IPHONE 7 BREAKS THE STREAK
Wall Street's expectations were exceeded by Apple's first big screen smartphone, the iPhone 6 and 6 Plus. But it is very unlikely the iPhone 7 and 7 Plus will get have the same gusto when Apple reports its first quarter earnings today. This is largely due to the younger brother not having the same wow factor as it's elder.
With two thirds of sales generated by the iPhone and a lot of revenue not directly from the iPhone but tied to it (services), it has become more important to Apple than ever before. But just like other handset manufacturers, Apple is facing diminishing excitement towards phones. This lead to a sales drop for the first time in the company's history in 2016.
Of course Apple will report they sold more iPhones in its first quarter than a year ago, reaching 78 million from 74.8 million. Although this uptick in sales breaks its streak of declines over the last three quarters, it will fail in comparison to the blowout Apple had in fiscal year 2015. This is largely due to the fact that it seems like Apple produced the same phone with limited changes and slapped an upgraded name to it.
Features like better cameras and water resistance only pleased some buyers, but because there was no design change, many would be customers opted to stick with their older models. The other side of that coin is people just aren't as excited to upgrade their phones as often. This could be contributed to pricing and the fact that most smartphones are so technologically sound that they meet the customers' needs longer.
Of course, Apple isn't the only company falling victim to this decline. The overall smartphone market has slowed over the last few quarters. This decline could be caused by the over saturation of new phones each year. The consumer is overwhelmed or just cannot afford to upgrade to another $800+ phone each year. Not to mention that carriers charge big penalties for upgrading early, which does not help the smartphone market the least bit.
Global phone shipments all but died in 2016 with a 0.6% rise to 1.45 billion units. This is extremely less than the 10.4% growth between 2014 and 2015. This statistic even includes the holiday season, when most smartphone companies see their biggest quarters due to gift givers and the fact that it is usually the first full quarter of sales.
To combat this overall decline, Apple is going to have to make some big design tweaks. Adding a OLED screen to the device for the first time is one of these big tweaks. They may even think about shrinking or getting rid of the bezel around the display to make the touchscreen larger.
Morgan Stanley analyst Katy Hubert said the iPhone 8 could drive a "supercyle" of sales, with shipments expected to rise 20% of more in 2018. But as it stands, Apple is going to have to weather a bad fiscal year 2017.
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Photo Credit: www.iphone7updates.org