I agree with absolutely everything he says, but I think a big factor not covered is that I don't think it's only about N versus NS version popularity. How different those major releases with new form factors are from past models really matters and particularly in China. The 7 was in theory a form factor update, but it wasn't different enough. The 5 was a major update, but as the article pointed out it was a particularly bad cycle.
I think the problem is there aren't that many different distinctive shapes you can make a phone. Apple has done extremely well in this regard. The jewel case design and the X design with notch are both outstanding examples. The 6 sold so well because it was, for an Apple phone, huge. But the jewel case lasted 4 years (more including the CS). Dramatically increasing the screen size works once. If they stick with the X form factor another few years they will lose the distinctiveness factor. However major form factor updates aren't something you can pull off every year indefinitely, for technical reasons sure, but especially when you have a huge accessories market.
It's really amazing how successfully Apple has maintained their design lead and distinctiveness, but there's no way they can pull the most unique, most amazing new rabbits out of the hat every single year.
> Apple seems to have underestimated iPhone SE demand to a significant degree
I would love to purchase a new iPhone (or Android) if they were to make a new device with a comparable form factor to the SE. Instead, everything has progressed to these two-handed monstrosities that have resulted in fanny packs [1] becoming fashionable again simply to hold the damn things.
I don't know what phone I am going to get after my iPhone SE no longer works after OS bloat kicks in. It's the perfect phone pretty much. I like android better but I can't find a phone this size that works in the android universe. Surely there must be others like me that want a capable phone that isn't the size of a tablet?
Pixel 3 (not 3XL) to me is perfect size, has the "it works" simplicity and polish of iPhone, and tuned software / camera tweaks of Google that make me not miss iPhone at all. Specifically the camera is just amazing, the portrait mode and wide angle screen shot features, and AI / visual core chip tuning the pictures makes the quality better than any other phone I've used.
The Pixel 3 is huge compared to what I'm looking for. I know the bigger screens like 5.5" are normal now but it is too big for me, I like to travel light and hate big phones in my pocket and hands. I like computing on an actual desktop computer with a mouse and keyboard and just use my phone for texting, maps, and taking photos, etc.
I know two people who said they won’t buy another phone until the day their SE won’t turn on. I agree, SE form factor solves a great problem for some people. Not everyone wants a big screen!
Apple either isn’t making enough money on the SE, not listening to their survey group, or an executive doesn’t care. They need to fix this.
Does anyone really think Apple hasn’t done market research to determine which size phone would be best for them to sell?
As mentioned in one of the other comments, SE was using the production lines of the 5/5s. It probably isn’t worth it to keep those going for an older phone and the R&D for a new smaller phone is a huge cost. I’m sure it’s been proven that most people want larger screens at this point.
I mean, even the newer cheaper phone they have, XR, is larger than their standard XS.
Apple clearly didn't think bigger form factors made sense for a while, until Samsung proved them terribly wrong.
I do agree that in this case their market research about the SE is probably solid, but I think it's a mistake to assume that their market research is always correct.
I went from a 6S to an 8 Plus last year. I dind't go with the X because it was a first-generation product.
The 6S feels comically small now. But, the Plus is too big. I think taking the bezels off the top and bottom would be the perfect size phone. Maybe a little smaller.
I upgrade in the fall, so I'm interested to see what comes out. I'm looking forward to going back to a smaller phone, but the SE and 6S are too small IMO.
I have an iPhone 8 Plus and it is larger than I like and heavier. I bought it because I needed the larger screen to watch tutorial videos on the go that had a lot of text and the battery life was better than any other iPhone.
But the X size phone is tempting. But I don’t see myself buying another phone for 3 years.
When Steve Jobs was alive, market research didn’t dictate all these things. They built the best product possible and the ergonomics of the hand guided the shape of the phone.
No no no. People with small hands don’t want large phones. You can’t take ergonomics out of the equation. You can add a small keyboard or whatever you want. Some people actually can’t use big devices. Shorter people are not a small minority for crying out loud. There’s a decision being made somewhere along the line that’s taking the smaller phone away from these people. It’s probably not an issue in focus groups. That leaves you with the other two options.
Or maybe there’s a fourth option: they’re listening and they know something you don’t. Maybe 1% of people will never buy an iPhone again if it’s not the SE, but that doesn’t mean it’s worth it to keep offering it.
Larger screens tend to lead to people to use their phones more, which results in more app purchases[0]. (which results in more money being made in Apple's services division). It's a way to offset the decrease in new phone sales.
It's also much better for the platform that there isn't such a wide range between screen sizes. It's incredibly hard to make UIs scale from the SE to the XS Max and both be as functional and good looking on both.
I'm not sure I understand the question. You need to install it on both your iPhone and your iPad for sure. But universal apps are the exact same binary. But a lot of developers prefer to create 2 different app, 1 for iPhone and 1 for iPad for various reasons; charging separately for each being one possible reason.
That was just one person's opinion. Now that earnings are down, I'd guess that there's someone at Apple floating the idea of a releasing a small iPhone to boost sales, because there's a small but vocal minority of people that really want one and will immediately buy it.
I think a lot depends on your use-cases, what you spend time on your phone doing, where you're carrying it, etc.
I really like iOS, but one think I really envy about the Android ecosystem is that there are multiple vendors, so users aren't locked to just the most-popular size phone.
Do you think this is because the larger screen is inherently better or perhaps it's because the iOS and the whole app eco-system is geared toward larger screen? Perhaps a little of both?
Both, but more so because the larger screen is just inherently nicer.
Basically I think the ideal is a screen that's as large as possible while still being usable with one hand. The iPhone 8 is just over the edge for my hand size, but it's close.
My thought is they're trying to transition the phone to being your watch, with a 'tablet' for serious typing in a bag of some kind.
I mean, the Apple Watch is seriously good for most cases, it reliably sends messages using siri, I can answer calls on it, I can read my messages and do basically anything the phone can do, albeit much slower.
However, they'll have to brick my SE before I give it up. I bought an SE just before they got discontinued last year with apple care. I "downgraded" from a 7, this phone is definitely the best iPhone that exists for me and my slightly smaller than giants hands.. Even if a lot of apps are obviously not tested on the SE's size anymore. :(
I vastly prefer the SE over any other current-ish options. I'll be really annoyed when my one dies, I suspect, and I wish I'd bought another one before they discontinued.
This is pretty much all about pockets though - I typically wear a 3XL glove so it's not being driven by reach. I can accept needing to carry a bag if I need a laptop. For a phone it's insane.
I would love to purchase a new iPhone (or Android) if they were to make a new device with a comparable form factor to the SE.
I am in complete agreement with your attitude. However, it looks like the SE isn't coming back, and I wanted an Apple Watch anyway (after wearing smartwatches since the first Pebble...or SPOT if that counts). So I gave in, bought an iPhone XS and a watch. Previous smartwatch usage told me that the phone could probably remain safely in the bag most of the day. An Apple Watch makes it stay in that bag even more, I found out. If I'm out and about without the messenger bag/man purse, the cellular keeps me in contact. So for me, at least, carrying the monstrosity is reasonably solved.
Every use case is different, so this might not be a solution for everyone. And, yes, it is ridiculous that the solution is "go spend more money" because there isn't a reasonably-sized phone available. OTOH, most of my phone looking is "who's calling? What does the wife want on SMS? What's that reminder?" which is easily taken care of on the watch. When I do need a bigger screen, it's nice to have...well, a bigger bigger screen. :-)
I have had wrist pains ever since getting the 6 back in 2016. Now that I'm on the X, it's gotten worse. I fucking hate these larger phones. They cause significant pain for me, and I don't even have tiny hands.
