This week, Tim Cook admitted that Apple earned less revenue in the last 3 months of 2018 than previously estimated. Although the US-China trade war, widespread economic slowdown and strong dollar have contributed to the decline in earnings, the most interesting factor is that fewer people are upgrading to a new iPhone.
Fewer carrier subsidies:
The cost of the top-end iPhone XS starts at $1000 and fewer carriers are offering subsidies these days. The price of the new iPhone doesn’t just make it an expensive proposition stateside, customers residing in countries which import the smartphone now have to pay much more for it owing to the strong dollar rate.
And Apple has never been one to accept lower profit margins (or dilute the premium status of the brand) by decreasing the price of its devices even in developing markets. Back in July 2018, it appointed Michel Coulomb as its new India head and made known its intention of putting an end to deep discounts.
Smartphone technology stagnation:
Another problem is that innovation in smartphone tech has pretty much stagnated across brands. There are only so many pixels your handset’s screen needs. Having an awesome camera is great and a lot of mid- to high-end phones already boast of amazing photographic capabilities.
Smartphone batteries are keeping up with the increasing amount of time we spend on our devices. And practically all handsets boast of the same form factor. Almost a year ago, Apple apologized for purposely slowing down older iPhones and started offering discounted battery replacements.
Since then, consumers have been wising up to the fact that a new battery and updated software may be the solution to smoother device performance. Apple’s bottom line may not be the only one to suffer due to wider consumer awareness. Rivals with flagships marked at sky high prices might also be feeling the burn.
Even though Apple phones arguably deliver the best integration of hardware and software right now, there is only so much the majority of people are willing to pay for a device they use primarily for calls, texts, mails and social media. Tim Cook has probably discovered that $1000 is it.
Apps and services to drive growth:
Back in September 2018, Lisa Jackson, Apple’s VP of environment, policy, and social initiatives said iPhones are built to last and users can therefore hold onto their devices. She also noted that it’s good for the environment. It’s good for the company’s apps and services ecosystem too.
Even if current customers do not upgrade to a new iPhone, they will continue downloading apps through the App store. With increasing awareness about global warming and environmental pollution, folks are waking up to the fact that enabling companies to churn out billions of handsets yearly is unsustainable.
But there’s little guilt attached to downloading or subscribing to apps or services. In the face of saturated smartphone markets in developed countries, economic uncertainties in emerging markets and general consumer awareness, Apple is looking beyond hardware for growth and profits.