Apple steps up battle with release of two new iPhones

Apple has announced two new iPhones, for the first time splitting its flagship product between a premium product and a more affordable version. The upmarket iPhone 5S will feature a new chip that offers what Apple claims is performance of the calibre of a desktop computer, an improved camera and a fingerprint security scanner; while the cheaper iPhone 5C will use a plastic body and many of the internals of the existing iPhone 5.

However both will offer the new operating system, iOS7, that Apple hopes will update its software to compete with newer versions from Google and Microsoft. Phil Schiller, Apple's senior vice-president, called the 5S "the most forward-thinking phone perhaps anyone has ever made", while chief executive Tim Cook announced that Apple would this month ship its 700 millionth iOS device, emphasising that the iPhone remains the world's most popular single phone. Designer Sir Jonathan Ive called the 5S "our most refined iPhone yet". In what analysts greeted as a solid but largely expected pair of updates, Cook claimed: "We don't just pack in feature after feature; instead we think deeply about the experience we want to create."

The remark places Apple in contrast to its closest rival Samsung, which has been accused of valuing the number of features it can include over their actual value to users. Apple's fingerprint sensor, called Touch ID, is a thin circle around the device's existing home button, and removes the need to enter a pin code to activate the device, but Apple did not claim it would replace the need for more advanced security features such as those required by online banking or shopping. It will, however, work to allow purchases of music and apps from Apple's iTunes Store.

The use of the fingerprint sensor in the 5S could be adopted by other retailers, but some commentators expressed scepticism that it may become like Apple's "voice assistant" Siri, which is largely regarded as a gimmick, although improvements in the service, however, mean it is gaining in popularity. Fingerprint sensors have previously been introduced in other devices, such as those made by Motorola, with limited success. The introduction of the cheaper iPhone 5C marks a major shift in Apple's marketing by offering a value proposition instead of solely high-end products. Available in five colours, it will feature a metal-reinforced plastic body around a black screen.

Malik Saadi, of analysts Informa, said the new devices were "mainly addressed at new audiences with the aim of extending the market opportunities of the iPhone beyond the high-end segment of the market". He added, however, that Apple had much to prove with the new devices, as its appeal has come under pressure in important new markets, despite a slight recovery in Western market share. "The timing of this launch is crucial as the industry is getting close to the end of the third financial quarter and the iPhone's performance during this period has been largely below expectations, particularly in China where the growth rate is falling rapidly," he said.

"It is becoming obvious that Apple can no longer afford to address the whole world as a single market for its iPhone." Retailers greeted the diversification strategy positively, however. Scott Hooton, chief commercial officer at Phones 4u, said: "We're expecting some very happy customers after today's Apple announcement that a more affordable version of the new iPhone, the iPhone 5C, will be available alongside the iPhone 5S. "Our research has shown that there is a strong appetite for both options - with 27% of people indicating an interest in getting their hands on a lower-cost iPhone and 33% more inclined to buy a premium version." He added that, overall, demand for the latest iPhone is at an all-time high with a 76% increase in the number of customers interested in purchasing the new device, since the launch of the iPhone 5 last year.

The iPhone 5S will sell from pounds 549, with Apple claiming it would offer similar battery performance to the existing model, despite a significantly improved processor which it claims is unique in the world of mobile phones and will unleash a new wave of more powerful apps. Apple's App Store and Google's rival Play Store now contain approximately the same number of apps, and the California-based Apple is thought to be keen to regain its lead.

Google also claims it is approaching 1bn active devices, while Apple has said only that it has sold 700m iOS units. Although the 5C will officially retail for pounds 469, just pounds 80 less than the 5S, it will present a new opportunity for retailers and a new challenge for Apple, whose brand is notoriously closely guarded.