Weak demand leads Apple to halve iPhone 5 component orders

[edgedemon]

Apple are still doing well, I saw an article somewhere for AT&T's results for the last quarter, 10 million smartphones sold, 8.2 million of them were iphones, so they can't be doing bad with figures like that.

Having said that, circumstantial evidence would suggest that there is a change going on at some level, we are seeing press reports of reduced demand, no-one can deny that there was a lack of wow factor in the iphone 5 release, bad press over the maps and constant legal battles, and how many people do we all know that are either switching or have decided not to upgrade.
In our office of 12, we did have 7 iphone users, now we have 3, 2 bought SG3's, one bought a note 2 and one switched to WP8. All of these users had been iphone users since the 3G, one since the original 3. Most of them just fancied a change, and the lack of the wow factor for the 5 pushed them to another OS, one guy had just had enough of Apple full stop.

Apple still generate massive profits, but maybe they can't rely on the cash flowing in in quite the same way that they used to and will have to work a bit harder for their cash..

 

[Fillado]

You seem to be conveniently confusing hardware and software to make a poorly thought out point.

Windows runs on any old hardware - OSX only runs on premium hardware.

Android is available free on loads of old handsets - iOS is only available on premium hardware.

Android / Kindle tablets are being sold at cost to make any sort of impact - iPad is only available at premium prices.

The fact that Apple is making so much money by purposefully restricting their market to the high end whilst their competitors are virtually having to give it away says everything to me.

Nope. Apple's hardware is linked specifically to its software so you can interchange Mac with OS X and iPhone with iOS if you wish. At the moment Apple are in an extremely odd place with having relatively low market share, extremely high profit share and the vast majority of app developers prioritising for the platform.

If Apple don't change then this position will. There is only so far Apple can go until Android's market share becomes unavoidable. Did you see the recent hoo-hah about the BBC releasing apps for iOS before Android (with truthful enough reasons that Android is much harder to code for in general taking into account multiple devices, most people still using Gingerbread etc.)? Soon enough no matter how good reasons they have, prioritising iOS over Android will become simply inexcusable. Once that happens Android's domination is complete.

Nobody (by-and-large) cares if you don't write an application for the Mac. If you don't for Windows you aren't in the desktop software game. Period. In the same way digital music = iPod + iTunes. Nobody cared about Zune, Creative, SanDisk etc. Although this could change as people dump their iPod for an Android phone and no longer need iTunes...

Sure the Mac is incredibly profitable but it's influence was only to be that stepping stone for Windows. Same as it seems the iPhone was the stepping stone for Android.

Based on arbitrary targets that would be ludicrous for any other company.

We still don't have any real evidence of decreased iphone demand which was the whole point of the thread.

What we do know is that to compete with Apple you have to give your products away.......

Okay let me ask you a question based on what I already posted:

Why has "iPhone" demand increased yet profit has barely done so? Hint. That's because people are choosing the older iPhone 4 & 4S over the 5. Which is evidence that at least expensive-iPhone demand is decreasing.


I bought an iPhone 5. It's a fantastic phone (and my first iPhone that I've properly owned). But if Apple move as much as they've done with 4 > 4S > 5 & iOS 4 > 5 > 6 then I sure won't have ANY need to buy a new one in two years. I'll either stick with it for ages (and remember you aren't useful to Apple unless you are buying their hardware) or jump to Android. It seems most people now are realising (just in the same was as Apple lump their numbers together) that an iPhone 4 is basically an iPhone 4S which is basically an iPhone 5. An iPhone is an iPhone. Apple aren't "innovating" and people are seeing this and voting with their wallets for a cheaper option.

So as it so happens it's Apple that needs to start competing with Samsung. Not Samsung that needs to start competing with Apple. Which they already do. It's called the Samsung Galaxy S3 and it sells for the same price (ish) as an iPhone and makes them loads of money.

 

[Robbo]

*snip*

Apple only compete at the top end of the market. I think we can all agree on that.

Therefore, overall, Android will inevitably have a larger market share. It's on devices (from new) available from £50 to £600, whereas the iPhone is £350+ (4), with most models being £450+ (4S/5).

