As Apple places blame on China’s economy and Trump’s trade war for its shocking decline in sales, the company seems to be missing the obvious: the iPhone has become too expensive.
Apple and other makers in the Smartphone industry may also need to wake up to another possibility: we may have reached the “peak” Smartphone.
Stocks went tumbling when Apple announced it was going to miss its own revenue target – and not by a little bit, but by at least $4 billion. This is the first time Apple has missed the mark in a 16 years.
Apple CEO Tim Cook put the blame on a diminishing economy in China for the decline during the holiday quarter, as well as President Donald Trump’s trade war.
“We did not foresee the magnitude of the economic deceleration, particularly in Greater China. In fact, most of our revenue shortfall to our guidance, and over 100 percent of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad,” Cook wrote in a letter to shareholders.
“We believe the economic environment in China has been further impacted by rising trade tensions with the United States,” Cook added in the letter. “We believe the economic environment in China has been further impacted by rising trade tensions with the United States.”
But what Cook and Apple may be blatantly missing or willfully ignoring, is that we may have reached “peak” Smartphone, in terms of what the market will bear in volume and in price.
What Apple isn’t saying is that the iPhone may have gotten too expensive.
Indeed, the iPhone is a premium device, and each year they improve the line with better materials, displays, cameras and features. But premium comes with a cost, and there is only a certain segment of the population that can afford apples premium devices given their current pricing structure.
Last year, the iPhone X debuted in a 64GB model at $999 and a 256GB model at $1149.
September and October 2018 brought us:
Another possibility and Apple’s woes is that the industry as a whole has peaked in terms of Smartphones. Both Apple and android phones have lacked the addition in the past few years of “must-have” innovations.
There simply isn’t an incentive for people to spend $1000 or more on a new Smartphone. All of the current smartphones, Apple or otherwise, generally have high quality cameras (many better than Apple), and all the other same core apps and features that consumers care about having.
Apple is already offering trade in cash value on a new iPhone. However, the incentives aren’t all that generous.
After spending $999 on your current iPhone 6 Plus or iPhone 7, then only getting a $200 or $300 trade-in value to get a minor equipment or feature lift, just doesn’t make economical sense for the average consumer.
Apple may need to tweak these incentives further to convince consumers to upgrade.
Apple CEO Tim Cook said fewer carrier subsidies is making people hold onto their phones longer in the absence of these incentives.
“There’s not as many subsidies as there used to be from a carrier point of view,” Cook said during an interview with CNBC.
Cook also mentioned that consumers being able to inexpensively replace batteries in their iPhones is another factor behind why consumers may be holding onto their phones longer.
