Sunday, 31 January 2016 14:36

Is the iPhone i-faltering?


Argus insights seems to think so. It says the number of consumers without a smartphone shrinks at a faster rate than the number of consumers without an iPhone. Or to be blunt, consumers are buying other brands over Apple.

The facts, according to Argus, are that Apple has recently scaled back iPhone production by at least 30% and even it has acknowledged that its growth in 2016 will be about 0.4%. Argus also argues that it has been seeing the decline of Apple in the US market for some time, having previously reported on the marginal increase in demand for the 2015 iPhone 6S and Plus after launch.

“Globally we are seeing a slowdown in iPhone demand.  Of the regions we track, only China saw growth in iPhone demand where the demand for older handsets, 5S, 6 and 6 Plus, outstripped the demand for newer handsets by almost 80%. This suggests that Chinese consumers prefer the lower priced handsets of the prior generation over the new features available on the 6S and the 6S plus,” it said.

Demand plummeted most in the US market. It almost disappeared after the initial boost following the release of the 6S and the 6S plus in late September. Then the holiday promotions started rolling in, not only for iPhone but also Apple Watch and iPads. Discounts were applied on the actual price, not the typical retailer trick of offering a gift card, to comply with Apple’s “You can’t compete with the Apple Store pricing” mantra for retailers, meaning that Apple endorsed what started off as “door-busters” and evolved into recurring discounts similar to what Samsung has done in recent years to boost demand in the face of competition from Apple.

Major US carriers were hit especially hard, since fierce competition to grab consumers upgrading to the larger screen iPhone 6 and 6 plus in 2014 took many consumers out of their normal two-year upgrade cycles. As you can see in the graph below, overall demand in the US market is falling year-over-year as consumers are keeping handsets longer. This trend is due to both lack of reason and lack of resources to upgrade. Apple has been riding the waves of adoption but is beginning to fall off.

Smartphone demand is slowing in all markets at a huge cost to Apple’s sustained growth in actual handset sales. Though global smartphone demand is slackening, the number of iPhone users continues to grow, albeit rather slowly. The revenue from each existing Apple user will sustain the company’s operations for years to come.


Saturation, lack of new compelling features, discounts, trade-ins, pot sweeteners and more – that describes the whole smartphone market, not just Apple. That it has done immensely well to date on what is effectively now a release cycle of new model (and one size variation) each year, and continuing selling the previous iteration – three models – is admirable.

iPhone represents (in round figures) 96% of Apple’s business and for whatever reason that business is under threat so its shares dipped briefly below US$100 last week.

Argus is not wrong – the facts are indisputable – but let’s not forget the back story. Apple introduced the 4.7 and 5.5” 6 series in September 2014 after doggedly sticking to a 4” model for too long - the rest of the industry had moved on. Pent-up demand for the 6 was phenomenal and it did break the ‘two-year’ upgrade cycle for a lot of existing 5/S users. The 6S/Plus are incremental improvements and were not enough to sustain that demand in 2015. Even Apple Insider says this is the first year where Apple’s iPhone line up has consisted of two different generations of arguably similar devices.

Add to that the lack of new features and innovation in general (not just Apple) in the smartphone industry and you have people now (a) holding on to handsets longer and (b) buying lower cost, fully featured smartphones instead.

This is well illustrated by LG that the now much lower cost 2014 G3 flagship outsells the more expensive 2015 G4 as there simply is not enough difference to justify the cost.

Then we have the rise of the Chinese tigers that are producing amazing kit at amazingly low prices. iTWire’s eye-opening report leaves little doubt that 2016 is the year of the Tiger (and the Monkey) where a Chinese brand, combined perhaps with the re-entry of Windows 10 Mobile taking sales from Apple and Samsung, could feasibly become number two supplier (by volume).

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Ray Shaw

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Ray Shaw  has a passion for IT ever since building his first computer in 1980. He is a qualified journalist, hosted a consumer IT based radio program on ABC radio for 10 years, has developed world leading software for the events industry and is smart enough to no longer own a retail computer store!

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