Your point is akin to saying that Aston Martin are a failure because they have a smaller market share than Ford. It's just not the case. Apple are making an absolute fortune, part of that is the fact they're recognised as very much a premium brand, they don't have to cater to the bottom end of the market.

 

[Hatter The Mad]

Nope. Apple's hardware is linked specifically to its software so you can interchange Mac with OS X and iPhone with iOS if you wish. At the moment Apple are in an extremely odd place with having relatively low market share, extremely high profit share and the vast majority of app developers prioritising for the platform.

If Apple don't change then this position will.

It is incredibly strange that you think Apple is in an 'odd place' because it dominates the high end (lower volumes, vastly bigger margins). Does that make every single luxury, premium or higher-end brand out there 'odd'?

Sure the Mac is incredibly profitable but it's influence was only to be that stepping stone for Windows. Same as it seems the iPhone was the stepping stone for Android.

The rest of your post (especially this part quoted) is sorely misguided and wrong, with a fundamental misunderstanding of how marketplaces operate and in particular what your conclusions are within the tech space.

 

[sbi5ar]

Okay let me ask you a question based on what I already posted:

Why has "iPhone" demand increased yet profit has barely done so? Hint. That's because people are choosing the older iPhone 4 & 4S over the 5. Which is evidence that at least expensive-iPhone demand is decreasing.

That's not really an argument is it? The production costs of old hardware will have come down to a point where they are still very profitable.

 

[SteveOBHave]

Apple only compete at the top end of the market. I think we can all agree on that.

Therefore, overall, Android will inevitably have a larger market share. It's on devices (from new) available from £50 to £600, whereas the iPhone is £350+ (4), with most models being £450+ (4S/5).

Your point is akin to saying that Aston Martin are a failure because they have a smaller market share than Ford. It's just not the case. Apple are making an absolute fortune, part of that is the fact they're recognised as very much a premium brand, they don't have to cater to the bottom end of the market.

No one has said that Apple is a failure. All he was talking about is that from a speculatory perspective Apple needs to up its game again. Operating at a perceived status quo wont cut it from an investor or shareholder perspective. Nor will it cut it with their customers. They can't keep repackaging the same OS and expect people to think that they're getting something new regardless of how good it is. 'If it aint broke...' doesn't float with gadgets and getting people to buy 'new' ones with the perceived 'same OS' does them no favours.

 

[Morfik]

Your point is akin to saying that Aston Martin are a failure because they have a smaller market share than Ford. It's just not the case. Apple are making an absolute fortune, part of that is the fact they're recognised as very much a premium brand, they don't have to cater to the bottom end of the market.

Aston Martin is a private company, Apple isn't. Apple shoud be working to increase shareholder return by catering to as much of the market as possible. Their old ideals don't cut it anymore.

 

[Raymond Lin]

Aston Martin is a private company, Apple isn't. Apple shoud be working to increase shareholder return by catering to as much of the market as possible. Their old ideals don't cut it anymore.

Errrrr, no.

Catering to as much of the market does not equal more profit.

Shareholders care about profit.

If you are a shareholder, do you care about your investment making more money or would you rather it cater for all the people but making less money?

Money. Money. Money.

 

[shine]

Aston Martin is a private company, Apple isn't. Apple shoud be working to increase shareholder return by catering to as much of the market as possible. Their old ideals don't cut it anymore.

Both a private and public company have people who at the end of the day want to see profits as that is how their investment makes them money.

Errrrr, no.
Shareholders care about profit.

Exactly, and at this time Apple is still making a lot of money.

 

[Fillado]

Apple only compete at the top end of the market. I think we can all agree on that.

No they don't.

Mac - (Extremely) High End
iPod - Low + Middle + High End
iPhone - Middle (thanks to selling off old models) + High End
iPad - Middle + High End

Think about it. It's only recently that Apple have continued to sell older models of products when they brought out a new one. Since when did they sell and have old Macs or iPods in place in an Apple Store?

Your point is akin to saying that Aston Martin are a failure because they have a smaller market share than Ford. It's just not the case. Apple are making an absolute fortune, part of that is the fact they're recognised as very much a premium brand, they don't have to cater to the bottom end of the market.

That is SUCH a horrible analogy. The car market doesn't depend on any external factors other than enough people are buying your car for you to make money. Same goes for clothes, watches etc.