This is essentially a long way of saying, "Phones are now seeing marginal improvements, just like PCs. The market is saturated." Or nearing saturation.
I wrote this in another thread, but when my iPhone 6 or 6s seemed to be failing a couple months ago, I just bought an iPhone 7 instead of the Xs or whatever the new hotness is. I can afford it but find it too expensive and the improvements marginal. Seemingly a lot of people are doing what I'm doing.
The piece explicitly rebuts that idea, most especially in its conclusion but also as the premise for why the market in China was poorly served by the schedule for the XR. You can disagree with it, but you can't reasonably claim that it's a long-winded way of saying the market is saturated.
It's funny to see the parent's comment in response to an article that literally claims
> [...] phones, thanks to their centrality in people’s lives as well as the greater likelihood of harm, will always have a faster replacement cycle than PCs.
Also funny: parent is committing a form of confirmation bias responding to an author concerned about confirmation bias.
I was already skeptical in general of articles about Apple doom -- we've seen those for decades. This year, I'm extra suspicious of any articles that lead with a chart of Apple stock, without showing for comparison the stock market overall.
Every company is suffering right now. AMZN, MSFT, FB, NFLX, and GOOG are all down 20-40% from their respective peaks 3 months ago, yet nobody seems to see reason to write articles saying that, say, Amazon's latest offerings are strategic errors.
I suspect you haven't read the article and stopped after glancing at the first graph. While the graph was, as you say, without context, the point was to illustrate numerous other stock hits due to iPhone misses.
But it strikes me as no different from any other divination. If it's true that "these errors really were predictable", why are they writing only after the fact, and why only about Apple?
Every time a stock goes up, down, or stays level, journalists and bloggers come up with some justification for it, and say that it was obvious in hindsight. It's usually plausible, but if it's so obvious, why can't they ever predict it?
If in Apple's case it's all because of product/market issues with the iPhone line, then why does it happen to correlate almost exactly with the Dow losses? Is this really an Apple error at all? Is Apple failing because they can't weather the same storm as everyone else without even getting wet?
I don't think Amazon, MSFT, FB or Netflix has issued a Warning in Guidance ( yet ).
Not to mention Apple, compared to others had a very low market P/E, and it still fall. Stocks Market buys into Companies future, not present. And that is the problem, they have never seen much headroom for Apple, but lots of downsides.
Is the psychology really that people prefer having last years “best” than this year’s “good”? This has not been my experience with close relatives, but the data seems to show it is in general.
These hot takes have really been blaming the consumer lately. Maybe because it sounds more intellectual to make broad stroke economic observations rather than talk about personal experiences with iOS versus Android phones, which often sound like flame wars.
I think people should be honest. Instead of suggesting that Chinese consumers have this or that idiosyncratic (implied stupid) preference, for which they have only broad market evidence, commentators should just say what they actually know from personal experience: that Android phones really, truly suck. That WeChat is an ecosystem of jank. That most Chinese consumers are actually smart people and agree with that premise, to the tune of the billions they spent on iOS devices every year anyhow.
I only recommend Apple stuff to relatives because they can go to a store when they need help. I wish companies like Google, HP, Dell, Samsung, and any other big consumer tech companies would open their own stores.
A secondary reason is that I still think Apple has a pretty big advantage when it comes to security and privacy. When you see Google starting to push RCS messaging with no default encryption you realize how little they really care about their user's privacy.
That said, the only Apple hardware I own is an iPad.
And Apple has even screwed that up their stores. They now no longer seem to do much in-store laptop repair. Sure, there's a location you can drive to. But your laptop still disappears for 3-7 days.
> I wish companies like Google, HP, Dell, Samsung, and any other big consumer tech companies would open their own stores.
They seem to be doing that - Microsoft has a large retail store in Sydney, Australia, and Samsung has retail stores in several Australian cities of varying sizes (the Sydney one is huge). The one in my city (Perth) is just a tiny pop-up stand, but they still do simple on the spot repairs of my Galaxy S8. Perhaps worth noting, some of the Samsung employees there were ex Apple Geniuses who had switched.
In fact, I've found that Apple's software is significantly worse than the alternatives. People used to ignore the fact that app start up time was worse on iOS devices compared to Android devices released two generations earlier, despite costing way more and running on four generations better hardware. App start up time is the performance metric that affects the vast majority of users the most. They finally fixed this in iOS 12.
Some things iOS users still can't do:
1. Develop applications for their own phone without paying a yearly tax or re-building and re-installing weekly.
2. Have a driving mode that works well when used in a phone mount.
3. Automatically route phone calls and texts through Google Voice or a secure phone app.
4. Multi-user support for sharing a device with family or temporarily sharing it with a stranger.
These are not niche features like playing games in emulators or using offline maps by default for privacy (both of which are also not possible on iOS). These are software deficiencies that affect normal daily use cases. The Chinese market has even more features that users need that are simply not supported on iOS.
The price is a big factor. Yes , people will buy the luxury phone , because there is a demand for that but it’s limited. Governments of so many counties spending so much money to financially educate people. They are not that stupid. I was going to do an upgrade , when XS and XS Max price was announced I was thinking that’s too much I’ll just buy the 1 y.o. iPhone X and that’s it. Instead they pushed “budget” $800 phone. Phones are going from specs competition back to normal branding and appealing. Means there will be strong resistance to buy not premium phone for premium price. They raise the price since 2 y.o. iPhone 7 almost 2 times. iPhone 7 was the premium device for the same price as XR. The main mistake they did is abandon iPhone X. They should release iPhone X , XR could be iPhone X hardware with non OLED screen , and price lower then X , that would stimulate the demand. Instead I will wait for the next year to switch to relatively new borderless form factor. And first time ever I’m checking what’s Samsung i going to present. I’m just not that stupid to spent $1,500 for smartphone even premium one , also not going to spent $800 for outdated XR. The main benefit of new iPhones is borderless trend introduced by Xiaomi 3 years ago. With outdated screen the benefits of this solution are zeroed. That’s actually why iPhone 8 lineup also failed. It’s not borderless. Instead of stimulating the biggest reason to upgrade Apple locked it with extreme pricing and not leveraging biggest trend for 3 years. Only premium segment of Apple products got this trend.
Besides your personal anecdote, there is no data to support you premise. Price increases for the flagship iPhone have resulted with increases of the average selling price across the entire line.
One of the major points of the article is that potentially, the XR just like the 5C, did not perform as well as Apple expected, because consumers want to buy the "best."
My belief is that Tim Cook's has been running Apple based mostly on inertia from Steve Jobs. As long as things worked mostly the same way, then not much needed to be changed to the formula. It's "easy" to increase revenues, when you benefit from the previous popularity of iPhones, a lot of previous revenue, and most of what you need to do involves launching the iPhone in new countries. Actually, BlackBerry benefited from a lot of these factors, too, when its revenue kept growing outside of North America, despite losing market share rapidly to the iPhone in the US.
But now that things are getting more different, such as prices becoming much higher, a possible economic downturn around the corner, mid-range phones becoming "good enough" for most people, the loss of subsidies from carriers, and so on, Tim Cook is getting a little "lost" in all of this, and doesn't know the best way forward. Worse, he may have already chosen a way forward (Apple becoming more "fashion-focus" for instance) and it may be the wrong way.
This was probably a good time for Apple to broaden their mac range, and expand their computer market share. Under the Steve Jobs era, the Mac was always a premium product, and focused on capturing industry profits rather than market share. I think switching to focusing on market share would have been a very good change for them to make.
