iPhone Sales fall off a cliff - Is Apple Obsolete ?
Today for the first time Apple reported that iPhone sales dropped year over year.
And this was not a small drop off but some 16% from 61.1M units in Q2 2015 to 51.1M in Q2 2016. And while Apple normally experiences a seasonal drop in sales from their Q1 (Oct/Nov/Dec) to Q2 (Jan/Feb/Mar) - this was much more than I think most folks expected.
The drop was also across the board with iPad Sales dropping 19% and Mac sales dropping 12%. Apple made more revenue in its' services categories - so AppleCare, ApplePay, iTunes, etc than it did selling Macs.
In some ways the Mac drop was to be expected as the entire PC industry saw and 11.6% decline in Q1 of 2016. iPad sales have been struggling the last few years and I don't think the new models are going to change that trend.
Apple's overall revenue dropped some 19% from 58B to 50.5B in a year over year comparison. So while still a very large revenue stream and some 2.5 times more than Microsoft - who did 20.5B in their comparative Q3 - a 19% drop in total revenue is pretty substantial for a company that is used to seeing 20%+ gains in revenue year over year.
While the overall smartphone market numbers for Q1 2016 have not been posted - If you add the decline in sales numbers for Apple and Windows Phone that means that Android devices gained market share in the first 3 months of 2016. I suspect that with the new Samsung Galaxy S7 series being available here in Q1 that most likely Samsung will show gains.
In China, one of Apple's biggest markets, Chinese manufacturers like Xaiomi and Huwaei are surpassing Apple in market share.
So what's going on ?
In my opinion 2 things.
First - as we all know iPhones are expensive. An iPhone 6s with 64Gb of storage is $749. Even with the iPhone Upgrade Program, etc that are available - you're still going to pay $438+ / year to own the latest...
IDC posted some interesting data whereby the average sales price paid for a smartphone in the US in 2015 was $352 with some 19% spending under that average. I know that for myself I've purchased Lumia's for family members for under $100 that fit their needs just fine.
I believe that is why Apple released the new 16GB SE model at $399 to try and reach those buyers. I'm not sure they will since for the same $399 you can buy a 32GB Nexus 5X for example with a larger screen, faster processors, etc.
Buyers have much more choice than ever and I believe have realized they can have an excellent experience without paying a premium for an Apple product.
The reality is when your paying that kind of money for a phone you tend to hold on to it. I bought an iPhone 6 for my wife in 2014 and I know that unless she breaks it - there is no reason to upgrade it for at least 2 or 3 more years. It does everything she needs.
I don't expect Apple to expand their portfolio beyond the SE in the entry market. Apple's strategy the last few years is to sell the previous edition model at a slightly lower cost. But an iPhone 6 16GB today is still $549 - some $200 above that IDC price mark.
Which brings me to the second part of the problem...
This week in an article posted by CNBC - a Chinese Tech Entrepreneur named Jia Yueting called Apple's iPhone outdated and obsolete. He called out that when the iPhone was originally designed, there were CPU and Network limitations that have largely gone away and that Apple's innovation has slowed.
Now this was one man's opinion and obviously Apple has done a pretty tremendous job with the CPU, Camera, Screen, etc. But I actually have to agree with him in some ways on the OS front.
Versus MS or Google, Apple has done a much better job of supporting the customers with annual iOS updates for a large portion of their device portfolio.
But in many cases, the apps tend to "feel" the same. And outside of some icon changes - look the same. So while in some ways that consistency is very comfortable for users, it also kind of gets old.
I've owned and used iOS, Android and Windows Phone OS devices and I have to say, that for example the Live Tile experience of Windows Phone is far superior to Apple icons. Similarly Androids notification areas were better. Apple obviously has a great App store and iTunes - but Google Play is right there.
The point here is that iOS is getting stale. Combine that with with the higher and higher prices that seem to come with each new iPhone, and folks don't feel the need to buy the new one every year or 2.
By comparison - the big Android players Samsung, LG, Xaiomi and Huwaei are continuing to push the hardware envelope on the high end while still providing many lower cost options. And while many argue over the fragmentation in the Android space - Google continues to move forward with new features and capabilities that iOS just doesn't have.
Several experts have predicted that 2016 will not be a big iPhone sales year as the new iPhone 7 is not going to provide enough new features to drive big sales.
So it is very possible that Apple may see iPhone sales drop below their 2014 levels of 192M units from 2015's 231.5M - that's nearly 40M units combine that with iPad and Mac sales declines and it is possible that Apple could see revenue drop $50 - $60B in in 2016.
Bottom line here is that Apple need's to be careful.
With this being the year of iOS 10.0 - maybe we'll see some major innovations in the UI, but if not and not much in the way of new hardware capabilities, Apple could find itself in maintenance mode.