A better one is saying Aston Martin make their own premium car that runs on their own premium petrol. Ford + Ferrari + Toyota + Bugatti + etc. runs on a general petrol. Petrol stations have both because they get more sales from the general but more profit from the premium. At SOME point though, the sales of the premium die off enough (or the sales of the general increase so much) to make it not worthwhile to have at every station. Perhaps one in every-so-many miles instead.

Yes. That is what will happen with Apple. Apps are what truly drive smartphones and where they are people will follow. There is a point where market share WILL matter and Android become the new Windows and iPhone becomes the Mac. Again.

It is incredibly strange that you think Apple is in an 'odd place' because it dominates the high end (lower volumes, vastly bigger margins). Does that make every single luxury, premium or higher-end brand out there 'odd'?


The rest of your post (especially this part quoted) is sorely misguided and wrong, with a fundamental misunderstanding of how marketplaces operate and in particular what your conclusions are within the tech space.

If you have one platform that has 70% of the market and one that has 20%... Which do you think you should code for? It's odd that people look at that and decide on the 20% one.

Based on you comparing Apple to "every single luxury, premium or higher-end brand out there" it shows you have little understanding of the tech market. Just look at how quickly Nokia (whether inevitable or due to Elop) took an utter nosedive. You'd be a complete fanboy to think this can't happen to Apple. Although due to their cash reserves they have the resources to act quickly and put things right if it did. Unless "quick" is shown by how quickly they've been improving Maps then perhaps not

Equally Apple are stubborn and this could undo them too. A phone such as the Samsung Galaxy Note is pretty much everything Apple reckons a phone SHOULDN'T be like. Yet they are selling and selling extremely well. Everyone laughed at the phone when it came out but it turns out Samsung gave customers something they didn't even know they wanted. Oh I wonder where I've heard than before?

That's not really an argument is it? The production costs of old hardware will have come down to a point where they are still very profitable.

Profit per unit sold then if that makes you happier?

No one has said that Apple is a failure. All he was talking about is that from a speculatory perspective Apple needs to up its game again. Operating at a perceived status quo wont cut it from an investor or shareholder perspective. Nor will it cut it with their customers. They can't keep repackaging the same OS and expect people to think that they're getting something new regardless of how good it is. 'If it aint broke...' doesn't float with gadgets and getting people to buy 'new' ones with the perceived 'same OS' does them no favours.

You can sum things up much better than I can



I will leave you all with two things to think about:

1.

And how are monopolies lost? Think about it. Some very good product people invent some very good products, and the company achieves a monopoly. But after that, the product people aren't the ones that drive the company forward anymore. It's the marketing guys or the ones who expand the business into Latin America or whatever. Because what's the point of focusing on making the product even better when the only company you can take business from is yourself? So a different group of people start to move up. And who usually ends up running the show? The sales guy. John Akers at IBM is the consummate example. Then one day, the monopoly expires for whatever reason. But by then the best product people have left, or they're no longer listened to. And so the company goes through this tumultuous time, and it either survives or it doesn't. Look at Microsoft — who's running Microsoft? (interviewer: Steve Ballmer.) Right, the sales guy. Case closed. And that's what happened at Apple, as well.

Tim Cook = A Sales Guy

Also Apple are pretty arrogant and they think the iPhone is just perfect the way it is (specifically the width).

2.

An advert like this would've been impossible a few years ago. But yet it successfully makes fun of pretty much everything currently Apple.

 

[Robbo]

No they don't.

Mac - (Extremely) High End
iPod - Low + Middle + High End
iPhone - Middle (thanks to selling off old models) + High End
iPad - Middle + High End

Aside from the iPod, it's all pretty much high end. The iPhone 4 is still very expensive compared to the majority of phones. It's not as if most of the iPod's are cheap anyway, they're fairly expensive compared to a lot of MP3 players.

That is SUCH a horrible analogy. The car market doesn't depend on any external factors other than enough people are buying your car for you to make money. Same goes for clothes, watches etc.

