Apple’s not-so-great start for 2019 could mean better things ahead for iPhone fans
Nope, Apple’s not going anywhere.
Apple didn’t get the start of the year they wanted, and apparently, the last quarter of 2018 was pretty rough for them too. CEO Tim Cook kicked the year off by penning a letter to Apple’s investors that the demand for the iPhone wasn’t strong. This applies to all of their markets, from emerging to developed markets. He especially cited the year-over-year decline from China, which is one of their major markets for their premium smartphone.
Cook also cited other reasons, including price increases due to the US dollar’s performance, fewer carrier subsidies, and other economic factors that hinders them from making the most out of every sale. These are very valid points that really contributed to iPhone’s “struggle” in the last quarter of last year, but it doesn’t mean that Apple are losing money. They failed to meet their targeted profit, but they still made a lot of money.
However, that simple piece of information from Cook made ripples that turned to waves for Apple’s stock. It wiped of a few billions from their value, with knee-jerk traders selling off quickly after hearing a bit of bad news. Still, Apple remains to be one of the most valuable brands today, and while it may hurt their stocks in a couple of days, some people will see it as an opportunity to invest on Apple.
A New Normal?
There are those who think that Apple’s decline in the past few months will be something that the company and its investors should get used to. In the Engadget article “Apple knows the age of yearly iPhone upgrades is over,” the author asserts that the mindset of consumers towards Apple products especially the iPhone has changed. They’re now more conservative with their spending, and won’t shell out more and more cash for small improvements. The article warned that “investors will just have to get used to a world where iPhone buyers upgrade after two or three years instead of every fall.”
One sign pointing to this pronouncement is the wave of customers taking advantage of “significantly reduced pricing” for iPhone battery replacements. When Apple pledged to replace iPhone batteries for a reduced price of $29 throughout 2018, many iPhone users chose this instead of getting a brand new handset. We must remember that this act of “generosity” came after it was revealed that Apple throttled iPhone performance as batteries aged, resulting to a slower phone, which ultimately leads to a new sale.
Looking at the figures, it’s easy to see that iPhone sales have stagnated for the past two years. What kept Apple afloat to still see revenue growth is their insanely high pricing. Apple’s top tier iPhone is usually more than double the average price of Android flagships. Apple concealed this problem by keeping the unit sales figures for the iPhone under wraps. This blew over when Apple launched the latest iPhone last September, with a wide pricing spread ranging from $749 to $1,099.
But will this really be a longstanding problem that Apple can’t handle? Will this brand that has existed for over 40 years really get buried in a hole that it apparently dug by itself? Apple is still one of the richest companies today, with more liquid assets than any major tech brand today. It’s hard to bet against a trillion dollar company that has more than enough money for R&D and marketing for the next decade.
Another factor that could have affected Apple’s iPhone sales is the current economic climate. US President Donald Trump is currently engaged in a trade war with China, and is really bullish when it comes to Chinese-made products. The trade war has imposed heavy tariffs on these products, and has caused a ripple effect, especially on the spending power of the Chinese market. Indeed, the new tariffs was not expected affect Apple, because the China-made iPhones were exempt from it.
However, it has affected the prices of Chinese-made goods in the U.S. which then affects the Chinese economy and spending habits in China. The Chinese leaders may not admit it, but this trade war with an economic superpower like the U.S. caused a slowdown in the Chinese economy. A weaker Chinese economy is resulting in softer demand for iPhones and Apple has not been able to offset the lower demand with its higher prices.
Will it really be the end of the Yearly iPhone refresh?
Apple’s profits are greatly anchored on the iPhone’s performance, so a decline in sales can really be alarming. But that doesn’t mean Apple’s done for, and that everybody should just jump ship and switch to Android. The iPhone is greatly known for its quality, and seeing the ubiquitous logo alone is enough to sway consumer’s decisions. Apple don’t have to play it safe and conservative by staggering its releases. They’ll still continue with their tradition of releasing a new phone every fall, and people will continue to line up for them. But they’ll be more cautious now, not only with their pricing, but also with the innovations that they put in for their new models. With Apple’s R&D, it would be foolish to say that they don’t have any tricks left for them to reveal. It has long been rumored that Apple has been withholding new features and will just release them when they see it profitable. Perhaps this time they’ll be more than willing to pack a few more to ensure more people will buy them.