, so why not capitalize on that with more sophisticated Camera app features and image editing? Add support for creating, say, time lapse captures and converting short videos to GIFs for sharing.
What features are you wishing for in iOS 7?
Tending the platform
People like to argue about whether Apple is a hardware company or a software company, but in reality, Apple is a platform company. It builds devices that run a differentiated software platform for third parties to create apps for. The challenge for Apple is to maintain that platform without simply being ripped off by a competitor making cheaper hardware or subsidizing its hardware with ads.
Or, alternatively, to avoid letting the platform grow stagnant and being passed up by competitors who can attract their own, stronger ecosystems to support their own platform instead.
In some cases, Apple needs to develop its own apps, as it has for iLife and iWorks apps. There's no equivalent to these apps for Android, BlackBerry or Tizen, making them key differentiators to Apple's mobile platform, the same way they were for the Mac a decade ago.
At the same time, Apple can leverage its iOS development platform and iTunes App Store to attract billions of dollars in third party hardware and software development, accomplishing far more than it otherwise could if it were trying to build every app and accessory on its own. What, exactly, Apple plans to do with iOS 7 will likely be detailed in a couple months at its Worldwide Developer Conference.