Apple for the first time after launching it’s iPhone in 2007 has recorded a decline iPhone sales as they sold fewer iPhones than they did in the same quarter last year.
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Apple shares dropped on Tuesday afternoon after the company reported a nearly 13% fall in quarterly sales of the iPhone.
At the earnings announcement, Apple CEO Tim Cook attributed the decline iPhone sales to “strong macroeconomic headwinds in most part of the world” citing unfavorable currency exchange rates and a grim global economic outlook. But behind the corporate-speak, it’s worth examining what’s really happening—and how worried Apple should be about the future.
Examining the the decline iPhone sales behind the corporate earning announcement a number of factors comes in mind.
Reasons for the decline iPhone sales in the first quarter of 2016
- Struggling Chinese Economy: China is the second largest market for Apple products behind US, and currently China’s economy is not in great shape as “Chinese consumption is down overall” and local companies in china like Xiaomi mimic Apple iPhone’s design and sell them at cheaper rate. China represented 32.1 percent of Apple’s sales at the end of 2015 making $18.4bn in China while report shows a decline iPhone sales of $12.5bn in its first quarter report.
- Lack of innovation in the “s” iPhone series: The latest upgrade with the iPhone 6s and 6s Plus is less of an upgrade than the last generation as there is no significant upgrade in design and innovation. Smartphone users tend to buy a new product that is a major upgrade like the iPhone 4 to and iPhone 5 and to the iPhone 6 but not upgrading from an iphone 6 to and iPhone 6s. Thus, less people are going to upgrade than in a more major upgrade year.
- iPhone fans ‘Over expectation’: Like aforementioned, last generation was a major upgrade, with excellent sales. I suspect analysts expected the same kind of sales performance of the iPhone 6 this year with the iPhone 6s. That didn’t happen, for the reasons in #2 (lack of major upgrade and innovation).
- General Smartphone problems: As you may or may not know, Google and Microsoft are also experiencing declines in terms of smartphone sales from their respective platforms, Android and Windows Phone. Yes, smartphone sales are slowing, but that doesn’t mean the end of the smartphone as we know it. I think future generations of the iPhone (probably the next) and other devices will re-energize smartphone sales as the iPhone 6 and previous devices did.
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I am though very concern about the lack of innovation in recent smartphones looking at the trend of innovations in smart phones over the year as that seems to be one of the problems Apple is facing resulting to a decline iPhone sales in the first quarter of the year 2016.