I believe Apple does not need to play any catch up with anybody. They set the trend, not follow others. To say that iPhone 5 (or what ever name they will give it) need to catch up with S III sounds so funny. Look at the trend, Apple dish out the original iPhone, other manufacturer tries to copy it after an overwhelming success. Before iPhone, all manufacturer tried to copy Blackberry. Even Google's Android prototype phone resembles a Blackberry with qwerty keypad. Apple introduced Siri, others try to mimic Siri.

It's not a matter of hardware per se but more to user experience. Look at Windows Phone especially Lumia. It's far less than iPhone nor Android in term of hardware specs but the GUI fluidity is far superior than Android and on par with iOS.

But one thing for sure, iPhone does have a higher value than other phone. In the end, it all boils down to one's preferences.