It wasn’t so many months ago when there were loads of reports that Apple’s great experiment, the iPhone X, was a huge failure. Inventories were growing, there were major cutbacks in production. All this allegedly based on reports from the supply chain.
Such blatant examples of fake news aren’t new. It happens almost every winter. After a December quarter and peak sales, Apple routinely cuts back on production from the March quarter. It’s not the only company to follow such seasonal trends, but somehow Apple gets the lion’s share of the attention.
From time to time, Tim Cook schools the media about relying on a few supply chain metrics, reminding them that, even if true, it doesn’t necessarily provide a full picture of supply and demand.
He might as well be talking to himself since he’s almost always ignored.
In any case, the numbers from the December and March quarters painted a decidedly different picture than those rumors depicted. The iPhone X was the number one best selling smartphone on Planet Earth for every week it was on sale. I don’t know if the trend has continued, but Apple has nothing to apologize for.
Now one of the memes presented in the days preceding the arrival of the iPhone X — before the talk about its non-existent failure arose — was that it would fuel a super upgrade cycle. Up till then, the usual two-year replacement scenario was beginning to fade. In part this was due to the end of the subsidized cell phone contract in the U.S. fueled by T-Mobile’s supposedly innovative “Uncarrier” plans. They appeared to represent something different, but at the end of the day, not so different in what you had to pay, at least for the term of your smartphone purchase.
Originally, you’d acquire a cell phone either by buying the unit outright, or signing up for a two-year contract in which you’d pay something — or nothing — upfront and then be obligated to keep the service in force for at least two years. If you cancelled early, you’d pay a penalty to cover what the carrier presumably lost because you didn’t pay off the device.
After two years, you’d be able to cancel your contract without penalty, but if you kept it in force, the price wouldn’t change even though the device had been paid off. It was a boon to the carrier if you didn’t upgrade. But if you did, the two-year requirement would start all over again.
With an “Uncarrier” deal, the cell phone purchase was separated from your wireless service. You could buy it, add one you own to the service if it was compatible, or acquire a new handset for an upfront payment, plus a given amount every month until it was paid off. It was essentially a no-interest loan, but you’d have the right to exchange it for a new device after a certain amount of time, usually 12 to 18 months. This way, the purchase became a lease, and you’d never own anything. In exchange for getting new hardware on a regular basis, you’d never stop paying.
What it also meant is that, once your device was paid off, the price would go down, giving you an incentive to keep your hardware longer if it continued to perform to your expectations.
Now that predicted iPhone super upgrade cycle didn’t occur as predicted. Yes, iPhone sales did increase a tiny bit in the last quarter, but revenue has soared because the iPhone X dominated new purchases, thus boosting the average transaction price. That, too, was contrary to all those predictions that Apple’s most expensive smartphone was way overpriced, and customers were reacting negatively.
How dare Apple charge $999 and up for a new handset?
Rarely mentioned was the fact that Samsung, Pixel Phone by Google and other mobile handsets makers also sold higher-priced gear, but there were few complaints. It’s not that sales were great shakes, but some regarded such handsets as certain iPhone killers, except that Apple overwhelmed these products in sales.
So where’s what’s the latest alleged super (duper?) upgrade cycle about?
Well, according to a published report in AppleInsider, Daniel Ives of GBH Insight claims that “the Street is now starting to fully appreciate the massive iPhone upgrade opportunity on the horizon for the next 12 to 18 months with three new smartphones slated for release.”
Deja vu all over again?
For now Apple has become a Wall Street darling. But don’t bet on that continuing. The next time someone finds reasons, real or imagined, to attack Apple’s prospects for success, the stock price will drop again. Of course, there are other reasons for stock prices to vary, including the state of economy, possible trade wars and other reasons, including investor psychology.
So what is Ives expecting?
He is projecting that Apple might sell up to 350 million iPhones over a period of 18 months after this fall’s new product introductions. Supposedly they will be so compelling that people who might have otherwise sat on the sidelines and kept their existing gear will rush to upgrade.
As regular readers might recall, predictions have focused on a new iPhone X and a larger iPhone X Plus, plus a regular iPhone with an edge-to-edge LCD display. Will there be an iPhone 8 refresh, or will Apple just sell last year’s models at a lower price? What about a smaller model, the alleged iPhone SE 2?
I don’t disbelieve the rumors about the 2018 iPhone lineup, but predictions of super upgrade cycles may not be so credible. People appear to be keeping their smartphones longer, so long as they continue to deliver satisfactory performance. And. no, I won’t even begin to consider the performance throttling non-scandal.