The 2007 iPhone launch pretty much created the smartphone market as we know it and prepared the stage for Apple to rise to the most valuable tech company in the world just three years later. Today, Apple is comfortably the world’s #1 public company by market cap. But that position is a revolving door, especially with unprecedented levels of technology driven innovation. Average tenure on the S&P500, for instance, is sharply decreasing. An estimated half of companies may be replaced in the next 10 years. Given Apple’s recent news coverage, I am convinced it has shed its innovators’ DNA and will pay the price in years to come.
Apple Must Face Reality
As lawsuits are piling up in response to news that Apple intentionally slowed down old phones without informing customers, one may wonder indeed what happened to Apple’s dedication to customer experience. Take Apple’s response to issues faced with its Face ID technology. As Steven Levy reports on his struggles with the solution he quotes Apple advising him that he may not have made eye contact with the phone.
Perhaps this shift from technology enabling great usability to gimmicky features that risk diminishing it aptly illustrates Apple’s turnaround from purpose-driven innovator to garden variety big-name corporate lacking vision and losing touch with customers. Its recent decision to shift all of Tim Cook’s travel to a private jet kind of affirms that notion.
No Party Goes On Forever
There are striking parallels to A&F, which blossomed in the late 90’s with its swanky flagship stores, youthful vibes, great quality and unique customer experience. A&F surfed the wave of the exploding teen retail market, but it fell in love with that model a little too much. As criticism of its marketing philosophy mounted, the brand failed to adjust to win over skeptics (parents, media and the public) and ultimately did not recover from its diminishing market position.
Years of less than tactful media appearances by its now-ousted CEO Mike Jeffries also didn’t help ameliorate the situation. By 2017, shares traded at a 17-year-low and A&F had faded into the background. A combination of pride and reluctance to accept a changing reality can throw once leading companies behind.
Apple might have to face a similar fate. In the early 2000’s, its legendary entry into the digital music market established it as a global pioneer in high-end portable devices that were a joy to use. The iPhone launch cemented its leadership in mobile devices and now accounts for over half of its worldwide revenue.
Apple’s Future Could Be Decided In Asia
A deciding factor in Apple’s future position will be the evolution of the smartphone market, and this battle will be fought in Asia. Sporting the world’s two largest smartphone markets and many of its fastest growing ones, it’s also home turf for all of Apple’s major competitors – Samsung, Xiaomi, Oppo and Huawei. As devices shipped increased by nearly 3% from Q3 2016 to Q3 2017, Apple’s share increased by only 2.6%, while Samsung’s grew nearly 4x and Xiaomi’s close to 40x as fast, doubling its global market share. As the smartphone market is consolidating, Apple is falling back in numbers.
None of this is surprising. Xiaomi’s new Android One commands roughly a third of a basic iPhone 8, while getting much of the quality and user experience right. Receiving a lot of the bang of a premium phone for a third of the buck sounds like quite the recipe, especially to Asia’s vast rising middle class.
In the super premium segment, there’s also evidence of a shift. As one media reports, activations of Google’s Pixel 2 surpassed iPhone X for the 2017 Christmas Weekend. If we count in the Pixel XL, the figure is double that of the X and greater than all new iPhone models combined. According to a Reuters source, Apple re-adjusted its Q1 2018 target for iPhone X sales down by 40%.
Apple’s Lacks A Standout Position In The World’s Two Largest Smartphone Markets
In China, as TechCrunch writes, Apple sales started declining from 2017. Sales went up again for the first time in Q3 2017, but aren’t expected to stay healthy. iPhone 8 and 8 Plus are said to perform poorly in the PRC with retailers forced to discount to drive sales. In India, APAC’s fastest growing smartphone market, Xiaomi is expanding most rapidly, with close to 24% market share as of Q3 2017, whilst Apple claimed under 3% of India’s mobile OS market in mid 2017. It means Apple lacks a standout position in the world’s two largest smartphone markets, with little indication that this will change anytime soon.
Has Apple Outlived Its Ethos?
Back in the day, Apple was a purpose-driven maker of minimalist portable devices with stellar customer experience. It cut through the clutter of the geeky and aesthetically challenged tech world. Aided by Jobs’ charisma and storytelling, this earned it a passionate following and a kind of "perceptive monopoly" in people’s minds: Apple was the only company offering the sort of experience its customers loved.
Now, the game has changed, and we seem to be entering an era in which competitors emulate the Apple recipe with greater success than the original. Asia’s highly brand conscious consumer pool may have afforded it an edge competing in this region, but that alone is no longer enough.
