Published in El Pais, 8 January 2018.
On January 2nd Tim Cook announced that the new iPhone sales reached well below their expectations resulting in a massive stock plunge. For his part, Cook blamed the worsening economy in China along with a potential trade war between the two nations as reasons for this outlook. In his defence there is some truth to this as the slowing economy and rising political tensions are far from ideal circumstances, but the reality is this is a situation that has been brewing for a long time, and Apple did very little to protect themselves.
I have written about the dire situations with smart phones in the past, a lack of innovation combined with price increases has lead to many concluding there is little point to upgrade. In fact, the technological progress seems to defy the industry. Normally we can expect products to go down in price and often be of superior quality as time goes on but with smartphones we are looking at a modest upgrade that will cost at least $200 more than our last phone.
Of course, the lack of innovation and the price increase goes hand in hand. Apple of course realized that once the market matured it would be harder to convince consumers to upgrade their phone. Their solution? To make phones even more expensive to help make up on the loss revenue. This strategy worked briefly but has now put themselves in even a bigger hole, the more money is spent on a device the longer people need to hold on to it to justify the cost.
I think all phone manufacturers, not just Apple, are going to have to conclude that this experiment of a $1000+ phone was a failure and that it is time to revert to the old ways of offering innovative new devices at affordable prices. This would allow everyone the option to upgrade when they are ready and not holding onto phones longer then they normally would because they cannot afford it. They may not see record growths over the next few years, but it should be stable and the alternative could see these companies continuing to see slumping sales.