Made In The USA: With IPhone 4 And IOS 4, Entrepreneurs See Big Opportunity

06/21/2011 11:27 am ET | Updated Aug 11, 2011

On June 7, Steve Jobs stepped out on stage, clad in his signature black turtleneck and jeans. The crowd at the Apple Worldwide Developers Conference, waiting in eager anticipation of the new iPhone 4 and the iOS 4 operating system, stood and broke into applause. Within moments, accessory and app makers everywhere scrambled to start working on cases and other add-ons designed for Apple's next big hit. And so the cycle began again.

The new iPhone 4, the latest version of of Apple's wildly popular smartphone set for release on June 24, features a whole new set of bells and whistles, powered in part by the souped-up iOS 4 operating system. But perhaps most importantly for scores of small accessory makers, the most talked-about phone of the year has a new form factor from its predecessors -- and that means big opportunity.

App makers -- there are now more than 200,000 apps in Apple's App Store -- are also taking notice, with the June 21 release of iOS 4. Multitasking, custom playlists, background wallpaper, spell check, folders for organizing apps and Bluetooth wireless keyboard support will now possible on existing iPhones, as well as the iPhone 4.

Since Apple has pretty much ceded accessory and app markets to third parties, there are plenty of scrappy startups and small businesses that are putting their own stamp on the iPhone. "This is an area where small companies can have an advantage because they are more nimble and they have design resources [that allow them to] work faster," says Adam Hanft, CEO and founder of Hanft Projects, a brand strategy firm. "It's a good entrepreneurial opportunity."

Apple is notorious for keeping its products under wraps before the ship date (despite a well-publicized incident earlier this year, where an Apple employee lost a prototype of the iPhone 4 in a bar). And that strategy works to the benefit of small businesses. "Apple has created a fair playing field," Hanft says. "Whether you are somebody huge or somebody who is working out of your garage, you have the same shot. Nobody has a head start." That applause coming from the developers conference was a virtual starting pistol for the iPhone 4 accessory market.

Standing Out from the Crowd

The majority of manufacturers kick design teams into high gear, then send the plans off to factories overseas. TRTL BOT, a four-person iPhone accessory startup in Los Angeles, has chosen to follow a different path. The company's flagship product is the Minimalist, a slim case that also holds up to three credit cards on the back of the iPhone. It is made from recycled materials and manufactured right in California. "The Apple accessory market is saturated with different companies," says Peter Gloria, president of TRTL BOT. "That is why we try to stand out more with our locally made products made from recycled material."

Making an impression on the crowded accessory market means doing something different. "Differentiation is key," Hanft says. "There is still a surprising lack of innovation. People who are using Apple products love the innovative quality. They are drawn to accessories that reflect that." It was that lack of innovation which motivated the launch of TRTL BOT in late 2009. "We're all iPhone owners," Gloria says. "We got sick and tired of what was already being made out there and thought we could make a better product that keeps the environment and local community in mind."

Using a U.S. factory helps TRTL BOT achieve its eco-friendly mission. "We get to put money back into the U.S. economy instead of sending it over to another country," Gloria says. "Manufacturing locally helps keep our products' carbon footprint extremely low. It takes less distance for a product to travel before it gets to our customer." The biggest trade off Gloria sees is the cost of local manufacturing. The company is banking on customers' willingness to support local and eco-friendly products. "The Apple customers like small independent brands," Hanft notes. "They like to support the local movement."

Keeping It Local

WaterField Designs, a San Francisco bag and case manufacturer with fewer than 20 employees, demonstrates why small companies have an advantage by staying nimble. Owner Gary Waterfield pre-ordered an iPhone 4 in hopes of having the actual device on hand as soon as possible. He expects to have his first custom-fitted case available within a week of the phone's release, in the form of a suede sleeve. Accessory makers that already sell cases for the third generation iPhone just have to tweak the designs to fit. "Since we make everything locally, we can get a case out within days," he says.

Speed to market is a factor for any accessory maker that wants to capture market share and make sure there is plenty of time to sell accessories before yet another iPhone is announced and the rush begins all over again. The good news is that iPhone owners don't stop shopping just because they bought a single case. "Being there in the first day or two is probably not the be all and end all because people like to trick out their phones over time," Hanft says. "They become fashion accessories. There is a very long cycle to it."

WaterField Designs runs into the same costs issues that TRTL BOT does when manufacturing in the United States. The company's strategy to keep prices down is to sell directly to customers through its website. "If we sold through resellers, it would be twice as expensive," Waterfield says. "The only place you can get our stuff is through us."

Having the factory in his own backyard means Waterfield can keep an eye on production. "There are benefits to it," he says. "You can really control quality. You can change things on the spot." It also means WaterField Designs can build a host of different colors and options for its cases. "It allows us to offer a lot of varieties without having to have a huge quantity of each one," he adds. Customers can order a WaterField iPhone Smart Case in copper with a belt clip or get the same case in pine green with flaps to attach to a shoulder strap.

Apple has already sold 50 million iPhone since it was introduced in January 2007, and the iPhone 4 already appears to be a runaway hit -- iPhone 4 pre-orders crashed the Apple and AT&T Wireless sites as soon as they were made available. And as long as people buy iPhones, they will want to buy snazzy cases, protective gear and fun extras.

The original version of this article appeared on AOL Small Business on 6/21/10.

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