As a high end product, the mac is likely not gonna make them much more profits than it already does. However, additional market share would further strengthen their customer base for the areas which will make them money. iPhones, iPads, and services.
If Apple were to release a 5-600$ laptop it likely wouldn't make them much money, but it would create more mac users, and I suspect mac users are significantly more likely to own iPhones and pay for services like iCloud and Apple Music than Windows and Linux users.
And TBH, Apple has a massive market in the enterprise just waiting for some competition. You can see this in the rapid and popular uptake of Google @ Work services, and Chrome OS in the enterprise and education services. People were looking for a simpler alternative to the entire MS Exchange ecosystem, and once again, while these may not have been massive money spinners on their own (though they definitely could have been that as well), they would form a strong solid base to sell iPhones to.
> I think switching to focusing on market share would have been a very good change for them to make
This would kill Apple. It's a profit share company. It's a profit share culture. Customer and culture are tightly knit; you don't change one without altering the other.
Between AirPods & Watch Tim Cook has overseen the creation of a Fortune 300 company within Apple in the wearable space. Not sure why people give Tim Cook shit. The fact of the matter is that all of tech is struggling at the moment with China tensions & overall economic volatility.
Pretty much. The corrolary is more interesting though: everyone, including Apple, thinks this is a "business" problem. It's not, it's technical.
The bottom line is that phones are commoditized at this point. There's nothing (statistically nothing, that is -- obviously everyone has preferences) that people want them to do that they don't, and there's nothing that a premium product can offer that the cheap ones don't have too.
That's not something Apple or Stratechery or posters here can fix. It's just the way technology works. It's the same thing (almost exactly the same thing) that happened to Apple in the early 90's. Sure, macs were still better. But they were better and more expensive and for 95% of what the median purchaser (which at the time meant "desk worker at a US business") wanted to do a PC clone running windows was perfectly fine. So Apple got trapped in a slowly shrinking prestige niche.
Now, eventually they broke out with exciting new products and new markets that drive new success. But that's not a "business decision".
I think such predictions are pretty much useless in most situations. For example, there are so many experts now who predicted the stock market crash. I follow a guy on Twitter who has been predicting global economy meltdown forever. These days he is suddenly looking like a prophet even though the meltdown has not totally started yet! Saying that Apple will have problems in China means nothing unless someone provides estimates for the losses.
This article uses all the data that is publicly available and yet claims that somehow Apple executives missed all that.
They're also one or two of the most highly regarded Apple commentators. And they provide examples of how apple execs missed stuff in the past. And apple clearly did miss stuff this last quarter: their guidance was uncharacteristically way off.
Stratechery isn't some random site, but you're comparing it to a guy on twitter.
A precise estimate isn't necessary. His claim was that they would shrink measureably in the first S year after a redesign.
Let's look at it this way. If I make 10 predictions out of which only 1 turns out true and if I keep harping on that 1 successful prediction, does that make me a good analyst? If you think yes, then I will be happy to be your investment adviser!
Edit: The guy I follow on twitter is not some random dude. He is an analyst and makes some great points.
The difference is that Apple is a cash-printing machine, making $100 billion dollars per year in revenue from the iPhone alone. Seems like people really do like those phones, and a comparatively tiny drop in the revenue one year doesn’t mean that’s changed.
I'm surprised that Apple made these forecasting mistakes despite having the foresight to release an extremely performant iOS 12.
This (performance focus) seemed like a capitulation to market saturation and longer device ownership cycles.
Either way, I think device makers are going to get hammered as tech plateaus. Focusing on longevity and usability will be huge differentiators. Apple's iOS12 seemed like a good move to prepare for this change.
This is a really great analysis of the situation but I think Ben, and Tim Cook in his public statements, are missing one important point: iOS 12 made the older devices (iPhone 5s, 6) run _much_ better than they were running on iOS 11 [1, 2, 3]. They improved the software so much on this iteration of iOS that they probably relieved a lot of the hardware upgrade pressure users were beginning to feel in the first half of 2018.
It will be very interesting to see if Apple even supports the iPhone 6 generation of hardware on the next version of iOS. If not, or if the software performance regresses significantly, I would expect the hardware upgrade pressure to really ratchet up again in the fall.
I don't think Ben misses this point. He concludes his pessimistic take with:
> It’s a bit of a hodgepodge with one primary takeaway: convincing customers to upgrade “good enough” phones is both challenging and unpredictable, and Apple can’t simply assume it will happen at the rate it has previously.
Ultimately he claims that users will eventually upgrade to the latest flagship iOS device. I think you (and I) disagree with his claim, though!
(I also might be falling prey to confirmation bias myself, specifically on the topic of phone pricing...)
users will eventually upgrade to the latest flagship iOS device
I know I fall into that group of users. I own a 7 currently, it's a few years old, but works well enough. I see no reason to upgrade to an XS today. If the 7 fails tomorrow, I'll buy an XS.
Ditto. Loved my 7. Walked into a pool with it in my pocket. Now have an XS. Typing this on a 2015 MacBook Air I only have because I traded my 2013 Air $500 to a neighbor for it. Plan on keeping it another 2 to 3 years; same, at the very least, for the iPhone.
They're well-built products that tend to work, and have warranties that show for it.
Yep, substantially so. So the battery program plus the iOS update both gave people reasons to hold on to their phones longer.
I usually upgrade every year, but the new phones just aren't enough of an upgrade from the original X to warrant it, especially given the much higher cost.
> This is a really great analysis of the situation but I think Ben, and Tim Cook in his public statements, are missing one important point: iOS 12 made the older devices (iPhone 5s, 6) run _much_ better than they were running on iOS 11. They improved the software so much on this iteration of iOS that they probably relieved a lot of the hardware upgrade pressure users were beginning to feel in the first half of 2018.
Meh, I don't know about that. Sure, iOS 12 is great and all, but the iPhone 5S and 6 have just 1GB of RAM. With essentially all mobile devices not using swap at all (due to the highly dubious endurance of the low-grade, Chinese-installed eMMC storage), that's just barely enough for the modern Web these days - and newer iOS apps can't be that much lighter, either! So, I fear that the iPhone 5S and 6 are practically on borrowed time, no matter what Apple does. The Nexus 5 is in far better shape, seeing as it came out with 2GB and will be able to run pmOS (on a mainline kernel, no less)...
Going a step newer, the Nexus 5X has common boot loop failure for which the solution is to flash a custom ROM that kills the pair of big A57 cores and use only the four smaller A53 cores. So it's not all sunshine and roses on the Android side either.
A friend of mine had a 5X replaced under warranty and immediately dumped it on eBay and bought something else because there was no sign of an official fix coming for this.
Not really. Source: iPhone 6 user. Couldn't upgrade to iOS 12 because of lack of space. Finally made room and after being told 12 would speed my device I had high hopes. Turns out, I don't notice any difference. App launch times, keyboard launch times, and overall responsiveness is just barely tolerable. 6S devices feel like light speed in comparison.
Thanks for the reply. I actually did check my battery, purchasing one of those apps that was trending about 6 months back when news broke of Apple's throttling. Battery is fine - phone is just slow which as you mentioned is probably because of the RAM situation.
> that's just barely enough for the modern Web these days - and newer iOS apps can't be that much lighter, either!
You might be surprised. Desktop safari is significantly more resource (including memory) efficient than Chrome and Firefox. And iOS apps are written in objective-c and swift, which are also a lot more memory efficient than say Java or JavaScript.
