So Was the iPhone 6s Refresh Not Compelling Enough?

February 2nd, 2016

That Apple sold over 13 million new iPhones the first week the iPhone 6s and iPhone 6s Plus went on sale last September seemed promising enough. It fed the expectation of continued rapid sales growth for the iPhone. But after the needs of the early adopters were met, it appears that sales growth has stalled. The iPhone barely grew in the December quarter and sales are fated to fall in the current quarter.

So was something wrong with the iPhone refresh? Was it not significant enough?

That’s one argument, but it doesn’t hold up so well. You see, Apple has upgraded the iPhone on an alternate-year basis since the beginning. One year, it’s the same case design with new hardware features, and the following year the case is changed. In the case of the former, the critics routinely claim that, since it looks the same, an iPhone refresh isn’t refreshed enough regardless of what’s changed.

Either way, there has been steady growth through the years. More to the point, most people aren’t in the habit of upgrading an iPhone every single year, though some of the lease plans allow for such upgrades. It’s usually every other year, which means that the design is going to be different. On the other hand, there are economic headwinds around the world, particularly in China where sales growth, while still in the double digits in the December quarter, was nowhere near as much as the previous year.

It may also be, in part, about product saturation. How many people are planning to buy their very first premium smartphones? While Apple continues to expand into developing countries, sales might have focused on lower-priced models. But if that were true, why were average sales prices up slightly in the last quarter for Apple?

There are also rumors of a new 4-inch iPhone to meet the needs of an up-to-date product that’s not only cheaper, but offers the smaller form factor some buyers still prefer.

Since I own an iPhone 6 that I purchased with no down payment in 2014, I would not be a candidate for the iPhone 6s unless the enhanced camera and 3D Touch appealed to me, and I was willing to spend the extra money to upgrade early. They’re not, at least for me, but that would have applied to the iPhone 5s compared to the iPhone 5 too. But since I had an iPhone 4s then, switching to an iPhone 5s made sense.

In short, I don’t think Apple necessarily did anything wrong, or that there’s something that Apple might have done better, except, perhaps, to better satisfy the need for smaller handsets. There are market conditions over which Apple, despite its size, cannot control. Consider the overall PC market, where most companies are seeing lower sales. Fewer Macs were sold too in the last quarter, and that’s a trend that’s hardly going to change overnight. Indeed, Microsoft Windows 10 does not appear to have sparked a large PC upgrade cycle, and it may be that there will never be another major PC upgrade cycle.

In the TV business, manufacturers are trying to foist 4K on us, but it’s mostly a hard sell. The actual visible difference requires a large set to detect unless other 4K features, such as the higher dynamic range and enhanced color gamut, are included. That’s the reasoning behind the Ultra HD Premium scheme, which will give the buyer a clear indication that these enhancements are included in the models they’re considering.

So perhaps, if Ultra HD Premium sets aren’t too expensive, it may actually boost sales. But probably not till there’s actually much to watch in 4K, and there’s not. Maybe the arrival of Ultra HD Blu-ray, if accompanied by a rich selection of titles at reasonable prices, will help some. I don’t think it’ll be near as bad as the 3D TV debacle.

Even then, the improvements in 4K, even with Ultra HD Premium, are nowhere near as drastic as standard definition versus HD. So it may help some, but the changeover would be part of the natural upgrade cycle as customers buy new sets. Selling cheaper sets with the enhanced color/contrast features will help, but I don’t see a revolution.

When it comes to smartphones, in addition to market saturation, feature saturation may also play a part. There are just so many gee-whiz features that handset makers can conceive each year, and many are hardly compelling enough to fuel upgrades. With the new pricing policies, where the cost of buying or leasing a handset is separated from the cost of the service, more customers may decide to just let the prices drop after their gear is paid for, particularly if the new models aren’t so appealing.

That’s clearly happened already in the PC market. Performance boosts of 10% or so each year are hardly noticeable, and PCs tend to last longer nowadays, so there’s not so much of an incentive to upgrade. Apple’s ongoing switch to Retina iMacs surely helped boost sales somewhat, but far more note-books are sold regardless. Maybe if the MacBook Air goes Retina this year with similar pricing to current models.

When it comes to tablets, it’s not at all certain when or if a major upgrade cycle will start. Maybe this coming holiday season, assuming Apple has some compelling product refreshes in the offing. Or they provide more compelling reasons to upgrade or even buy one in the first place.

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