Services, refurbishments and discounted older generations
A rebooted iPhone SE (pictured) isn’t
what Apple needs, even if it’s what you want (Image Credit: TechRadar)
what Apple needs, even if it’s what you want (Image Credit: TechRadar)
Apple’s iPhone revenue has declined foranother quarter according to the company’s latest earnings, and
it means income is being dented.
it means income is being dented.
It’s no
surprise – a slow performance in China amid a worldwide slowdown in the
smartphone market is making things incredibly challenging for Apple at a time
when spending on a new handset is being considered more carefully than ever
before.
surprise – a slow performance in China amid a worldwide slowdown in the
smartphone market is making things incredibly challenging for Apple at a time
when spending on a new handset is being considered more carefully than ever
before.
People are
holding onto their smartphones for longer because they’re still performing –
they weren’t cheap when purchased a couple of years ago, and the high-end
features then are still performing now.
holding onto their smartphones for longer because they’re still performing –
they weren’t cheap when purchased a couple of years ago, and the high-end
features then are still performing now.
It means Tim Cook and co. will likely
be scratching their heads, wondering how to turn the tide. Could the answer be
the much-rumored, fan-backed iPhone SE 2?
be scratching their heads, wondering how to turn the tide. Could the answer be
the much-rumored, fan-backed iPhone SE 2?
Cook
noted in his earning call to the media on April 30 that revenue decline eased a
little towards the end of the quarter thanks to price cuts to the iPhone in
some markets – an iPhone XR price cut
in China saw sales increase by 20million– but it still witnessed a major salesshortfall in the region.
noted in his earning call to the media on April 30 that revenue decline eased a
little towards the end of the quarter thanks to price cuts to the iPhone in
some markets – an iPhone XR price cut
in China saw sales increase by 20million– but it still witnessed a major salesshortfall in the region.
So
could new, cheaper handsets be the answer in getting Apple’s handset business
back on track?
could new, cheaper handsets be the answer in getting Apple’s handset business
back on track?
Apple has refused to
step below the premium tier in the smartphone market to date, and while the iPhone XR is more
affordable than the iPhone XS and iPhone XS Max, it still
carries a hefty price tag which keeps it out of reach for many.
step below the premium tier in the smartphone market to date, and while the iPhone XR is more
affordable than the iPhone XS and iPhone XS Max, it still
carries a hefty price tag which keeps it out of reach for many.
However,
before you get all giddy about the prospect of a new mid-range and compact
iPhone SE 2, realize it’s highly unlikely to ever happen.
before you get all giddy about the prospect of a new mid-range and compact
iPhone SE 2, realize it’s highly unlikely to ever happen.
There’s an image to uphold
Applehas built its reputation on producing premium products, and it’s what gives
consumers the confidence to buy as they know they’ll be getting a high-end
device.
consumers the confidence to buy as they know they’ll be getting a high-end
device.
IDC’s
Associate Vice President for Devices, Francisco Jeronimo told us
“launching a mid-range handset [such as an iPhone SE 2] would be good for
short-term interest, but it won’t help the brand in the long term as the image
of Apple is premium…it’s much better to sell discounted older and refurbished
devices as it keeps Apple’s band at the high level.”
Associate Vice President for Devices, Francisco Jeronimo told us
“launching a mid-range handset [such as an iPhone SE 2] would be good for
short-term interest, but it won’t help the brand in the long term as the image
of Apple is premium…it’s much better to sell discounted older and refurbished
devices as it keeps Apple’s band at the high level.”
Appleis one of the very few manufacturers that can make refurbished devices part ofa successful business model, as iPhones generally hold their value well thanks
to their exclusively high-end existence.
to their exclusively high-end existence.
That’s
why Apple offers its trade-in service, something Jeronimo believes it’ll
continue to push heavily, as it not only provides a way for customers to
upgrade to the latest phone sooner by cutting down on the new device’s upfront
cost, but also allows Apple to make a second margin on an older phone by
repairing and then reselling it.
why Apple offers its trade-in service, something Jeronimo believes it’ll
continue to push heavily, as it not only provides a way for customers to
upgrade to the latest phone sooner by cutting down on the new device’s upfront
cost, but also allows Apple to make a second margin on an older phone by
repairing and then reselling it.
The
key thing to spur a new smartphone purchase is either an old model not working
as well, or the latest device being so appealing that not upgrading becomes
impossible.
key thing to spur a new smartphone purchase is either an old model not working
as well, or the latest device being so appealing that not upgrading becomes
impossible.
So
to offset this, whenever Apple launches a new iPhone series, it cuts the price
of the previous generation, moving the handsets towards a more mid-range price
point, rather than producing dedicated devices for the price point which would
have to, in some way, compromise on Apple’s premium aesthetic.
to offset this, whenever Apple launches a new iPhone series, it cuts the price
of the previous generation, moving the handsets towards a more mid-range price
point, rather than producing dedicated devices for the price point which would
have to, in some way, compromise on Apple’s premium aesthetic.