Of course, 1GB of RAM is still pretty small. But if the idevices can last 5 years instead of 2, that would be pretty significant. I don't think anyone expects them to last forever.
I have two coworkers still running 4Ses, which are more than 7 years old now. Smallish company, maybe 25 people in my office. It still makes phone calls, sends texts, and takes photos, so they'll upgrade when it dies.
Stuck on iOS 9 with that so it might not be a good idea from a security perspective, but I'm impressed with the hardware. At least one of them I know had a screen replacement, but still.
> They improved the software so much on this iteration of iOS that they probably relieved a lot of the hardware upgrade pressure users were beginning to feel in the first half of 2018.
Another other side of this is that they've given people good reasons not to upgrade: I've been surprised by the number of people who commented that the new phones are uncomfortably large to hold and, of course, a fair number of people don't like losing the headphone jack. None of those are complete showstoppers but since costs have also gone up around 20% beyond the rate of inflation[1], you don't need to give people much of a reason to delay a purchase which isn't necessary since everyone knows the phone you buy next year will be even better.
1. A quick spot-check comparing the iPhone 6S & 6S Plus we bought in 2015 vs. the XS / XS Max now has it at 24% with no improvement in storage capacity.
Yes, I totally agree. I think there are a constellation of factors that influence the upgrade decisions of users, but I have found it surprising how much the software has been under-discussed following Apple's miss.
If someone was happy enough with their iPhone 5s, 6, or 6s running iOS 11 when the X was released (Fall 2017) then I suspect they didn't feel much more pressure to upgrade when they were running iOS 12 and the Xs was released (Fall 2018).
The showstopper for me is FaceID. I won’t buy a device where that is the only biometric AuthN solution available. If/when my 7plus dies, I’ll buy an 8plus, either new or used.
I won’t buy anything newer than an 8, until such time as they give me fingerprint ID back in some form.
I think Apple will continue to have FaceID at their Entry level / lowest pricing iPhone. FaceID is expensive, I just don't see it coming to lower tier in the next two years.
Why is that a showstopper but Touch ID isn’t? They’re both biometric systems where the raw data never leaves the secure element, both are hardened against simple attacks, etc.
Have you ever tried to use FaceID with a reader that is arms length away from you, and you can’t get any closer to it?
What about a reader that is not only arms length away, but oriented in a very inconvenient position?
I don’t want any device that could potentially unlock itself just by someone holding it up and asking if this is my phone. Or that could lock itself up tightly and possibly even wipe itself, because it had seen too many strange faces.
Now, I don’t use biometrics to unlock my phone. But the inconvenience of having to look at the phone and have it scan my face when I want to use ApplePay, that’s plenty enough reason for me to never use a device where face scanning is the only biometric method available.
I don’t care how much they claim that the data never leaves the phone. That’s just table stakes for me.
software really is eating the world. in this case, apple's profits.
also software that causes such "harm" is typically written by someone else. it is funny seeing apple themselves write and distribute the harmful piece.
I don't think this surprised Apple. In their September 2018 event [0], Lisa Jackson took the stage to say that Apple sees longer-lived devices as a goal of the company, from both a consumer and environmental standpoint. She specifically called out the renewed life that iOS 12 will bring to older devices. On top of that, at WWDC 2018 [1], Federighi heralded the new life customers will find when iOS 12 would be released to 5 year old phones.
I don't think that any of this has surprised Apple. I think they have long seen that peak iPhone (and a mature market) is coming, or even already arrived.
Apple is focusing on their install base, which is enormous (over 1.5 billion devices [2]), and is figuring out ways to leverage that advantage. They know that the upgrades will come, albeit more slowly, but in the meantime, they can provide services, accessories, and eventually new products that customers will be fully willing to pay for. I think it is obvious that there is a pretty big transition that the company is in the middle of, but I think they are clearly best positioned to take advantage of that position.
It would, frankly, be baffling for Apple to suddenly change course direction over a single quarter. I think they are setting this course (ie, longevity of devices) because they think it is the right thing to do for their customers, similar to how they uniquely ran the battery replacement program. [3]
[3] - “We did not consider in any way, shape, or form, what it would do to upgrade rates. We did it because we thought it was the right thing to do for our customers. And sitting here today, I don’t know what effect it will have. And again, it’s not and was not in our thought process of deciding to do what we’ve done.” - Tim Cook
If all (or most of) the growth is in services as Apple claims, why hike hardware prices so much that it could over time erode their installed base?
I believe the answer is that Apple doesn't really believe that service revenue will grow fast enough to compensate for longer hardware replacement cycles.
And that belief is probably justified because their service offering doesn't seem very robust at this point.
Apple didn't just raise prices, for the sake of raising prices. Their takeaway [0] from the iPhone X was that customers were willing to pay for more advanced and more expensive features. FaceID, OLED, stainless steel, etc. Apple is making more expensive products (not just raising prices), because people have shown that they want to pay more for more value.
Lots of people on HN, as well as elsewhere, will take issue with that philosophy. But that is what Apple thinks, and why they have the roadmap they do.
Inevitably, there is a limit to that price elasticity, but I don't think this quarter indicates that the devices are too expensive. Also, I think you are right about services. It is the only current growth story, but 1.5 billion devices is a lot, and they will upgrade at some point in the future, most likely to another iPhone. But you are correct that there is nothing that will replace the rocket ship that was iPhone.
[0] Tim Cook - "And I think that iPhone X shows that when you deliver a great, innovative product there's enough people there that would would like that and it can be a really good business." https://www.imore.com/apple-earnings-q3-2018
>I don't think this quarter indicates that the devices are too expensive
I don't claim that it does. My point is that there is a trade-off between increasing the average selling price of hardware and broadening the user base so you can sell more services to more people.
Apple's market share is now dangerously low in some parts of the world, including some rich European countries. It makes features and services that are restricted to Apple devices completely useless or far less valuable.
In non-US locales, aren't iPhones a major luxury item and status symbol? Increasing pricing to decrease the number of users feeds into this marketing strategy.
You can’t discount both the older generation phones that Apple still sells, the used market, and hand me down phones effect on the installed base.
Every phone that Apple has introduced since 2013 is still getting updates. The 2015 iPhone 6s still runs circles around midrange Android phones and is even faster than flagship Android phones in single core performance.
I'm not discounting it. I'm a happy iPhone 6 user myself. But the trickle down effect you're talking about has to start with some people actually buying new iPhones at some point. I'm a bit worried that Apple is overplaying its hand.
A premium strategy is fine. A luxury strategy could be a disaster, especially if they intend to make money on services that require broad adoption.
I am not sure where you get that 1.5 Billion number from, I don't see Horace mentioning it. But the latest number of Active Devices, as Tim Cook mentioned a 100M increase would equate to 1.4B Active Devices. ( Which is actually slower than previous momentum, as they were adding 150M / year between 2016 and 2017. )
I think Cook's pretty happy to paint over Apple's errors with growing services revenue. Someone probably showed him how it grows into an iPhone killer that requires 100,000s fewer employees and no device at all. Then when he got his AOL dial-up bill for the 1090th time he realized this kind of innovation could carry Apple for decades.
Armchair quarterbacking here, but the current iPhone lineup is confusing.
It’s a tired trope to imagine what Jobs would have done, but when he returned to Apple he saw a myriad of macs and decided that Apple would kill them all and sell 4: a laptop and a desktop in pro and consumer models.
Apple started grabbing more market share by providing all these different form factors, but in the process they’ve lost the simplicity that has always been their hallmark: walk into a store, pick the pro device or the consumer device. No choice paralysis.
