iPhone 3G sold well primarily for 2 reasons. 1) The AppStore effect 2) The $199 pricing. But its no secret that the iPhone 3G is an expensive smart phone while lacks some of the very basic features like SMS Forwarding, Copy / Paste, Video recording, MMS etc. While the OS 3 promises a lot of these, Apple now has severe competition going ahead.
The App store advantage would be much less now with Nokia OVI, Blackberry world and others coming in. Add to that some really promising devices like the Palm PRE and the Nokia N97 coming up.
Recently released LG Cookie and Nokia 5800 have done extremely well. Both of them selling for the value proposition provided. While the Cookie is priced aggressively the 5800, gives great features at an affordable pricing. Nokia has never seen such success with a touch screen before. The 5800 Xpress Music has sold 2.8 million units last quarter.
iPhone 3 would counter a lot of criticism by adding all the basic features missing on the iPhone till date, combined with some extreme features like WiFi n, 7.2Mbps HSDPA etc. The key selling point for the iPhone is the media, strong internet connectivity and the amazing appstore apps. The app store would continue to provide some unique and unmatched apps for some time, until others catch up. However, getting the value part right would be crucial for Apple. The new iPhone has to be cheap and not just subsidized with a 2 yr contract. This also rises expectations for 2 iPhones targeted at different segments of the market. While we highly doubt that both devices would be released in June/July together, we can expect the second one before year end.
What adds value to the iPhone is the combination of iPod, Portable gaming, Internet and a phone. Only time will tell if this manages to compete with the Nokias and Palms coming up against it!