We’ve suddenly been hearing alarms that the iPhone and Android growth wave are done and over with. Some say the Apple iPhone is on the same track as the Sony Walkman or the VCR. While I agree new smartphone sales are slowing, there is a big difference between the iPhone and the Walkman.
There has been such a wide variety of speculation. Most of it only shows one slice of the pie and does not reflect the full picture of what’s really happening. So, let’s take a few minutes and dig into this topic and see what is really happening.
I’ve been saying for years the amazing iPhone and Android growth wave cannot continue forever and have written many columns about this exact topic. The writing was on the wall when the iPhone first stumbled years ago. And even though they recovered and flourished again, this (very telling) warning sign should have remained on everyone’s radar.
I said then and still say today it’s only a matter of time until smartphone sales slow. Not end, but slow. That’s the difference…and it’s a very important difference to understand.
The iPhone is not taking the same path as the Walkman, the VCR and other doomed technologies who rode the growth wave up and down again. The reason is simple…there’s no new technology to replace it. Not yet anyway.
Since there’s nothing to replace the smartphone, people will continue to use them. That’s not the problem. The problem is new smartphone sales are slowing. And there are reasons for this. Some reasons couldn’t be addressed. Other reasons could’ve been, but simply haven’t.
Slowing iPhone sales don’t frighten users, but do scare investors
Sales of iPhones and Android phones are not ending. Far from it. However, they are slowing. And while slowing sales don’t matter to users, they do matter to the investor.
That’s why we’re seeing scary stories about Apple, Google, Samsung and every other smartphone maker in the news today. These stories are true – but they’re written from the investor angle.
Over the last decade, iPhone and Android sales came from a variety of different areas. One area was new sales to non-smartphone owners. Another area was upgrades to existing smartphone owners. And yet another area was to children who are growing up. In other words, there are many different segments of this market.
Two of these areas have changed and slowed.
One area is fairly straightforward: pretty much everyone who wants a smartphone already has a smartphone. The youth market that grows up and gets their first smartphone may be the only first-time customer left. So, sales to first-time users have slowed considerably.
Another area of change/slowdown is the upgrade cycle. In the early years of smartphones, users upgraded their devices on an annual basis. Everyone wanted what was new and hot. It was an exciting place to be.
I believe users would still be upgrading on an annual basis, but because there’s little in the way of innovation today, the upgrade cycle is getting longer. That’s the fault of smartphone makers like Apple (iPhone), Google (Android) and Samsung (Galaxy).
iPhone, Android smartphone sales are slowing, impacting investors
Since there is little innovation to make that costly upgrade effort worthwhile, users are hanging onto their existing smartphones longer than ever.
Instead of updating their smartphones on an annual basis when the new one comes out, they wait two, three or even four years.
A third reason for this upgrade delay is the cost of new iPhones has skyrocketed. While the iPhone may be the gold standard in smartphones, there’s a limit to what customers will pay. Especially when there’s little innovation.
So, the more Apple increases prices, the slower new iPhone sales will be. This growth curve is real, but apparently Apple didn’t get the memo.
These three factors are why iPhone sales are slowing
These three different factors are why iPhone sales are slowing. It’s too bad. If Apple kept their eye on the ball, things could have been better for them. If they kept prices at the same level and if they kept innovating, sales would have continued to climb.
However, because sales are continuing to moderate, this makes the investor look elsewhere and the stock price drops. It’s really as simple and as uncomplicated as that. Users still love the iPhone, but without innovation have little reason to upgrade as quickly as they once did.
So, what is the solution? I see things heading in one of two directions. If Apple continues to produce high-priced smartphones, sales will continue to slow. If they do not create new, innovative features, sales will continue to slow.
It’s really that simple. Price and innovation are all screwed up at Apple, Google and Samsung.
Apple growth is due to iPhone innovation
With Apple, all of their cards are in one iPhone pile. They’ve tried to create new devices and services and have shown growth in those. But not to the same degree as the iPhone, which is still the center of their universe.
At some point in the future, we may leave the smartphone and move to a next-generation device. However, there is no next-generation device in the market today. Because of that the smartphone will remain king of the hill…for now.
People will continue to love and to use their smartphones. The only difference is they won’t upgrade the device as quickly as before. And that’s why investors are spooked.
Several months ago, when Apple said they would no longer disclose iPhone sales statistics, the writing was on the wall. The news coming out of the company has been fighting this battle with the investor and the user for the last several years and things are only getting worse.
That does not mean Apple will fold up and disappear. They are a huge company with loads of happy customers. Users will remain satisfied. The investor, however, may be a different story.