It also muddles the consumer signaling that has always driven Apple — there’s a new high-end device, it’s obviously different than last year’s, and people know you bought the newest, hottest device.
Part of that is a mature market. But part of it feels like the company of “a thousand no’s for every yes” is saying “yes” a lot.
Jobs talked often about creative destruction and how making great things involves being bold and killing some of your favorite things; that seems to have been replaced with a certain amount of timidity.
>It’s a tired trope to imagine what Jobs would have done, but when he returned to Apple he saw a myriad of macs and decided that Apple would kill them all and sell 4: a laptop and a desktop in pro and consumer models.
I honestly don't understand how anyone can suggest this is a smart thing to do. The reason Apple did that in the late 90s is because the product line had too many SKUs, but also because Apple was close to bankruptcy. Focusing all your marketing and product development on a few products is a good way to make sure you aren't holding the bag on unsold inventory (part of why Tim Cook is now CEO). Today's Apple is in a fundamentally stronger position and can manage the supply chains for multiple products (and multiple SKUs of them).
Indeed, Steve Jobs later eschewed that consumer/pro grid with the iPod, which had a SKU for every price point.
> Secondly, thanks in part to the lack of information, this miss is catnip for confirmation bias: everyone has their pet theory about what Apple is doing wrong or how they will ultimately fail, and it has been striking the degree to which this revenue warning has been breezily adapted to show that said critics were right all along (never mind that many of those critics trotted out the exact same explanations in 2013 and 2016).
HN, in its comments on Ben's article:
- Apple downgraded its forecast because it needs to refresh the iPhone SE
- Apple downgraded its forecast because its phone prices are too damn high
- Apple downgraded its forecast because its phone lineup is too confusing
- Apple downgraded its forecast because iOS 12 has improved performance and postponed upgrades for another year
These confirmed biases all have a "developed market" vibe. I believe they're also meaningless in the context of last year's iPhone X launch. Apple killed their estimates last year. Everyone is forgetting this!
None of these theories address Ben's point about the lack of smartphone differentiation in China (arguably Apple's most important market), which is (IMO) a more interesting discussion and a stronger headwind to Apple's financial prospects.
I agree with Ben that the "S" designation is probably hurting the company, as it introduces 8-quarter "seasonality" into their financial projections because Chinese consumers are only buying heavily-differentiated form factors.
I disagree that consumers will always buy the flagship iOS device. Then again, this earnings report just confirms my own bias for phone pricing. :)
Very good comment. All we know is that Apple underperformed in China and their strategy to expand asia needs revision. I agree with Ben's points that product substitution and third parrty software providing the integrations are the main drivers for deceleration of sales.
OK, reasons I personally am not buying an iPhone right now:
° My current phone works fine.
° VOIP is very poor on iOS, especially compared to Android.
° Price.
° Apple trying to push platform lock-in and therefore crippling features on devices.
° Lack of headphone jack.
° Lightning connector.
Otherwise, I'd be on board in a heartbeat. Here are things I like:
° I love that Apple focused on speeding up iOS.
° I feel that I can trust Apple a bit more than Google and the others.
° I am also not a huge fan of Android.
° Apple's hardware is predictable and of good quality.
I wish Apple would put more sensors like SDR and such into their devices. Also wish they would put GPS in the wifi only iPads.
Sooner or later Apple's growth was going to slow down. If it wasn't this quarter, it would be another quarter.
Apple can settle down and be a nice, profitable phone manufacturer. If Apple is going to grow a lot more it is going to have to get into a new and radically larger business line and that seems awfully hard.
Not to be under-estimated either: Android in general and Chinese phones.
Android has gotten pretty good. I broke my iPhone 7 earlier this year and am using a Pixel 2-- I thought I'd switch back, trade it for an X or an XS as they became available, but to my surprise I actually like it quite a bit.
Many of the complaints I used to have about Android have been worked out, and there's some cool features (like Night Sight) that I think I'd miss if I switched back.
Moreover, a lot of cool Android phones were released this year-- I'm sure the next iPhone, since it wont be an S, will be cooler and bring about a more radical change.
This past year in Android saw the release of many cool Chinese phones. I'd say the most exciting phones of the year came from Chinese manufacturers and featured creative ways to try to get rid of bezels and the notch-- finger-print sensor behind the srceen, two screens, notch-less with automatic mechanical parts, I recently even saw a slider-phone [1]! There's the promise of foldable phones too, which has me intrigued.
My cousin got a mid-tier Xiaomi phone-- it wasn't very expensive but it's pretty neat. If you do the side-by side comparison, it's not as great as an iPhone, but at the price, and for his use-cases, the big screen and fast chip are enough of a fit. I don't know how much iPhones cost in China, but I wouldn't rule out the fact that tariffs and macro-economics aside, Chinese phones have just gotten good enough, are probably more widely available, and honestly also just seem more exciting and creative.
Never thought I'd say this, but I hope Apple (and other manufacturers too) take some clues and inspiration from Chinese phone manufacturers ¯\_(ツ)_/¯.
I would never in my life use a Chinese phone. Chinese manufacturers are _guaranteed_ to be in the pocket of the CPC and its security services. Moreover, their record on security and privacy is poor. For a device that is so intimately tied to my personal data, the premium I pay for Apple's brand is vastly inferior to the value I would lose by constantly worrying about my privacy with a Chinese handset.
At least NSA follows the rule of law. Yes, you can argue they sometimes don’t, or they they push things. But there is simply no comparison at all with China where there is no rule of law at all.
I seriously do not understand how Chinese mobile phones business works. Either they have access to lots of no interest capital, or they simply have other source of Finance. Many of those things simply don't add up.
I had often thought when these phones enter EU / US Market they will be subject to higher patents fees and will be $100 to $150 more expensive than Chinese Home Prices. But that didn't happen at all.
Hindsight is 20-20. When Apple released a forecast of 89 billion dollars with the bulk of the revenue from the new devices, it seemed more like wishful thinking, I should have shorted the stock. I wonder if the smart money didn't do that... they would have recognized this right away. It would have been the perfect moment to bet.
Fools and their throw-away culture can stuff it. Luxury goods last a long time and you don't replace them on a regular basis. Angela Ahrendts is probably bringing some much needed sanity into the tech industry. Getting a new phone every year is not sustainable.
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[ 2.7 ms ] story [ 176 ms ] threadI think the problem is there aren't that many different distinctive shapes you can make a phone. Apple has done extremely well in this regard. The jewel case design and the X design with notch are both outstanding examples. The 6 sold so well because it was, for an Apple phone, huge. But the jewel case lasted 4 years (more including the CS). Dramatically increasing the screen size works once. If they stick with the X form factor another few years they will lose the distinctiveness factor. However major form factor updates aren't something you can pull off every year indefinitely, for technical reasons sure, but especially when you have a huge accessories market.
It's really amazing how successfully Apple has maintained their design lead and distinctiveness, but there's no way they can pull the most unique, most amazing new rabbits out of the hat every single year.
I would love to purchase a new iPhone (or Android) if they were to make a new device with a comparable form factor to the SE. Instead, everything has progressed to these two-handed monstrosities that have resulted in fanny packs [1] becoming fashionable again simply to hold the damn things.
[1] https://www.today.com/style/fanny-packs-are-so-popular-they-...
At this rate it seems like the smartphone market has abandoned small form factor phones.
I think you might be confusing it with the non-Compact edition?
https://www.phonearena.com/phones/size#/phones/size/Google-P...
Apple either isn’t making enough money on the SE, not listening to their survey group, or an executive doesn’t care. They need to fix this.
