27 April 2016

The New York Times: “iPhone Sales Drop, and Apple’s 13-Year Surge Ebbs”

From the iPod to the iPhone to the iPad, Apple created more than a decade’s worth of new gadgets to fuel its historic growth.

But the technology company’s dazzling 13-year run of quarterly revenue growth ended on Tuesday — a casualty of Apple’s already immense size, weakness in key global markets like China and the lack of another hot product to pry open the wallets of customers.

Apple, the Silicon Valley giant that has spent much of the last five years as the world’s most valuable company, said on Tuesday that revenue for its second fiscal quarter, which ended in March, declined 13 percent to $50.6 billion as sales of its flagship product, the iPhone, fell, with little else to take its place.

Vindu Goel

Hardly surprising given the poor growth in the previous quarter, when sales were just barely up compared to the previous year. The current weak demand may be caused, at least partially, by the abnormal surge in sales last year, when people got excited about finally getting larger screens in the iPhone 6 line – I was one of them after all! Somehow I doubt the smaller iPhone 5SE will generate the same flood of demand once it hits the stores – and at about half the price, it will make a significantly smaller contribution to Apple’s revenues.

Apple year-on-year growth by region

A more worrying trend that I just recently noticed is the shrinking demand in China. In the past quarters Apple has constantly presented China as their growth driver for the near future, but recent numbers show the Middle Kingdom is no longer interested in iPhones – in fact, the significant growth period in China coincides almost perfectly with the launch of the iPhone 6, suggesting buyers were primarily interested in the larger screens. Combined with the increased control and distrust of Chinese authorities towards American companies, it may signal tougher times for Apple and the end of fast growth in Asia.

Update: The prospects for India don’t look very promising either, despite Tim Cook’s comments, as the plan to sell refurbished iPhones was rejected by Indian authorities.

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