A better one is saying Aston Martin make their own premium car that runs on their own premium petrol. Ford + Ferrari + Toyota + Bugatti + etc. runs on a general petrol. Petrol stations have both because they get more sales from the general but more profit from the premium. At SOME point though, the sales of the premium die off enough (or the sales of the general increase so much) to make it not worthwhile to have at every station. Perhaps one in every-so-many miles instead.

It may not be an ideal analogy, but you surely must understand the point behind it. Apple can choose to participate in whatever part of the market they want. Just because they get massively undercut by cheaper (and inferior) alternatives doesn't mean they have to drop their prices or they're in trouble. People are always happy to pay more for something that's better. It's the same reason Audi/BMW/Mercedes are very popular and everyone just doesn't get a Ford/Vauxhall instead.

I know exactly what your overall point is, but the fact is Apple don't have to do any of that. You can operate perfectly fine without it; as the record profit margins show. Shareholders clearly have unrealistic expectations when you can post record profit margins and they still complain.

As for the other comments about them 'repackaging' the same OS and hardware etc, that is just utter nonsense. If you think that then the same applies to Samsung/Google and so on. It's just a ridiculously narrow minded statement that frankly shows a hefty amount of bias and very little thought.

 

[SteveOBHave]

As for the other comments about them 'repackaging' the same OS and hardware etc, that is just utter nonsense. If you think that then the same applies to Samsung/Google and so on. It's just a ridiculously narrow minded statement that frankly shows a hefty amount of bias and very little thought.

It's a perception game. IOS looks the same, has always looked the same so the 'perception' is that it's the same. It's not an observation that it's good or bad only that it's perceived 'reality' to the customer is that they haven't changed up their game. Android in its various incarnations has always changed the way it looks, cleaned up various aspects and refined existing. MS WinPho is a whole new ball game that looks stunning in its operation and comes in some really nice new hardware that has broader appeal than the 'older' more staid iOS. It doesn't matter if Apple has frequently changed it up, added newer better features, it still looks the same. Perception is reality.

It's not a narrow minded statement, I think you just fail to see the bigger picture and unfortunately suffer from your own bias. Apple can continue to do whatever they like but 'whatever they like' doesn't translate into investor and shareholder confidence and that is clearly evidenced by Apples 37% stock value fall since September last year. 37%!!! Over a third of their stock value. There does seem to be a bit of 'ostrich head burying' going on here.

 

[Hamish]

Not sure what the argument is about here.
Apple is the most profitable phone manufacturer who just had their best quarter ever
They make the fastest, thinnest, best supported, phone with the highest customer satisfaction rating, best customer service and best ethics. They have the phone with the best battery life and best app ecosystem.

There are other manufacturers who also make other phones, a couple of which are as good as the iPhone.

Apple are not losing money, they are not releasing bad products, they are not corrupt or ripping people off, they don't have dissatisfied customers.

Why do so many people have such a problem with them? Jealousy?

 

[MatteH Oxford]

Why do so many people have such a problem with them? Jealousy?

No, they remind me very much of VW, especially the Golf car.

Both apple & VW have this perceived level of quality which is not accurate. The Ford Focus for instance is more reliable & far nicer to drive than a Golf, the golf is more expensive & inferior yet the blind sheep that buy them are convinced that they are getting a 'better' product.

All down to good marketing, which is what apple is mostly about i.e. giving people products with an obvious visual statement which supposedly means they have an above average lifestyle.

 

[SteveOBHave]

Not sure what the argument is about here.
Apple is the most profitable phone manufacturer who just had their best quarter ever
They make the fastest, thinnest, best supported, phone with the highest customer satisfaction rating, best customer service and best ethics. They have the phone with the best battery life and best app ecosystem.

There are other manufacturers who also make other phones, a couple of which are as good as the iPhone.

Apple are not losing money, they are not releasing bad products, they are not corrupt or ripping people off, they don't have dissatisfied customers.

Why do so many people have such a problem with them? Jealousy?

Hmm - I think you might need to check up on a few things there regarding things such as ethics, battery life, thinnest.

Apple has dropped 37% of their share value since September last year wiping $50billion USD off their value.

I'm not for or against Apple but it's important to look at the facts objectively and unfortunately they don't stand up to your analysis. There is a fairly large separation between factual critical analysis and jealous misinformation.