As mentioned in one of the other comments, SE was using the production lines of the 5/5s. It probably isn’t worth it to keep those going for an older phone and the R&D for a new smaller phone is a huge cost. I’m sure it’s been proven that most people want larger screens at this point.
I mean, even the newer cheaper phone they have, XR, is larger than their standard XS.
Given that around 70% of the iPhones in use are the 4.7" and under sized phones, I would say it is questionable. People like that form factor.
I do agree that in this case their market research about the SE is probably solid, but I think it's a mistake to assume that their market research is always correct.
The 6S feels comically small now. But, the Plus is too big. I think taking the bezels off the top and bottom would be the perfect size phone. Maybe a little smaller.
I upgrade in the fall, so I'm interested to see what comes out. I'm looking forward to going back to a smaller phone, but the SE and 6S are too small IMO.
But the X size phone is tempting. But I don’t see myself buying another phone for 3 years.
https://www.reddit.com/r/apple/comments/a68a1v/we_get_it_you...
[0] https://www.wsj.com/articles/apple-banks-on-bigger-screens-t...
Not a wide range? What about the iPad and iPad Pro? iOS apps need a responsive interface anyway.
But then I fired up my old iPhone 5 and quickly appreciated the larger screen of the iPhone 8. Although I still like holding the smaller one better.
I really like iOS, but one think I really envy about the Android ecosystem is that there are multiple vendors, so users aren't locked to just the most-popular size phone.
Basically I think the ideal is a screen that's as large as possible while still being usable with one hand. The iPhone 8 is just over the edge for my hand size, but it's close.
I mean, the Apple Watch is seriously good for most cases, it reliably sends messages using siri, I can answer calls on it, I can read my messages and do basically anything the phone can do, albeit much slower.
However, they'll have to brick my SE before I give it up. I bought an SE just before they got discontinued last year with apple care. I "downgraded" from a 7, this phone is definitely the best iPhone that exists for me and my slightly smaller than giants hands.. Even if a lot of apps are obviously not tested on the SE's size anymore. :(
This is pretty much all about pockets though - I typically wear a 3XL glove so it's not being driven by reach. I can accept needing to carry a bag if I need a laptop. For a phone it's insane.
I am in complete agreement with your attitude. However, it looks like the SE isn't coming back, and I wanted an Apple Watch anyway (after wearing smartwatches since the first Pebble...or SPOT if that counts). So I gave in, bought an iPhone XS and a watch. Previous smartwatch usage told me that the phone could probably remain safely in the bag most of the day. An Apple Watch makes it stay in that bag even more, I found out. If I'm out and about without the messenger bag/man purse, the cellular keeps me in contact. So for me, at least, carrying the monstrosity is reasonably solved.
Every use case is different, so this might not be a solution for everyone. And, yes, it is ridiculous that the solution is "go spend more money" because there isn't a reasonably-sized phone available. OTOH, most of my phone looking is "who's calling? What does the wife want on SMS? What's that reminder?" which is easily taken care of on the watch. When I do need a bigger screen, it's nice to have...well, a bigger bigger screen. :-)
I wrote this in another thread, but when my iPhone 6 or 6s seemed to be failing a couple months ago, I just bought an iPhone 7 instead of the Xs or whatever the new hotness is. I can afford it but find it too expensive and the improvements marginal. Seemingly a lot of people are doing what I'm doing.
> [...] phones, thanks to their centrality in people’s lives as well as the greater likelihood of harm, will always have a faster replacement cycle than PCs.
Also funny: parent is committing a form of confirmation bias responding to an author concerned about confirmation bias.
Every company is suffering right now. AMZN, MSFT, FB, NFLX, and GOOG are all down 20-40% from their respective peaks 3 months ago, yet nobody seems to see reason to write articles saying that, say, Amazon's latest offerings are strategic errors.
But it strikes me as no different from any other divination. If it's true that "these errors really were predictable", why are they writing only after the fact, and why only about Apple?
Every time a stock goes up, down, or stays level, journalists and bloggers come up with some justification for it, and say that it was obvious in hindsight. It's usually plausible, but if it's so obvious, why can't they ever predict it?
If in Apple's case it's all because of product/market issues with the iPhone line, then why does it happen to correlate almost exactly with the Dow losses? Is this really an Apple error at all? Is Apple failing because they can't weather the same storm as everyone else without even getting wet?
Whatever flaws the author's argument may or may not have, all the 3 points he presents were points he had made in the past, and not after the fact.
Not to mention Apple, compared to others had a very low market P/E, and it still fall. Stocks Market buys into Companies future, not present. And that is the problem, they have never seen much headroom for Apple, but lots of downsides.
I think people should be honest. Instead of suggesting that Chinese consumers have this or that idiosyncratic (implied stupid) preference, for which they have only broad market evidence, commentators should just say what they actually know from personal experience: that Android phones really, truly suck. That WeChat is an ecosystem of jank. That most Chinese consumers are actually smart people and agree with that premise, to the tune of the billions they spent on iOS devices every year anyhow.
A new iPhone xr with a storage bump and a good charger is over $1k with tax. A MacBook air is similarly $1600 plus with 256g and a warranty and tax.
There are perfectly serviceable 500 Androids and $750 windows laptops. Apple's software isn't good enough to double the price.
A secondary reason is that I still think Apple has a pretty big advantage when it comes to security and privacy. When you see Google starting to push RCS messaging with no default encryption you realize how little they really care about their user's privacy.
That said, the only Apple hardware I own is an iPad.
They seem to be doing that - Microsoft has a large retail store in Sydney, Australia, and Samsung has retail stores in several Australian cities of varying sizes (the Sydney one is huge). The one in my city (Perth) is just a tiny pop-up stand, but they still do simple on the spot repairs of my Galaxy S8. Perhaps worth noting, some of the Samsung employees there were ex Apple Geniuses who had switched.
Some things iOS users still can't do:
1. Develop applications for their own phone without paying a yearly tax or re-building and re-installing weekly.
2. Have a driving mode that works well when used in a phone mount.
3. Automatically route phone calls and texts through Google Voice or a secure phone app.
4. Multi-user support for sharing a device with family or temporarily sharing it with a stranger.
These are not niche features like playing games in emulators or using offline maps by default for privacy (both of which are also not possible on iOS). These are software deficiencies that affect normal daily use cases. The Chinese market has even more features that users need that are simply not supported on iOS.
Android is a privacy nightmare. I cannot in good conscience recommend it.
At the same time, Apple's walled garden increasingly feels like an uncomfortable jail I want to break out of.
One of the major points of the article is that potentially, the XR just like the 5C, did not perform as well as Apple expected, because consumers want to buy the "best."
Sorry, what?
But now that things are getting more different, such as prices becoming much higher, a possible economic downturn around the corner, mid-range phones becoming "good enough" for most people, the loss of subsidies from carriers, and so on, Tim Cook is getting a little "lost" in all of this, and doesn't know the best way forward. Worse, he may have already chosen a way forward (Apple becoming more "fashion-focus" for instance) and it may be the wrong way.
As a high end product, the mac is likely not gonna make them much more profits than it already does. However, additional market share would further strengthen their customer base for the areas which will make them money. iPhones, iPads, and services.
If Apple were to release a 5-600$ laptop it likely wouldn't make them much money, but it would create more mac users, and I suspect mac users are significantly more likely to own iPhones and pay for services like iCloud and Apple Music than Windows and Linux users.
And TBH, Apple has a massive market in the enterprise just waiting for some competition. You can see this in the rapid and popular uptake of Google @ Work services, and Chrome OS in the enterprise and education services. People were looking for a simpler alternative to the entire MS Exchange ecosystem, and once again, while these may not have been massive money spinners on their own (though they definitely could have been that as well), they would form a strong solid base to sell iPhones to.
