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Apple effort to make amends is bad for iPhone business

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Published: January 5, 2018 1:00:45 PM

I hate to be a party pooper, but I am. Apple Inc.'s decision to do the right thing for customers will be bad for business.

Apple, iPhone business, recent news on i phone, iPhone batteries, iPhone units, US smartphone owners, Barclays, New iPhone X, apple PC sales, latest news on apple, Wall Street Apple pledged to make it easier for people to check the health of their iPhone batteries, and it cut the price of replacing them from to . (Reuters)

I hate to be a party pooper, but I am. Apple Inc.’s decision to do the right thing for customers will be bad for business. You probably know that Apple (sort of) apologized for not telling people about a software tweak it made about a year ago that slowed performance of iPhones with worn out batteries, to prevent them from shutting down unexpectedly. Apple pledged to make it easier for people to check the health of their iPhone batteries, and it cut the price of replacing them from $79 to $29. It’s the right thing to do, even if Apple had to be shamed into doing it. I’m planning to take Apple up on its battery deal. Apple’s shame is my gain. I probably wouldn’t have replaced the 6s model I bought more than two years ago any time soon. But I’m definitely not going to buy a new one now that I can just freshen it with a low cost new power pack. Apple just made me believe I don’t need to upgrade until the device goes completely kaput. What will thinking like this do to sales of Apple’s most important product? Roughly 500 million iPhones currently in use are between one and three years old, and therefore eligible for the battery replacement. Surely some of those people are considering a newer model, but would gladly pay $29 for a chance to perk up their phone, rather than pay $700 or more for Apple’s latest editions.

On Wednesday, Barclays stock analysts estimated if owners of one out of every ten of those roughly 500 million iPhones got a battery replaced, and 30 percent of those people were happy enough to skip a new phone purchase this year, Apple could lose out on sales of 16 million fresh iPhone units. Any estimate is likely a shot in the dark. And if the analysts are correct, it’s not bad. Wall Street expects Apple will sell more than 240 million iPhones in its fiscal year ending in September; Barclays’ figures suggest Apple’s battery-related hit might amount to a few percentage points of revenue. Not good. Not a disaster, either.

But let me go back into party-pooper mode. In this stage of the smartphone industry, growth is hard to come by. IDC forecasts that global smartphone shipments inched up 1.2 percent in 2017, compared with an annual growth rate of 28 percent in 2014. The research firm doesn’t expect the pace of sales to improve that much in coming years. That makes every single sale important, especially those from repeat buyers. Apple sells the vast majority of new iPhones to people trading up from its older models, and other smartphone vendors are also heavily dependent on replacement purchases.

The bad news is people aren’t replacing their smartphones as often as they used to. On average, U.S. smartphone owners are now waiting more than three years between purchases, up from about two years in 2014, according to industry consultant Chetan Sharma. Some other big smartphone markets have similar trends. New iPhone X and 8 models were supposed to trigger a “super cycle” of upgrades, particularly from the many owners of Apple’s three-year-old iPhone 6 models. Anything that makes existing iPhone owners delay a new purchase — even if it’s just a few months or a year — will make this cycle less super.

The patterns in smartphones are starting to look — gasp! — like what happened in the personal computer industry. People and companies started to feel their computers were good enough, and waited longer to replace old ones that worked fine. That had a profound effect on PC sales. Unit shipments were on pace to decline in 2017 for the sixth year in a row. If smartphones are the new PCs, Apple won’t be in the mood to party.

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