Above Avalon:
Not too hot. Not too cold. The iPhone is entering a new era that can best be characterized as status quo. The days of huge growth are over, and fundamentals aren’t likely to improve significantly from current levels. However, underlying dynamics found with the iPhone business will likely prevent sales and revenue from dropping precipitously in the near term. We are in the iPhone’s Goldilocks era.
Typical well thought out analysis. Keep this Goldilocks Era idea in mind over the next few cycles. Apple is going to be just fine with iPhone sales, even if they can’t hit the historic heights of years past.
The iPhone is breaking into a bear family’s house?!
It’s all about the honey.
Also doesn’t seem to mention the halo effect. If you own a Mac, iPad, AirPods, use Apple Music etc. your gonna get another iPhone.
I think he’s counting that as upgraders. As he notes, people are upgrading a bit less frequently.
He’s basically saying that people who currently have iPhones will stay in the eco system and replace (though less often than in the past), some high end android switchers will appear and some new buyers will enter the market (think kids getting hand me downs from mom or dad which means that the parent gets the new phone).
All of that feels reasonable to me. Barring some huge market share shift toward Apple in a major market or in a lot of markets, the iPhone is where it’s going to be for awhile. Now… if they ship Apple AR glasses that are small, stylish and do something really awesome? That’s potentially a growth area along with Watch, Airpods, etc.
So, the iPhone has become the Ford Taurus?
Services, that’s Apple’s focus now.
They knew this back in 2016 when it was leveling off.
We shall see though, with Apple you can never be too sure.
Ahem, “top of the line Ford Taurus”.
The one factor he didn’t take into account is that Apple could decide to go after the midrange market. They’ve already lowered the minimum price of entry by $100. If they introduce a new SE but keep the old one around, they could push the price of entry down to $300, maybe even $250.
Back in the Ipod days, Apple was very good at lowering the price of the lowest cost ipod to the point where hardly anyone could compete with them on price. The delicious taste of 50% profit margins on iphones lured them away from that approach, but they could go back to it. If they do, there’s going to be a lot of people switching over. Not as lucrative as a boom in iphone x sales, but considering the degree to which pursuit of growth is a religion among Wall Street types, they may do it.
Yeah that will help, but if they only do things like the old SE it’s going to be fairly marginal, not a re-ignition of the growth they had through 2016.
Keep in mind that they’re talking revenue growth, not market share. I mean you can buy a 6S for $449 right now. The SE is, as you note, $349… Below that it’s a commodity market.
Well, yes.
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If Apple goes into the mid-range smartphone market (which it probably won’t because there’s not enough money for Apple to put in any effort), Apple would have to do better than using older iPhones against the latest mid-range Android smartphones. I believe most consumers would rather have the latest Android smartphones than a higher quality iPhone. Wall Street definitely thinks Apple has messed-up thinking with selling some iPhone SE to consumers.
Anyway, Apple is likely smarter than I am when it comes to selling iPhones, so I’ll go with Apple trying to sell iPhone SE models. Apple may be good with margins, but Wall Street is still only interested in Apple growing iPhone market share. It doesn’t make any sense to me, but that’s how those greedy big investors think. They always feel more secure when a company has some dominant market share percentage position. I believe they feel it guarantees them wealth.
As usual, Wall Street thinks Apple is going to fail to achieve any measurable growth in the smartphone market, so Apple shareholders are basically screwed in terms of getting any decent share gains. If Apple can’t achieve historic gains in the smartphone market, big investors are going to put Apple on the “avoid” list.
ipods didn’t have to run apps and maintain developer and hardware support for apps. a bit different with iphones, the minimum hardware bars are higher.
services are a fraction of their hardware sales so i don’t think that’s the primary focus at all.
Tim has said as much as far as their focus. Not that it’s all about the main part of the business as far as sales is concerned. More about retention.