This would kill Apple. It's a profit share company. It's a profit share culture. Customer and culture are tightly knit; you don't change one without altering the other.
The bottom line is that phones are commoditized at this point. There's nothing (statistically nothing, that is -- obviously everyone has preferences) that people want them to do that they don't, and there's nothing that a premium product can offer that the cheap ones don't have too.
That's not something Apple or Stratechery or posters here can fix. It's just the way technology works. It's the same thing (almost exactly the same thing) that happened to Apple in the early 90's. Sure, macs were still better. But they were better and more expensive and for 95% of what the median purchaser (which at the time meant "desk worker at a US business") wanted to do a PC clone running windows was perfectly fine. So Apple got trapped in a slowly shrinking prestige niche.
Now, eventually they broke out with exciting new products and new markets that drive new success. But that's not a "business decision".
This article uses all the data that is publicly available and yet claims that somehow Apple executives missed all that.
Stratechery isn't some random site, but you're comparing it to a guy on twitter.
A precise estimate isn't necessary. His claim was that they would shrink measureably in the first S year after a redesign.
Edit: The guy I follow on twitter is not some random dude. He is an analyst and makes some great points.
That sounds an awful lot like the wishful thinking that was around Apple in the early 90's when Apple was going bankrupt and almost got bought by Sun.
This (performance focus) seemed like a capitulation to market saturation and longer device ownership cycles.
Either way, I think device makers are going to get hammered as tech plateaus. Focusing on longevity and usability will be huge differentiators. Apple's iOS12 seemed like a good move to prepare for this change.
It will be very interesting to see if Apple even supports the iPhone 6 generation of hardware on the next version of iOS. If not, or if the software performance regresses significantly, I would expect the hardware upgrade pressure to really ratchet up again in the fall.
[1] https://bgr.com/2018/09/20/ios-12-speed-test-vs-ios-11-on-ip... [2] https://techcrunch.com/2018/09/17/ios-12-makes-your-phone-fa... [3] https://www.engadget.com/2018/09/18/apple-ios12-older-iphone...
> It’s a bit of a hodgepodge with one primary takeaway: convincing customers to upgrade “good enough” phones is both challenging and unpredictable, and Apple can’t simply assume it will happen at the rate it has previously.
Ultimately he claims that users will eventually upgrade to the latest flagship iOS device. I think you (and I) disagree with his claim, though!
(I also might be falling prey to confirmation bias myself, specifically on the topic of phone pricing...)
I know I fall into that group of users. I own a 7 currently, it's a few years old, but works well enough. I see no reason to upgrade to an XS today. If the 7 fails tomorrow, I'll buy an XS.
I hope Apple will use it's hoard of cash to become like Toyota - long-term reliability promoting trust and in turn promoting long-term cash flow.
Ditto. Loved my 7. Walked into a pool with it in my pocket. Now have an XS. Typing this on a 2015 MacBook Air I only have because I traded my 2013 Air $500 to a neighbor for it. Plan on keeping it another 2 to 3 years; same, at the very least, for the iPhone.
They're well-built products that tend to work, and have warranties that show for it.
I'm surprised your phone died, given that iPhone 7 is relatively water resistant.
I usually upgrade every year, but the new phones just aren't enough of an upgrade from the original X to warrant it, especially given the much higher cost.
Meh, I don't know about that. Sure, iOS 12 is great and all, but the iPhone 5S and 6 have just 1GB of RAM. With essentially all mobile devices not using swap at all (due to the highly dubious endurance of the low-grade, Chinese-installed eMMC storage), that's just barely enough for the modern Web these days - and newer iOS apps can't be that much lighter, either! So, I fear that the iPhone 5S and 6 are practically on borrowed time, no matter what Apple does. The Nexus 5 is in far better shape, seeing as it came out with 2GB and will be able to run pmOS (on a mainline kernel, no less)...
A friend of mine had a 5X replaced under warranty and immediately dumped it on eBay and bought something else because there was no sign of an official fix coming for this.
EDIT: I wasn't sure if this is still up to date, but after some research it looks like "custom ROM to disable the fast cores" is still the state-of-the-art solution https://www.reddit.com/r/nexus5x/comments/8pbg5n/my_guide_to...
I do have an old 6, but its not my main phone. I thought it was faster, but haven't used it enough to say.
I would check your battery health under battery settings. If it's under 80% that could be causing the issue.
The 6s has 2 gb of ram, which is a big part of the difference.
You might be surprised. Desktop safari is significantly more resource (including memory) efficient than Chrome and Firefox. And iOS apps are written in objective-c and swift, which are also a lot more memory efficient than say Java or JavaScript.
Of course, 1GB of RAM is still pretty small. But if the idevices can last 5 years instead of 2, that would be pretty significant. I don't think anyone expects them to last forever.
Stuck on iOS 9 with that so it might not be a good idea from a security perspective, but I'm impressed with the hardware. At least one of them I know had a screen replacement, but still.
Another other side of this is that they've given people good reasons not to upgrade: I've been surprised by the number of people who commented that the new phones are uncomfortably large to hold and, of course, a fair number of people don't like losing the headphone jack. None of those are complete showstoppers but since costs have also gone up around 20% beyond the rate of inflation[1], you don't need to give people much of a reason to delay a purchase which isn't necessary since everyone knows the phone you buy next year will be even better.
1. A quick spot-check comparing the iPhone 6S & 6S Plus we bought in 2015 vs. the XS / XS Max now has it at 24% with no improvement in storage capacity.
If someone was happy enough with their iPhone 5s, 6, or 6s running iOS 11 when the X was released (Fall 2017) then I suspect they didn't feel much more pressure to upgrade when they were running iOS 12 and the Xs was released (Fall 2018).
I won’t buy anything newer than an 8, until such time as they give me fingerprint ID back in some form.
Hard stop.
I'm pretty sure that if you like Finger print sensors, you'll have to switch to Android at some point.
What about a reader that is not only arms length away, but oriented in a very inconvenient position?
I don’t want any device that could potentially unlock itself just by someone holding it up and asking if this is my phone. Or that could lock itself up tightly and possibly even wipe itself, because it had seen too many strange faces.
Now, I don’t use biometrics to unlock my phone. But the inconvenience of having to look at the phone and have it scan my face when I want to use ApplePay, that’s plenty enough reason for me to never use a device where face scanning is the only biometric method available.
I don’t care how much they claim that the data never leaves the phone. That’s just table stakes for me.
also software that causes such "harm" is typically written by someone else. it is funny seeing apple themselves write and distribute the harmful piece.
I don't think that any of this has surprised Apple. I think they have long seen that peak iPhone (and a mature market) is coming, or even already arrived.
Apple is focusing on their install base, which is enormous (over 1.5 billion devices [2]), and is figuring out ways to leverage that advantage. They know that the upgrades will come, albeit more slowly, but in the meantime, they can provide services, accessories, and eventually new products that customers will be fully willing to pay for. I think it is obvious that there is a pretty big transition that the company is in the middle of, but I think they are clearly best positioned to take advantage of that position.
It would, frankly, be baffling for Apple to suddenly change course direction over a single quarter. I think they are setting this course (ie, longevity of devices) because they think it is the right thing to do for their customers, similar to how they uniquely ran the battery replacement program. [3]
[0] - http://live.arstechnica.com/apples-september-12-2018-gather-...