This
way, even if you opt to buy a ‘cheaper’ iPhone, you’ll still be getting a
handset which was once at the top of the pile.
way, even if you opt to buy a ‘cheaper’ iPhone, you’ll still be getting a
handset which was once at the top of the pile.
Apple still sells the iPhone7 and 7 Plus – launched as flagships in 2016 – through
its website, and at less than half the cost of the new iPhone XS and XS Max,
they provide a clear entry to point to the ecosystem for those on tighter
budgets.
its website, and at less than half the cost of the new iPhone XS and XS Max,
they provide a clear entry to point to the ecosystem for those on tighter
budgets.
Trade-in
is offered across all the iPhones it currently sells, allowing you to reduce
the cost of the cheaper, older handsets too.
is offered across all the iPhones it currently sells, allowing you to reduce
the cost of the cheaper, older handsets too.
The 5G and services solution
Asfor where Apple goes from here, Jeronimo told TechRadar that he sees short and
long term ways the firm will look to revert the slump back into growth, without
launching a specifically mid-range handset.
long term ways the firm will look to revert the slump back into growth, without
launching a specifically mid-range handset.
Part
of the short-term action, he posits, is the trade-in service Apple offers, but
it’s what’s available on your iPhone which is where a lot of money can be made
quickly.
of the short-term action, he posits, is the trade-in service Apple offers, but
it’s what’s available on your iPhone which is where a lot of money can be made
quickly.
That’s why the brand
even held a standalone event for the first time in its history earlier this
year for new Services, to unveil products that weren’t hardware, in the shape
of Apple News Plus, AppleTV Plus and AppleArcade.
even held a standalone event for the first time in its history earlier this
year for new Services, to unveil products that weren’t hardware, in the shape
of Apple News Plus, AppleTV Plus and AppleArcade.
Revenue
from Services is now almost 50% of the revenue of the iPhone business, showing
huge growth thanks to the likes of Apple Music, Apple Pay, the App Store and the new additions will
only bolster this further.
from Services is now almost 50% of the revenue of the iPhone business, showing
huge growth thanks to the likes of Apple Music, Apple Pay, the App Store and the new additions will
only bolster this further.
By
getting more and more iPhone users to sign up to these services, Apple won’t
need to worry as much about pushing consumers to upgrade to the latest iPhone,
as they’ll be able to make significant revenue from these services no matter
the model in a person’s hand.
getting more and more iPhone users to sign up to these services, Apple won’t
need to worry as much about pushing consumers to upgrade to the latest iPhone,
as they’ll be able to make significant revenue from these services no matter
the model in a person’s hand.
Apple News Plus was announced in March 2019
(Image Credit: Apple)
(Image Credit: Apple)
Looking longer term, and
it’s 5G which
could be another big revenue driver for iPhone, as Jeronimo explains.
it’s 5G which
could be another big revenue driver for iPhone, as Jeronimo explains.
“5G
will have an impact on providing an incentive to replace your phone, but it
won’t happen this year, as it will cost quite a lot and the [network] coverage
won’t be that high.
will have an impact on providing an incentive to replace your phone, but it
won’t happen this year, as it will cost quite a lot and the [network] coverage
won’t be that high.
This is something that
Cook alluded to strongly in the recent earnings call, where – when questioned
about adding 5G to the iPhone – he mentioned the highcost of components, and only when the price point Apple desired
could be reached would they consider adding new technology.
Cook alluded to strongly in the recent earnings call, where – when questioned
about adding 5G to the iPhone – he mentioned the highcost of components, and only when the price point Apple desired
could be reached would they consider adding new technology.
“5G will have a strong impact [on
the upgrade market] when consumers who purchased iPhones in 2018/2019/2020 are
ready to upgrade [to a 5G phone] in 3-5 years time,” added Jeronimo.
the upgrade market] when consumers who purchased iPhones in 2018/2019/2020 are
ready to upgrade [to a 5G phone] in 3-5 years time,” added Jeronimo.
With rumors suggesting we won’t get a 5G iPhone until 2020 or 2021 at the earliest,
there’s no short-term gain for Apple from the fifth generation network, but at
least by the time a 5G iPhone does emerge the networks will be more mature and
the services offered more robust, meaning the Cupertino brand is likely holding
out until the improved connection offers some real, material benefits.
there’s no short-term gain for Apple from the fifth generation network, but at
least by the time a 5G iPhone does emerge the networks will be more mature and
the services offered more robust, meaning the Cupertino brand is likely holding
out until the improved connection offers some real, material benefits.
Whether the mix of trade-in upgrades,
refurbs and a buffet of services will be able to recover Apple’s lost revenue
remains to be seen, it’ll take a few years for the true impact of these models
to be fully realized, but for now Apple fans should mourn the iPhone SE 2: the
affordable, compact and modern iPhone that never was.
refurbs and a buffet of services will be able to recover Apple’s lost revenue
remains to be seen, it’ll take a few years for the true impact of these models
to be fully realized, but for now Apple fans should mourn the iPhone SE 2: the
affordable, compact and modern iPhone that never was.