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tim cook talks about iphone 8 on stage in cupertino california september 2017
Wake-up call: Tim Cook introduces the iPhone 8 in Cupertino, California, September 2017. Photograph: Stephen Lam/Reuters
Wake-up call: Tim Cook introduces the iPhone 8 in Cupertino, California, September 2017. Photograph: Stephen Lam/Reuters

You don’t need to be a computer scientist to work out why iPhone sales are down

This article is more than 5 years old
John Naughton

The slowdown at Apple should surprise no one given that most adults on the planet already have a smartphone

It must be tough being Tim Cook, the CEO of Apple. Well, perhaps we shouldn’t be too sympathetic: in 2018 he took home $15,682,219, and his earnings since 2011 are estimated to be not far south of three quarters of a billion dollars. For that he has to run the world’s most successful tech company. But that’s probably a doddle compared with trying to manage the expectations of Wall Street and the world’s media, both of which have an obsession with Apple that sometimes borders on psychosis.

It’s not that long, for example, since the fevered speculation about whether Apple would be the first trillion-dollar company reached a climax on 2 August last year when it finally scaled that particular greasy pole. But since October its shares have dropped 20% and it’s been overtaken by Microsoft – yes, ye olde Microsoft! – as the world’s most valuable company. And then on 2 January, in a letter to investors, Tim Cook revealed that he expected revenues for the final quarter of 2018 to be lower than originally forecast.

Given that most of Apple’s revenues come from its iPhone, this sent the tech commentariat into overdrive – to the point where one level-headed observer had to point out that the sky hadn’t fallen: all that had happened was that Apple shares were down a bit. And all this despite the fact that the other bits of the company’s businesses (especially the watch, AirPods, services and its retail arm) were continuing to do nicely. Calmer analyses showed that the expected fall in revenues could be accounted for by two factors: the slowdown in the Chinese economy (together with some significant innovations by the Chinese internet giant WeChat); and the fact that consumers seem to be hanging on to their iPhones for longer, thereby slowing the steep upgrade path that had propelled Apple to its trillion-dollar valuation.

What was most striking, though, was that the slowdown in iPhone sales should have taken journalists and analysts by surprise. Everyday experience should have told them that the iPhone picture was changing. I’ve lost count of the number of friends, colleagues and acquaintances who are happily still using their four- or five-year-old iPhones. The devices still work perfectly for their purposes. Sure, the camera isn’t as good as the one on the iPhone XS, but it’s still good enough for everyday use. My trusty old iPhone 6 is still more than adequate for my needs. In fact, since the last couple of iOS updates and a replacement battery, it’s as good as it ever was. And one of the things that would stop me upgrading is that I find its fingerprint recognition much more convenient for secure online activities than the much-touted face recognition in the newer iPhones would be. I’ve been an early adopter and a gadget freak for as long as I can remember, so if I’m not upgrading, there must be lots more like me.

Besides, way back in August Bloomberg’s Tim Culpan had published a very perceptive piece under the headline “Dark clouds gather as tech stockpiles hit pre-crisis levels”, which made it crystal clear that there was a slowdown coming. Mr Culpan, who takes an interest in unfashionable topics like supply chains, had spotted that inventories were uncharacteristically high in the companies that supply parts to smartphone manufacturers. So it followed as the night the day that those same manufacturers were expecting to sell fewer phones.

The significance of this, as pointed out by Benedict Evans – an acute observer of these things who produces an unmissable weekly newsletter – is that we’re approaching “peak smartphone”. There are 5.5 billion adults on Earth, of whom 5 billion have a mobile phone and between 3.5 billion and 4 billion have a smartphone, of which between 800 and 900m are iPhones. “The mobile market is reaching saturation,” writes Evans, “and so is the smartphone market, and Apple has won the high end of the smartphone market. This is not ‘the fall of Apple’ – it’s just the shift of smartphones to boring maturity, as we look for what’s next.”

Which of course is what those wretches who made the trek to the Consumer Electronics Show (CES) in Las Vegas recently were trying to find out. What’s going to be the New New Thing? And the heartening thing – at least for this columnist – is that nobody has a clue. Plus ça change.

What I’m reading

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The Perils of Perception: Why We’re Wrong About Nearly Everything – an intriguing (and sometimes embarrassing) book by Bobby Duffy.

Alexa’s army
We were shocked to discover that Apple had 800 engineers working on the iPhone camera. The Wall Street Journal has reported that Amazon has over 10,000 employees working on Alexa. Can this be true?

Happy snaps?
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