[1] - http://live.arstechnica.com/wwdc-2018/#post-1319367
[2] - http://www.asymco.com/2018/02/27/the-number/
[3] - “We did not consider in any way, shape, or form, what it would do to upgrade rates. We did it because we thought it was the right thing to do for our customers. And sitting here today, I don’t know what effect it will have. And again, it’s not and was not in our thought process of deciding to do what we’ve done.” - Tim Cook
I believe the answer is that Apple doesn't really believe that service revenue will grow fast enough to compensate for longer hardware replacement cycles.
And that belief is probably justified because their service offering doesn't seem very robust at this point.
Lots of people on HN, as well as elsewhere, will take issue with that philosophy. But that is what Apple thinks, and why they have the roadmap they do.
Inevitably, there is a limit to that price elasticity, but I don't think this quarter indicates that the devices are too expensive. Also, I think you are right about services. It is the only current growth story, but 1.5 billion devices is a lot, and they will upgrade at some point in the future, most likely to another iPhone. But you are correct that there is nothing that will replace the rocket ship that was iPhone.
[0] Tim Cook - "And I think that iPhone X shows that when you deliver a great, innovative product there's enough people there that would would like that and it can be a really good business." https://www.imore.com/apple-earnings-q3-2018
I don't claim that it does. My point is that there is a trade-off between increasing the average selling price of hardware and broadening the user base so you can sell more services to more people.
Apple's market share is now dangerously low in some parts of the world, including some rich European countries. It makes features and services that are restricted to Apple devices completely useless or far less valuable.
https://deviceatlas.com/blog/android-v-ios-market-share
Definitely not a status symbol.
Every phone that Apple has introduced since 2013 is still getting updates. The 2015 iPhone 6s still runs circles around midrange Android phones and is even faster than flagship Android phones in single core performance.
A premium strategy is fine. A luxury strategy could be a disaster, especially if they intend to make money on services that require broad adoption.
Like iPhone 6, then iPhone 6s, then iPhone 7 all being the same phone and then introducing a new design with the X.
So with this past year being the XS, this year will be the whatever XS 2 is, but with the same design, then we can expect a new design next year.
Meaning that their China not upgrading problem, as per the article, will continue for at least another year.
It’s a tired trope to imagine what Jobs would have done, but when he returned to Apple he saw a myriad of macs and decided that Apple would kill them all and sell 4: a laptop and a desktop in pro and consumer models.
Apple started grabbing more market share by providing all these different form factors, but in the process they’ve lost the simplicity that has always been their hallmark: walk into a store, pick the pro device or the consumer device. No choice paralysis.
It also muddles the consumer signaling that has always driven Apple — there’s a new high-end device, it’s obviously different than last year’s, and people know you bought the newest, hottest device.
Part of that is a mature market. But part of it feels like the company of “a thousand no’s for every yes” is saying “yes” a lot.
Jobs talked often about creative destruction and how making great things involves being bold and killing some of your favorite things; that seems to have been replaced with a certain amount of timidity.
I'm ready to buy another (my 5th) laptop and I can't figure out which one I want, delaying my purchase.
Do I want a bigger iPhone or a smaller iPad? Now that I'm finally buying more ebooks than printed books, I'm paralyzed by indecision.
Even as a dedicated Apple fan, I simply was too confused as to whether I should have gotten an XR, XS or Max.
I honestly don't understand how anyone can suggest this is a smart thing to do. The reason Apple did that in the late 90s is because the product line had too many SKUs, but also because Apple was close to bankruptcy. Focusing all your marketing and product development on a few products is a good way to make sure you aren't holding the bag on unsold inventory (part of why Tim Cook is now CEO). Today's Apple is in a fundamentally stronger position and can manage the supply chains for multiple products (and multiple SKUs of them).
Indeed, Steve Jobs later eschewed that consumer/pro grid with the iPod, which had a SKU for every price point.
> Secondly, thanks in part to the lack of information, this miss is catnip for confirmation bias: everyone has their pet theory about what Apple is doing wrong or how they will ultimately fail, and it has been striking the degree to which this revenue warning has been breezily adapted to show that said critics were right all along (never mind that many of those critics trotted out the exact same explanations in 2013 and 2016).
HN, in its comments on Ben's article:
- Apple downgraded its forecast because it needs to refresh the iPhone SE
- Apple downgraded its forecast because its phone prices are too damn high
- Apple downgraded its forecast because its phone lineup is too confusing
- Apple downgraded its forecast because iOS 12 has improved performance and postponed upgrades for another year
These confirmed biases all have a "developed market" vibe. I believe they're also meaningless in the context of last year's iPhone X launch. Apple killed their estimates last year. Everyone is forgetting this!
None of these theories address Ben's point about the lack of smartphone differentiation in China (arguably Apple's most important market), which is (IMO) a more interesting discussion and a stronger headwind to Apple's financial prospects.
I agree with Ben that the "S" designation is probably hurting the company, as it introduces 8-quarter "seasonality" into their financial projections because Chinese consumers are only buying heavily-differentiated form factors.
I disagree that consumers will always buy the flagship iOS device. Then again, this earnings report just confirms my own bias for phone pricing. :)
° My current phone works fine. ° VOIP is very poor on iOS, especially compared to Android. ° Price. ° Apple trying to push platform lock-in and therefore crippling features on devices. ° Lack of headphone jack. ° Lightning connector.
Otherwise, I'd be on board in a heartbeat. Here are things I like:
° I love that Apple focused on speeding up iOS. ° I feel that I can trust Apple a bit more than Google and the others. ° I am also not a huge fan of Android. ° Apple's hardware is predictable and of good quality.
I wish Apple would put more sensors like SDR and such into their devices. Also wish they would put GPS in the wifi only iPads.
Sooner or later Apple's growth was going to slow down. If it wasn't this quarter, it would be another quarter.
Apple can settle down and be a nice, profitable phone manufacturer. If Apple is going to grow a lot more it is going to have to get into a new and radically larger business line and that seems awfully hard.
Android has gotten pretty good. I broke my iPhone 7 earlier this year and am using a Pixel 2-- I thought I'd switch back, trade it for an X or an XS as they became available, but to my surprise I actually like it quite a bit.
Many of the complaints I used to have about Android have been worked out, and there's some cool features (like Night Sight) that I think I'd miss if I switched back.
Moreover, a lot of cool Android phones were released this year-- I'm sure the next iPhone, since it wont be an S, will be cooler and bring about a more radical change.
This past year in Android saw the release of many cool Chinese phones. I'd say the most exciting phones of the year came from Chinese manufacturers and featured creative ways to try to get rid of bezels and the notch-- finger-print sensor behind the srceen, two screens, notch-less with automatic mechanical parts, I recently even saw a slider-phone [1]! There's the promise of foldable phones too, which has me intrigued.
My cousin got a mid-tier Xiaomi phone-- it wasn't very expensive but it's pretty neat. If you do the side-by side comparison, it's not as great as an iPhone, but at the price, and for his use-cases, the big screen and fast chip are enough of a fit. I don't know how much iPhones cost in China, but I wouldn't rule out the fact that tariffs and macro-economics aside, Chinese phones have just gotten good enough, are probably more widely available, and honestly also just seem more exciting and creative.
Never thought I'd say this, but I hope Apple (and other manufacturers too) take some clues and inspiration from Chinese phone manufacturers ¯\_(ツ)_/¯.
[1]: https://www.youtube.com/watch?v=7HCcP0YexTU
I had often thought when these phones enter EU / US Market they will be subject to higher patents fees and will be $100 to $150 more expensive than Chinese Home Prices. But that didn't happen at all.