OPINION: Chris Smith looks at how the global smartphone decline is finally set to knock on Apple’s door and why it’s no cause for rivals to celebrate
Apple sold an incredible 74.8 million iPhones during the final three months of 2015. That’s a personal best. The most handsets the company has sold in a single financial quarter, spurring it onto record revenue and profits.
Talking about popping the champagne corks! Tim Cook probably won’t be able to find the glasses on his face by chucking out time, because the unstoppable iPhone is clearly going from strength-to-strength!
Except it isn’t really.
Taken in isolation, today’s figures would be cause for celebration. In the wider context, it causes a headache worse than any hangover. You see, although Apple set a record in sales, it also set another one for slowest growth. A 0.4 per cent uptick, compared with 46 per cent a year ago.
By just 300,000 units (give or take), the company avoided a year-on-year decline in iPhone sales, which has never happened before. Not in the 8 plus years the iPhone has existed.
However, today was just a stay of execution in that sense. Apple will have to wait another three months before it delivers that sobering news to the vultures on Wall Street. For the March quarter, Apple is forecasting the first drop off in year-on-year revenue since 2003.
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However, it’s not like the warning signs haven’t been there. For more than a year now, we’ve heard about slowing smartphone sales, the undisputed bedrock of consumer tech for almost a decade.
Samsung’s shipments dropped 8.2 per cent in the most recent quarter with sales of flagships dragged down a whopping 50 per cent by the unpopular Galaxy S6, as per Forbes.
Last October, LG announced a $67.8m loss for its mobile division. HTC revealed sales dropped 36% year on year in Q4 2015 and, as thus, seems to be forging a new path in VR. Lenovo, meanwhile, is consolidating its assets and thinning the Motorola line-up.
Despite the troubles of other mobile giants, the iPhone seemed immune. At least with the records falling with greater regularity than a Russia-only Olympics, we assumed it was.
That narrative began to unravel earlier this month with reports Apple was scaling back iPhone production.
Upgrades in increments
So what could this deceleration of the juggernaut possibly be attributed to? It seems we have to start with the incremental improvements offered by the iPhone 6S range.
While it’s not uncommon for Apple to keep the big changes for the even-numbered years, it was openly debated whether features like Live Photos, 4K video and 3D Touch were going to be enough.
The company even prepared itself for the dissent by devoting a marketing campaign mocking the commonly held assertion “not much has changed.” The fact the below clip referenced a new colour and iOS features unrestricted to the iPhone 6S tells its own story.
Today, Cook remained relatively bullish in the earnings call, claiming Apple had won over more Android users than ever. “We were blown away by the number of Android switchers we had in last quarter,” he said.
Yet growth still remained stagnant.
Were those Google deserters negated by loyalists who felt the iPhone 6S and 6S Plus weren’t enough of a reason to upgrade?
Indeed, Apple might boast about a customer retention rate that doubles any other company in the industry, but that doesn’t mean iPhone users are updating as often.
A Gallup poll last summer revealed 54 per cent of Americans would only consider upgrading when the handset stopped working or becomes completely obsolete. 44 per cent planned to do so when their contracts were up, leaving only 2 per cent of folks planning to upgrade every year.
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The next big thing is (not) already here
It’s easy to see why upgrades are dropping off. We’ve passed the point where improvements to displays are discernible by the human eye. Processors are already running faster than fingers can move.
Batteries are making it beyond 24 hours without too much bother and the form factor is set now utterly set beyond debate. Even if it weren’t no-one’s bothering to try anything else.
New flagship handsets are offering far fewer tangible improvements, while full-on game changers seem like a thing of the past. Smartphones, although better than ever, appear to be stuck in a rut. The world is still waiting for the next big thing.
Meanwhile, mid-range handsets are offering a pretty good approximation for those unwilling to spend big bucks. The difference between the haves-and-have-nots is far less pronounced. When all the profit is in the flagships, that’s not a good sign for the industry.
Put it this way. Right now, I’m at a loss when considering what the iPhone 7 could do to convince me the iPhone 6 just won’t cut it anymore. Thinner, lighter, faster isn’t enough, while the rumoured loss of the 3.5mm jack will only serve to piss me off.
And what about iOS? iOS last had a proper revamp in 2013’s iOS 7 and once again it’s starting to feel tired. Meanwhile, iPhone handsets as old as the iPhone 4S are still powerful enough to run the very latest version, iOS 9, relatively efficiently and efficiently.
If all that wasn’t enough to justify a slowdown, owning the newest
flagship smartphone, once the be-all-end-all for tech enthusiasts, isn’t
nearly the status symbol it was even three years ago.
A sense of perspective
Of course, today’s news requires a dose of common sense. Let’s not forget that Apple just broke records for sales, revenue and earnings, thanks to the iPhone.
This had to happen sometime. Constant, exponential growth had to come to an end. The market was always going to reach a point of saturation as it has for every tech product in history, and the only way from the top of the mountain is down.
However, although perspective is required, the ramifications for Apple are significant, mainly because today’s records are tomorrow’s shortcomings.
Of last quarter’s $75.8 billion in revenue, 68 per cent of it came from the iPhone. The iPad remains in serious decline (sales down 5 million units/25 per cent on last year), and the Mac is no longer bucking the PC slowdown, falling 3 per cent year-on-year.
We don’t know about the Apple Watch, because Apple won’t tell us, but the clandestine strategy has always led to suspicions the wearable is not performing above expectations.
But the iPhone is king and has been driving these record setting quarters for years, shielding some weaker areas of the business at the same time. With device seemingly set for its first ever sales decline, the picture changes somewhat.
Even if the iPhone is simply entering a period of holding its own, the whole appears less healthy.
Suddenly the rumoured 4-inch iPhone 5se appears to be little more important, doesn’t it?