Apple’s iPhone sales have dropped. This is big news because it is the first time it has happened since the iPhone appeared in 2007, almost a decade ago now.
In this week’s Q2 earnings call Apple confirmed declines in both revenue and iPhone units sales, despite having more models readily available on market. The numbers were down by quite a bit as well: $58 billion in Q2 2015 vs $53 billion in Q2 2016.
So what gives? Is the iPhone finally experiencing what every other phone maker has, for years, simply accepted as a fact of life? Phone sales cannot and will not increase ad infinitum; this is simply impossible. And 100% of businesses -- and now Apple -- will attest to that.
But many assumed Apple had somehow done the impossible with iPhone and found its way around the principle that what comes up must, inevitably, come down. It might have taken awhile, but reality has now set in and the news is simple; the iPhone is not invincible. Apple is subject to changes in global demand and nuances, just like Samsung, HTC, Sony and every other consumer technology brand out there. It just took a little longer for it to happen.
iPhone sales slowed in Q2. Analysts expected 51.53 million units, but the actual Q2 2016 sales came in at 51.2 million. To put this into context, Apple sold 61.17 million iPhones in the same period in 2015. Similarly, iPad sales came in at 10.2 million units versus 12.62 million units for the same period in 2015.
Not a great advert for the iPad Pro line either, then.
Here's what The FT made of the earnings call: "The figures underlined what was already apparent: Apple is living in the shadow of its own past success. The surge in sales following the launch of the iPhone 6, which began in September 2014, has left an acute hangover. And the longer it goes on, the more the pressure will grow on Apple to prove that it can still whip up fresh excitement for its ageing smartphone product line when the time comes to reveal the iPhone 7 later this year."
“We’ve hit an innovation plateau,” says Geoff Blaber, an analyst at CCS Insight. “The iPhone can’t grow indefinitely.” Apple’s greatest challenge, he adds, is living up to the outsized expectations generated by its own past success.
So what the hell is happening? I have a theory, though I admit it is quite a boring one. But it is simple — and it goes a little something like this; in 2014, Apple released the iPhone 6 and iPhone 6 Plus. These were exceptional handsets in every regard and, importantly, they were completely different to what came before. Demand for larger screened iPhones was massive at the time, and this is reflected in just how well these handsets sold.
I still use my iPhone 6 Plus to this day. It works fine and looks exactly the same as the iPhone 6s Plus in my opinion. This brings me to my next point; what’s the point of updating to a phone that looks and performs more or less the same as your current one?
The answer is simple, there is NO point. Like, none whatsoever. Battery performance is the same. The design is the same. There is no additional utility inside Apple’s iPhone 6s line that should make any iPhone 6 user want to update.
Consumers need a reason to update, a USP not offered by the previous model. Phones cost a lot of money, so if the one you use works fine, why the hell would you fork out for a brand new one that isn't all that different to your current model? And by USP, I mean something tangible, something that adds in lots more utility. Not 3D Touch.
The iPhone SE is slightly different, but it is so niche the overall effects of its release will likely be negligible in the grand scheme of things for 2016/17’s bottomline.
I’d also wager that Apple lost a fair few users to Samsung this year as well. And this trend will almost certainly continue with floating voters as more and more ultra-powerful Android phones like the LG G5, HTC 10, OnePlus 3, Nexus 2016 and Galaxy Note 6 hit the market between now and the launch of the iPhone 7.
2014/2015 was a dull-ass year for Android phones and a great one for iPhones. The past few months, however, have been the exact opposite. Android is back on fine form and the high-profile releases will keep on coming until well into Q4 2016. With this in mind is it any wonder that Apple’s current line up is not match fit?
The way I see it is simple; smart iPhone users either A) defected to Android at beginning of the year (Galaxy S7) or, B) are patiently holding out for the release of the iPhone 7 with their 2014 iPhone 6 handset. Both scenarios explain the dip and both make complete sense given what Apple came to the table with in 2015/16. The big fly in the ointment on all of this is that if what KGI Securities analyst Ming-chi Kuo is now saying is correct (and it usually is), Apple will release another incremental update this year with the iPhone 7 and we'll have to wait until late 2017 for the major revamp aboard the iPhone 7s (or whatever it's called, Kuo claims the whole product line or brand is getting a massive overhaul). That would mean Apple's sales would likely continue to decline well into 2017 until that big launch.
Let’s hope it isn't so, and that the company has learned its lesson for the iPhone 7/iPhone 7s, but with product cycles being long-term things planned well in advance we're certainly not holding our breath.