iPhone sales growth flattens

Apple confirmed iPhone sales grew at their lowest-ever rate during the last quarter of 2015. The company went on to say sales could fall again in the current quarter, ending in March.

Mike Hosking asked me to put this into perspective on Newstalk ZB.

Yes, it spells the end of stellar iPhone sales growth. No, it doesn’t mean the end of the iPhone or Apple.

Apple made a profit of US$18.4 billion during the last quarter of 2015. That’s more than any company has ever earned in a single quarter at any time in history.

Apple has problems?

That’s not the worst kind of problem a company could have.

At the New York Times Farhad Manjoo writes:

“Apple’s iPhone business is now so huge it sounds almost fantastical — Apple books more revenue from the iPhone (about $154 billion in its last fiscal year) than Amazon, Facebook, Google, Microsoft, Hewlett-Packard or IBM generate from all of their operations. Two-thirds of the world’s countries have gross domestic products smaller than annual sales of the iPhone.”

That isn’t going to go away overnight.

What is behind the slowdown?

First, Apple reported problems selling in China where the economy is slowing. For the last two or three years most new iPhone sales have come from that country.

Second, Apple’s flat looking sales report comes after a huge sales surge the same time a year earlier. In late 2014 there was pent-up demand for a big screen iPhone. That meant a larger than expected increase at the time. Beating those record sales was never going to be easy.

Third, Apple changed the way it sells phones in the US. Until recently the iPhone was sold on a plan which meant buyers were subsidised by carriers. Now Apple sells phones outright, which means consumers have to dig deeper.

The phone market

There’s something else going on too. Just as Apple reported its slowdown, Samsung told investors it also sees slowing demand in 2016.

Owen Williams’ story suggests phones have hit the same saturation point as PCs.

That’s possible, but there are differences. People use phones every day and wear them out faster than they burn through PCs. They drop them more often, lose them, have them stolen more often than PCs. The average useful working life of a phone is between two and three years, although they can go on longer.

Phones eventually need replacing. Which means sales will stabilise. What level that happens at is a matter of guesswork, but it won’t be far from the sales peak.