2023-08-07 09:40:00
Bloomberg — Apple Inc.’s third straight quarter of declining revenue is a sign that while people love using the company’s iPhones, lately they’re feeling less pressure to buy a new one. If Apple wants to turn the tables and ride out the industry slump, the next iteration of its most popular product has to go back to the days when owning the latest iPhone seemed like a major upgrade.
In the April-June period, iPhone sales of $39.7 billion, down 2.4% from the same period a year earlier, fell short of analyst expectations, as did the iPad. , which fell by 20% year-on-year, and those of the Mac line, which fell by 7.3%. CFO Luca Maestri said device sales in the current quarter didn’t look rosy either, blaming currency headwinds and supply chain disruptions.
Another revenue drop in the July-September quarter would mean Apple’s worst streak of revenue declines in two decades. Shares were down about 3% in early trading on Friday, dragging Apple’s stock value below the coveted $3 trillion level it reached in late June. This despite the fact that the company’s global revenues were higher than expected due to the boom in Apple’s services segment, the part of its business that includes subscriptions such as Apple TV + and Apple Music. For the first time, there were more than 1 billion subscribers to its various offerings, Apple said, boosting service revenue by 8.2%.
While this was encouraging news for investors — services are Apple’s most profitable segment — what they’re really worried about is the health of the iPhone, which accounts for more than half of Apple’s annual revenue. So the focus is now on September, when Apple is scheduled to launch the iPhone 15.
Bloomberg News has reported that the device is expected to be the biggest upgrade since Apple added 5G to the phone three years ago. The new model will use a “low-pressure injection overmolding” manufacturing technique, which allows the bezel around the display to be smaller than ever before, bringing it closer to a truly edge-to-edge display. It will run on a faster chip, and the camera improvement will be significant. And everything will come titanium coated, so it will stain less.
Will it be enough for people to rush to update it en masse? Is it too much to ask. We are in the midst of a general decline in mobile device sales. Earlier this week, Qualcomm Inc, a major maker of smartphone chips, warned of declining demand. “The smartphone industry is tough in the United States right now,” Apple CEO Tim Cook acknowledged on Thursday on CNBC.
Consumers are feeling the pressure of inflation in their daily spending. That could make a new phone too much of a luxury, especially since the device will be Apple’s most expensive to date. It is a factor that is often overlooked. In 2017, when Apple announced that the iPhone X would cost $999, many wondered if consumers would balk at such an expense.
They didn’t, and the phone was a smashing success. However, while people are willing to spend that kind of money on a device that they use many times a day, a side effect of the higher price has been a reluctance to update as frequently. According to an estimate by analytics firm Wedbush, of the roughly 1.2 billion iPhones in existence today, some 230 million have not been updated in at least two years.
Another reason is the quality of Apple’s engineering. In the early days of the iPhone, if you ran into a cycle or two of lag, you could tell when apps were slowing down. Some wouldn’t install at all, and your battery struggled to last even half a day.
Thanks to its own ingenuity, aided by the development of its custom chips, Apple has been able to produce a device that is increasingly faster and more durable. Apple hasn’t completely eliminated the frustrations of old devices, but it’s clear that the reason many people don’t update their phones for years is that they simply don’t need to, at least not that often. The iPhone 15, even with its improvements, has to contribute a lot if it wants to break that pattern.
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