Meaning they'll service the customers they already have - and will no longer see the huge growth or revenue numbers they posted since 2007.
And this was not a small drop off but some 16% from 61.1M units in Q2 2015 to 51.1M in Q2 2016. And while Apple normally experiences a seasonal drop in sales from their Q1 (Oct/Nov/Dec) to Q2 (Jan/Feb/Mar) - this was much more than I think most folks expected.
The drop was also across the board with iPad Sales dropping 19% and Mac sales dropping 12%. Apple made more revenue in its' services categories - so AppleCare, ApplePay, iTunes, etc than it did selling Macs.
In some ways the Mac drop was to be expected as the entire PC industry saw and 11.6% decline in Q1 of 2016. iPad sales have been struggling the last few years and I don't think the new models are going to change that trend.
Apple's overall revenue dropped some 19% from 58B to 50.5B in a year over year comparison. So while still a very large revenue stream and some 2.5 times more than Microsoft - who did 20.5B in their comparative Q3 - a 19% drop in total revenue is pretty substantial for a company that is used to seeing 20%+ gains in revenue year over year.
While the overall smartphone market numbers for Q1 2016 have not been posted - If you add the decline in sales numbers for Apple and Windows Phone that means that Android devices gained market share in the first 3 months of 2016. I suspect that with the new Samsung Galaxy S7 series being available here in Q1 that most likely Samsung will show gains.
In China, one of Apple's biggest markets, Chinese manufacturers like Xaiomi and Huwaei are surpassing Apple in market share.
In my opinion 2 things.
First - as we all know iPhones are expensive. An iPhone 6s with 64Gb of storage is $749. Even with the iPhone Upgrade Program, etc that are available - you're still going to pay $438+ / year to own the latest...
IDC posted some interesting data whereby the average sales price paid for a smartphone in the US in 2015 was $352 with some 19% spending under that average. I know that for myself I've purchased Lumia's for family members for under $100 that fit their needs just fine.
I believe that is why Apple released the new 16GB SE model at $399 to try and reach those buyers. I'm not sure they will since for the same $399 you can buy a 32GB Nexus 5X for example with a larger screen, faster processors, etc.
Buyers have much more choice than ever and I believe have realized they can have an excellent experience without paying a premium for an Apple product.
The reality is when your paying that kind of money for a phone you tend to hold on to it. I bought an iPhone 6 for my wife in 2014 and I know that unless she breaks it - there is no reason to upgrade it for at least 2 or 3 more years. It does everything she needs.
I don't expect Apple to expand their portfolio beyond the SE in the entry market. Apple's strategy the last few years is to sell the previous edition model at a slightly lower cost. But an iPhone 6 16GB today is still $549 - some $200 above that IDC price mark.
Which brings me to the second part of the problem...
This week in an article posted by CNBC - a Chinese Tech Entrepreneur named Jia Yueting called Apple's iPhone outdated and obsolete. He called out that when the iPhone was originally designed, there were CPU and Network limitations that have largely gone away and that Apple's innovation has slowed.
Now this was one man's opinion and obviously Apple has done a pretty tremendous job with the CPU, Camera, Screen, etc. But I actually have to agree with him in some ways on the OS front.
Versus MS or Google, Apple has done a much better job of supporting the customers with annual iOS updates for a large portion of their device portfolio.
But in many cases, the apps tend to "feel" the same. And outside of some icon changes - look the same. So while in some ways that consistency is very comfortable for users, it also kind of gets old.
I've owned and used iOS, Android and Windows Phone OS devices and I have to say, that for example the Live Tile experience of Windows Phone is far superior to Apple icons. Similarly Androids notification areas were better. Apple obviously has a great App store and iTunes - but Google Play is right there.
The point here is that iOS is getting stale. Combine that with with the higher and higher prices that seem to come with each new iPhone, and folks don't feel the need to buy the new one every year or 2.
By comparison - the big Android players Samsung, LG, Xaiomi and Huwaei are continuing to push the hardware envelope on the high end while still providing many lower cost options. And while many argue over the fragmentation in the Android space - Google continues to move forward with new features and capabilities that iOS just doesn't have.
Several experts have predicted that 2016 will not be a big iPhone sales year as the new iPhone 7 is not going to provide enough new features to drive big sales.
So it is very possible that Apple may see iPhone sales drop below their 2014 levels of 192M units from 2015's 231.5M - that's nearly 40M units combine that with iPad and Mac sales declines and it is possible that Apple could see revenue drop $50 - $60B in in 2016.
Bottom line here is that Apple need's to be careful.
With this being the year of iOS 10.0 - maybe we'll see some major innovations in the UI, but if not and not much in the way of new hardware capabilities, Apple could find itself in maintenance mode.
Meaning they'll service the customers they already have - and will no longer see the huge growth or revenue numbers they posted since 2007.
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