Apple’s CEO Tim Cook issued a warning to investors about weak demand for Apple products in countries like China. Cook noted that “in some developed markets, iPhone upgrades also were not as strong as we thought they would be.” Things went from bad to worse as Apple’s stock fell by over 9% after the warning.
The company has gone down $450 billion in value from its highest point back in October. Apple broke a record by becoming the world’s most valuable company by having a market cap of over $1 trillion. However, in just two months, the Silicon Valley giant is no longer valued at $1 trillion anymore. The amount by which Apple has fallen is more than the value of some tech giants such as Facebook.
Facebook currently stands below $400 billion and Apple lost more than $400 billion, it’s a big hit. The company’s not in a good place currently as the new iPhones are not selling as much as the company would like them to. Apple’s stock value has also gone down quite considerably. Only a week ago Apple’s shares were worth over $150 and now they’re close to the $140 mark.
Tim Cook has offered several explanations for low iPhone sales. He cited earlier launch dates for the newer iPhone XS and XS Max, supply constraints due to so many Apple products being launched in the fall, the strength of the US dollar, and China’s ‘economic weakness’ as the reasons for the decline in iPhone sales overseas, particularly China.
“Lower than anticipated iPhone revenue, primarily in Greater China, accounts for all of our revenue shortfall to our guidance and for much more than our entire year-over-year revenue decline.”
In an interview with CNBC, Cook also believes that the trade tensions between China and the US have also impacted sales. Loss of revenue has also been affected due to the reduced battery replacement price for older phones. The battery replacement price was reduced after the whole fiasco where it was claimed that Apple was purposely slowing down their phones. Whatever the reasons may be, it’s clear that people are slowly moving away from the iPhone.
Why aren’t people buying iPhones anymore?
Low value for money
There are several reasons apart from the ones Tim Cook mentions which contribute to the lack of iPhone sales. These reasons are more general reasons, there are a few that affect the Chinese market as well which we’ll get into as well. The first and foremost reason is the price. While Apple’s new phones may be great, but they’re definitely not worth the price.
The reason why the iPhone XS and the XS Max were introduced was that Apple was not happy with the sales of the iPhone X. However, if you’re not going to make much of a change to your phone, and then keep the price the same, how can you expect things to improve? An argument can be made that a new chip alongside better, optimized software was an improvement that they made. However, is it really an upgrade if the hardware and software remain old-gen?
The high price point was one factor, but it wasn’t as big an issue as most of Apple’s direct competition also has similar pricing. It then comes down to the value for money that iPhones provide. Compared to phones like the Galaxy Note 9 and the Huawei Mate 20 Pro, the two phones priced at $1000, it’s very hard to argue in favor of the iPhone XS. Both Android phones are powerhouses which are packed with features.
The fact that Apple removed features and then charged a high price is what made a lot of people move away from the iPhones. Phones are all about accessibility and features, one should not forego the fingerprint sensor in order to introduce a new way of unlocking a phone. Not everyone will enjoy one particular feature, which is why there should be multiple options which is exactly what the competition provides.
Speaking of competition, 2018 has been a great year for smartphones. A lot of amazing smartphones have come out this year at half the price. Every day, the line between a budget and flagship device gets blurred even more. Phones like the Pocophone F1, the OnePlus 6T are leading the way, with price tags half of that of the iPhones but performance more or less the same.
Therefore, when so many good phones are available at a fraction of the cost, it’s not surprising to see why people aren’t buying iPhones anymore. Low sales in China are also attributed to competition. There are many Chinese brands, with the leader being Huawei that are making waves in the smartphone market. Even though Huawei flagships are closely priced with iPhones, the Chinese prefer their own product which is also a reason for low iPhone sales.
Apple is in big trouble right now. Most of their revenue is coming through iTunes, Apple Pay, Macbooks etc. Everything non-iPhone. A lot of the revenue is also coming through dongles since iPhones no longer have the headphone jack.
However, since the company’s main source of revenue was the iPhone itself if the phone performs badly in the market, the company performs badly. Therefore, if Apple doesn’t do something with their next generation of iPhones, it might no longer be the giant it is right now in the smartphone market.