Smartphones as we know them today were created by Apple in the form of an iPhone, and ever since the first iPhone was brought to the market in 2007, iPhone Sales have been on the rise year in year out. The fact that other phone makers ventured into the smartphone market to come up with juicer smartphone models didn’t stop iPhone Sales from rising, well, until this quarter that saw Apple report a drop of iPhone sales for the first time ever.
In the quarterly declaration of earnings, Apple revealed that revenue declined by 13% to record $50.6 billion compared to the same period the previous year. The decline in revenue was attributed to a 16% deep in iPhone sales that recorded 51 million units in sales down from 61 million the same period of the previous year.
Although Tim Cook has attributed the drop in iPhone Sales to “strong macroeconomic headwinds, unfavorable currency exchange rates and a grim global economic outlook”, the fact of the matter is that smartphone sales have peaked at the top end where most of those who would need a high end smartphone device have already acquired one. “The global smartphone market is slowing as penetration of smartphones in major mature markets reaches saturation,” said Jan Dawson, president of Jackdaw Research.
The announcement that iPhone Sales had dropped for the first time ever immediately affected Apple’s shares with trading closing yesterday after Apple Shares had undergone an 8% drop. As Forbes reported, revenue from sales of iPads also “declined 19% and from sales of Macs by 9%. Services revenue grew 20% to $6 billion. Overall sales declined in every region of the world, except Japan, where they grew by 24%.”
For Apple, matters are even worse considering that in 2015 they were able to penetrate the huge Chinese market and this penetration had given them the expectation that iPhone Sales will continue to experience the steady growth it has had the previous 8 years.
What the drop in iPhone Sales means is that if Apple wants to remain relevant in the smartphone market, it must diversify her smartphone offering and start considering penetrating the emerging markets like Asia, Latin America and Africa where brands such as Xiami, Meizu, Tecno, Infinix and the others are taking foothold. Otherwise if Apple still wants to remain the rich only brand that it has been then it must revolutionize the smartphone industry and come up with a totally different smart communication device.
The problem Apple now faces even if it was to think in lines of cheap affordable smartphones is that those Chinese brands that have taken root in emerging markets are offering extremely affordable devices with better specs, specs that are in some cases are much better than some of the top end offerings Apple has given the market in the recent years.
Given that Samsung has also been experiencing decline in smartphone sales at the top end of the market where their latest models like the Samsung Galaxy S6 and Samsung Galaxy S7 haven’t been able to report formidable sales at the levels of Samsung Galaxy S2, Samsung Galaxy S3 and Samsung Galaxy S4 provided, including the fact that other brands like HTC, LG, Sony and Lenovo have also been experiencing the same sales problems,it is clear that smartphones as we know them today are getting old and it is time for these companies to rethink the entire smartphone ecosystem.