Apple is set to make 5 billion dollars less this quarter than it previously expected. That’s a pretty big deal, and it’s down to two major things. One was an “economic weakness in some emerging markets.” The other was that Apple said it sold “fewer iPhone upgrades than we had anticipated.”
That second one is very interesting. Why aren’t people upgrading? There are two possibilities. One is that they’re switching to Android. The other is that people are holding onto their old iPhones for much longer. Why’s that?
Lower carrier subsidies
It used to be that nobody bought a phone outright. We’d head to the local cellphone store and see what was available in our monthly price range. The actual selling price of the handsets wasn’t even shown. That now seems as crazy as buying a random PC from the selection at the local mega-mart. These days we pick a phone, and shop around for a good carrier deal, but those subsidies have shrunk.
It’s not a total disaster for Apple. Pocket computers have become an essential part of our lives, snuck into that role by masquerading as on-contract mobile phones. But, like computers, we now hold onto our almost $1,000 pocket versions for a lot longer.
Cheap battery replacement
Apple’s performance-throttling Battery Health feature is designed to keep old phones ticking along, even when their old, weak batteries aren’t up to the task. It’s the phone equivalent of a walking stick for old folks. It slows you down, but at least you can still get around.
Not only did it get dinged for this by the press, it also meant that old iPhones last longer. Worse, the bad publicity led Apple to offer cheap battery replacements for older iPhones, which gave them a new lease of life. A double-whammy, combining bad publicity and lost sales, all because Apple was trying to do the right thing.
iPhones are more expensive this year. Whether it’s rising costs, or the strong U.S. dollar, or Apple trying to make up for the lack of sales growth with higher prices, it doesn’t matter. The result is that even the entry-level new iPhone this year, the XR, is more expensive that last year’s iPhone 8.
And that’s just iPhones. Accessories like the new iPad cases and keyboard are almost absurdly expensive. And the amazing new iPad Pro might be the best ever iPad, but it is also the most expensive ever iPad. You can get it up to two-thousand dollars on storage bumps alone.
If you already have an iPhone, then these higher prices are enough to stop you upgrading for an extra year at least.
iOS 12 made old iPhones faster
The title of this section says it all. iOS 12 made old iPhones faster. And arguably, the older your iPhone, the bigger the performance jump when you upgraded. iOS 12 also runs on all phones that could run iOS 11.
Usually, Apple must decide which iPhones are too old to run an iOS update. If it supports older handsets, then it’s accused of deliberately slowing them down to force upgrades. If it drops support, it’s accused of forced obsolescence. Either way it can’t win.
iOS 12 didn’t drop anyone, and still made their phones faster. And yet Apple still didn’t win, in upgrade terms.
Apple is designing iPhones to last
In the 2018 iPhone event, Apple’s environment Lisa Jackson. Cult of Mac head honcho Leander Kahney wrote this about it:
And lastly she spoke about how Apple is making its products more durable and recyclable. Jackson talked up Apple’s GiveBack program, which takes back old devices for an Apple store credit to be resold or recycled.
One of Apple’s main goals for the iPhone is to make the product more sustainable. That means it lasts longer, and also that it uses fewer resources to make. And Apple is serious about this stuff. It’s far from corporate greenwashing. For example, Apple now runs its entire business 100% on renewable energy. That includes data centers, offices, and retail stores in 43 countries. Apple is also pressuring its suppliers to do the same, and is succeeding.
All of which is to say, Apple is deliberately designing its devices to last, and to be usefully recyclable when they finally die. And that’s bad for upgrade sales.
While you or I have never dropped our iPhones down the toilet, plenty of people do. That used to mean a new iPhone. Even AppleCare wouldn’t cover water damage. These days, if you drop your iPhone in the toilet, you just have to spritz it with bleach, and carry on. Good for us, bad for Apple’s bottom line.
Old iPhones as a gateway drug
There’s another knock-on effect of people keeping their iPhones for longer. They don’t hand them down to family or friends. Often, an old iPhone is donated to a family member who uses Android, and would never normally buy an expensive iPhone. Until they get hooked by a freebie, anyway. Those hand-me-downs are gateway drugs, leading to further upgrade sales in the future.
Corporate growth and an enlightened, sustainable corporate practices can go together, but Apple is suffering from the runaway historical success of the iPhone. There will probably never be another iPhone, or even another technology category will ever match smartphones for their crazy worldwide popularity. Apple’s growth will inevitably slow. The question is, what will it do about it?
Apple is far from doomed, but surely there are some big changes coming over the next few years. It’s going to be interesting to watch.