 

[shine]

Hmm - I think you might need to check up on a few things there regarding things such as ethics, battery life, thinnest.

Apple has dropped 37% of their share value since September last year wiping $50billion USD off their value.

I'm not for or against Apple but it's important to look at the facts objectively and unfortunately they don't stand up to your analysis. There is a fairly large separation between factual critical analysis and jealous misinformation.

I agree that not everything Hamish said is as clear as he makes out but share value does not change the fact that Apple are still making profits and are expected to continue.

 

[Hades]

Apple's company valuation has fallen below Exxon and is no longer the highest valued company:

http://www.theregister.co.uk/2013/01/26/apple_loses_most_valuable_status/

 

[Robbo]

It's a perception game. IOS looks the same, has always looked the same so the 'perception' is that it's the same. It's not an observation that it's good or bad only that it's perceived 'reality' to the customer is that they haven't changed up their game. Android in its various incarnations has always changed the way it looks, cleaned up various aspects and refined existing. MS WinPho is a whole new ball game that looks stunning in its operation and comes in some really nice new hardware that has broader appeal than the 'older' more staid iOS. It doesn't matter if Apple has frequently changed it up, added newer better features, it still looks the same. Perception is reality.

It's not a narrow minded statement, I think you just fail to see the bigger picture and unfortunately suffer from your own bias. Apple can continue to do whatever they like but 'whatever they like' doesn't translate into investor and shareholder confidence and that is clearly evidenced by Apples 37% stock value fall since September last year. 37%!!! Over a third of their stock value. There does seem to be a bit of 'ostrich head burying' going on here.

I don't think you understand my point properly.

You are essentially saying Apple haven't changed iOS 'much', because it still looks similar to when it started. Firstly, you can't assume that's a bad thing, many many people, more than the Android crowd who want full computer functionality, like the fact it remains familiar, but still evolves under the bonnet.

Secondly, it has evolved, there has been a lot added to it over the years, yet the same tired arguments continue to be peddled, people saying the first iOS is the same as the latest, which anyone with a brain cell knows is rubbish. By the same logic you can claim Android is no different, it's fundamentally the same as it has been for years and years, just with gimmicky things added. I know that isn't the case, but it's the same line of thinking.

I'd personally like it to be changed more, live icons and new icons and animations would spruce things up nicely and I expect that to be added. I think Windows Phone has great potential, it's smart (although seems to divide opinion) but the app situation is currently a joke, not just the choice but the prices. It's pretty much iOS with a different skin, and iOS comfortably wipes the floor with it in every area at present.

There's also the hardware to take into account, public perception would dictate the iPhone 5 has the best design and quality feel. It's the fastest phone in operation at most things and it's also a unique size. Not everyone wants a 5"~ screen.

Lastly, it's really not a discussion that can be had as, for example, the best selling Android phones - the Galaxy series, are heavily modified and look/work differently to the Nexus phones. So it would be a long and ultimately pointless discussion.

As for the whole 'perception' thing, that boils down to the individual person and the attitude on this forum - computer enthusiasts for the most part - probably accounts for a tiny amount of people in reality.

As for the last part about shareholder confidence, they have clearly expected Apple to continue to create new markets year on year, which is a ridiculous expectation, so they couldn't win anyway. In this sense they've been a victim of their own success. All they can do now is dominate their target markets, which they do with ease. When/if that changes, you can start the doom mongering.

 

[Number29]

If you have one platform that has 70% of the market and one that has 20%... Which do you think you should code for? It's odd that people look at that and decide on the 20% one.

As a developer I would focus my efforts on the platform that made me the most money. It would be irrelevant whether that platform had 20% of the market or 70%.

 

[Skyboat]

Not sure what the argument is about here.
Apple is the most profitable phone manufacturer who just had their best quarter ever
They make the fastest, thinnest, best supported, phone with the highest customer satisfaction rating, best customer service and best ethics. They have the phone with the best battery life and best app ecosystem.

There are other manufacturers who also make other phones, a couple of which are as good as the iPhone.

Apple are not losing money, they are not releasing bad products, they are not corrupt or ripping people off, they don't have dissatisfied customers.

Why do so many people have such a problem with them? Jealousy?

Unfortunately, these two points are grossly subjective to most consumers.