Large corporations spend more than a small fortune trying to predict and shape the future. Apple is no exception. iPhone’s annual sales began to slow to a plateau a few years ago. iPad sales declined for years. Mac sales have been in decline (and now back to record levels). Apocalypse?
Yet, Apple continues to churn out new products with ever higher prices. Let’s call it inflation. Why? Apple is bulking up for a long, cold winter as the headwinds of a smartphone and gadget apocalypse swirl across the globe.
Says who? Research.
The kind of research that Apple takes seriously because its fortunes and future depend upon accurate tea leaf readings (not to mention stock price, corporate executive bonuses, and the shine on Apple’s logo).
After growing annually by an average of 16% from 2012 through 2017, shipments of smartphones will decline about 1% this year
How many? 1.5-billion.
Remember, such numbers are guesstimates from professional guesstimators so take them with a grain of salt but already the handwriting is on the wall. Smartphone sales growth is a thing of the past. Of that 1.5-billion guesstimate, Apple sells over 200-million iPhones which account for more than 60-percent of the entire smartphone industry’s revenue and over 80-percent of its profits. Samsung’s smartphone sales exceed 250-million units and the Korean conglomerate gets most of Apple’s leftovers.
Many markets have already hit a saturation point for new smartphone demand and are dependent on replacement demand.
Apple knew that a few years ago and began to reshape the product line to account for lower replacement demand. iPhones are a sticky product and few customers switch to other brands, but they hold onto their iPhones longer before upgrading to a more expensive model.
iPhones are more expensive than ever.
Buying a more expensive device results in extending the length of replacement cycles, especially when your earnings are limited.
What is Apple doing to avoid the smartphone apocalypse?
We can be polite and call it inflation. Customers are holding onto their hardware longer than ever and to make up for the slowdown in the replacement cycle, Apple has raised prices.
Ipso facto and alakazam. Apple makes more money on each sale. Hardware, software, in-app subscriptions, and the entire ecosystem is designed to extract money from a customer base that isn’t growing like it did a few years ago, and isn’t upgrading to new hardware as frequently.
Smartphone revenue for 2018 is projected to increase 9% even as sales fall. That’s a stronger growth rate than the 7% seen in 2017 when sales increased 3%
Higher prices mean fewer sales. Fewer sales means an industry wide apocalypse. More money per sale means the rich get richer.
And you wonder how Apple stays rich?