Falling iPhone sales, hubris that could even be construed as arrogant complacency, and, now, also possible patent infringements. Apple’s shooting star is threatening to burn up rapidly in the sky. It was not all that long ago, in the summer of 2018, when the tech giant from Cupertino was still worth more than a trillion dollars – never before in the history of humankind had a single company been worth so much.
Meanwhile, there are clear signs of a dramatic decline. Although, it appears that the tech company’s stock price has found a floor, valuing the firm at slightly above $700 billion. What’s the reason for this dramatic decline? Is the iPhone at fault?
The problems for the Apple fairytale all started when Tim Cook, Steve Jobs successor prior to his death in 2011, announced a disappointing sales forecast in November 2018. The company still beat expectations. However, that was not enough. Apparently, the company’s signature iPhone product had lost its luster – consumers were just not taking to it, preferring to stay with their existing models.
Also, Apple announced that the company would forgo the release of sales data in the future. The reason is that the numbers are not representative of business success. Instead, the tech titan stressed that profit and turnover figures are much more relevant.
Apple’s newest model had only recently launched a few days before the announcement. For many analysts, the XR was going to be the spark of the 2018 models and save the day – so far they have been proven wrong.
The Christmas 2018 sales were not what the tech giant had expected from its new Apple iPhone XR – they were lackluster at best – nothing like in the past when consumers started lining up the night before to get their hands on the newest product from their favorite smartphone brand. The reason for this is simple. There simply was not enough demand and also the product offering was insufficient.
The iPhone XR has been shipping since the 26th of October 2018. While the two OLED models of Apple’s 2018 line-up have been on the market for a while, the delivery of the iPhone XR with the LCD display has only recently started.
Released as a budget version of the iPhone Xs to solve consumer complaints that the iPhone was overpriced, the iPhone XR is obviously not selling as well as Apple had anticipated. As Nikkei reported, Apple has ordered Foxconn, the leading iPhone manufacturer in China, to produce 100,000 fewer units per day. This represents a decrease of up to 25%.
That’s to say that the production capacity of the two leading iPhone manufacturers, Foxconn and Pegatron, are not fully utilized. For example, Foxconn initially set up 60 production lines for the iPhone XR, of which only around 45 are currently in operation.
Currently, the fairy-tale Apple story, which started with the release of the first iPhone in 2007 and lasted more than ten years, is only left with very little shine. As of the end of 2018, there is even a sales ban for two iPhone models in all German Apple stores after a judgment of the District Court in Munich. The bad news is hitting the firm on all fronts.
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Is the iPhone fairy tale started by Steve Jobs, the relentless CEO, who led the California-based company to the top of the world finally over?
Even after Job’s death, most products still bore his signature, including the design of the iPhone 5 with its larger screen and the new flat aluminum housing. His successor, Tim Cook, only set his mark with the novelties that followed. And to some extent, he was finally able to free himself from the shadow of the uber-father that to this day still looms over the company.
And Cook has done a pretty good job of it so far. However, as we have already seen, problems loom for the tech behemoth. Here are four reasons that explain Apple’s decline and form the basis why the iPhone XR will not act as the knight in shining armor.
Patent infringement in Germany – Apple Stores stopped selling some iPhones in Germany.
The District Court of Munich found that Apple violated a Qualcomm patent. As a result, Apple has placed a sales stop in all German Apple stores of the iPhone 7 and 8 models. Internationally, the decision will not cause many problems. However, it must be said that it could form a precedent for other disputes between the two companies in other countries.
The patent in question is technology that adjusts the power consumption of telecommunications chips that keep the battery running longer. From Qualcomm’s point of view, it is not possible to circumvent this patent by a software change.
As we already mentioned, the patent dispute can still have serious economic consequences for Apple beyond Germany; the reason being that Apple and Qualcomm have been fighting each other for years in numerous lawsuits in different countries.
While the current ban on sales in Germany might hurt, a similar sales ban in China would have completely different economic dimensions for Apple. Presently, Qualcomm is pushing for a court decision in China for an immediate sales stop of all iPhone models. The patent dispute is only really starting now, and it’s going to get really expensive.
A Slump in sales
One of the most prominent signs of alarm for Apple, however, is the worldwide decline in demand for iPhones. In the summer of 2018, Huawei for the first time knocked Apple off the second place spot in the ranking of smartphones sold worldwide.
Suddenly, Apple had to settle for only third place. However, Apple makes more profit and revenue than its competitors due to the higher premium on its products. But this trend of falling sales figures can no longer be discussed away in 2019. The introduction of the iPhone XR, which is $350 cheaper than the XS, might be a sign that even Apple has realized that they have to compromise with the price.
The biggest problem is that Apple boss Tim Cook has no answer to this trend. Insiders claim there is a lack of innovation in the newest iPhone models compared to the competition. In addition, the ever more expensive devices are getting worse and worse due to unusually many bugs.
This mixture will inevitably lead to a decline in sales this year. As Bloomberg recently reported, Apple even resorted to marketing measures and price deals to boost sales of the new iPhone models – actions that are extremely unusual for the tech giant that prides itself on the superior quality of its products.
Bugs in software and hardware
iPhones are no longer the ultimate must-have for consumers, especially in China. Unfortunately, Apple’s high prices no longer mean the highest quality. Luxury models such as the iPhone XS and XS Max sell for over 1,000 dollars and have problems.
When Apple released an iOS update, it mainly included bug fixes of the previous version and did not bring any innovations. When updating to iOS 11.4, users subsequently reported problems with the battery. Also, iOS 12 brought battery problems. And recently, an iOS version caused problems with Wi-Fi and LTE connectivity. Not even the cheaper iPhone XR could placate consumers.
Apple’s hubris is the main issue. Year after year, the tech firm’s iPhones became more and more expensive. At the same time, innovation did not keep up with the competition, which started to offer the same at lower prices and in some cases even surpassed Apple in certain areas, especially camera technology.
Not even the most recent attempt by launching a more affordable model in the form of the iPhone XR could the firm gain any traction with customers. It appears people simply do not wish to upgrade or are fed-up with having to pay a premium for a product which is more or less the same as the competition. Furthermore, all Apple did with the XR model was use LCD rather than OLED display technology in the hope that a saving of $350 would be enough to entice consumers.
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In the end, it appears that Apple smells the roses of change.
Apple is getting its act together. Rumors abound that the company from Cupertino will phase out LCD in favor for OLED in 2020 like most of its competitors.
What does that mean for the iPhone XR that was only recently launched with LCD technology? Well, in short, Apple tries to tout the lower price as a reason for the LCD screen, but consumers are not buying it because Huawei and Samsung both sell smartphones at lower prices with OLED technology.
Presently, Apple is in talks with Sharp, one of the major providers of OLED displays. Apparently, as early as next year, iPhones will all have the technology. According to Bloomberg, Apple wants to diversify its OLED sourcing, allowing for more options. Besides, Sharp is investing $566 million in OLED production factories, which will begin churning out displays by June 2020.
It makes sense. The future is OLED. The technology is more flexible than LCD and has become almost standard for the likes of Samsung and Huawei. It makes sense for Apple to adopt the technology. However, more importantly, they have to do something about their pricing to remain competitive. Merely offering the iPhone XR, as an alternative is, as we have seen, not enough.
Of course, a stellar new technological breakthrough like when the late Steve Jobs was alive might change everything. Let’s wait and see what happens in 2019 and beyond. The Apple story is definitely not over yet.