More Illusions about iPhone Sales?

January 27th, 2017

We’re just days away from getting the hard numbers from Apple on December 2016 quarterly sales. From Apple’s guidance, which tends to be quite conservative, the company stands to show a slight increase over the previous year. This would represent a welcome change from last year, where the first-ever sales drop for an iPhone occurred. That was the iPhone 6s, which I suppose wasn’t regarded as much of an upgrade to the iPhone 6.

Now the iPhone 7 was also regarded as a fairly tepid upgrade considering the case didn’t change much. The loss of the headphone jack was supposed to be a huge impediment to sales, but there’s little evidence that it changed things all that much. Apple’s decision to supply a wired headphone and an adapter dealt with most issues. The sole problem involved people who want to listen and charge at the same time, which requires a somewhat costly adaptor.

In any case, the star of the show appeared to be the iPhone 7 Plus, with two cameras and a digital Portrait Mode that is the focus of some of the flashy TV ads. It was real close to Christmas before orders and shipping times came into alignment, and this appeared to be the result of the fact that Apple didn’t anticipate its demand. Or it may have partly been due to the fact that it is harder to build them, and thus it took longer to ramp up production in sufficient quantities.

Regardless, tech pundits and Wall Street analysts are having their say. Some of the chatter is reasonable, based very much on the fact that Apple isn’t into missing its own estimates. They might miss Wall Street estimates, but that may also mean that the estimates themselves were not reasonable.

Some projections, though, seem rather less sensible, such as one in a major business publication that I shall not name.

While the article does predict increasing sales, and that’s nothing special, there are the usual cautions and fear-mongering. So there’s the theory that many of those sales were for the previous year’s model, the cheaper one, since customers evidently aren’t tempted by high-end gear.

I won’t dispute the fact that the iPhone 6s is a perfectly good smartphone and the changes in the newer model may not be sufficient to justify paying $100-120 more. But over the usual 24-month installment/lease deal, it doesn’t represent more than a few dollars more for each payment. Don’t forget, the iPhone 6s is the one that didn’t do so well. It was the first iPhone whose sales didn’t match the previous year’s model, so why would it suddenly catch fire? So people could save a little money.

Now the article doesn’t actually list the actual price differences between the iPhone 6s and the iPhone 7. As a result, despite higher sales, average sale prices allegedly declined, assuming this theory is true. This would allegedly be bad news for Apple even if more units were actually sold. Go figure.

But don’t forget the apparent high demand for the iPhone 7 Plus, the fact that it was backordered for weeks. Does that coincide with lower demand and a preference for the previous year’s model. I mean, if customers wanted the lowest price possible for an iPhone, they could have settled on a smaller display and purchased the iPhone SE, which starts at $399.

The article’s main slant, in suggesting that people preferred the cheaper iPhone, is based on the assumption that existing smartphones are good enough, that the changes in the iPhone 7 series weren’t sufficient to entice people to pay more for one. Instead of buying an iPhone 6s in 2016 when it was the top-of-the-line, they waited for a new model to replace it and thus benefit from a lower purchase price.

I suppose that’s possible for some customers, and it may well be that people upgrading from, say, an iPhone 5 or an iPhone 5s, might be perfectly content to have the older product, since it still represents a sea change for them. Having the latest and greatest is less important than having something that meets their needs and will deliver excellent service for another two or three years.

Overall, that may also explain why people tend to keep their tech gadgets for longer periods, although wireless carriers are still trying to push you towards the two-year cycle. Even though those two-year contracts have largely been phased out, they have been replaced by plans that let you buy the handset of your choice on some sort of credit plan, and, and if you pay a little more per month, you can exchange the one you have for a newer one every 12 to 18 months with no financial penalty.

But if anything, that might be an incentive to buy the latest model, and stick with the upgrade cycle. It also locks you in to a single carrier.

That’s quite unlike personal computers and tablets, where people hang onto them for several years without feeling they are suffering from inferior performance or reliability.

Obviously any prediction about iPhone sales is only current until January 31, when Apple will reveal the truth. You’ll want to pay attention to total iPhone revenue, and the average selling price. If the latter goes down, the naysayers in that article were right. If it stays the same or increases, the optimistic expectations fueled by the apparent high demand for the iPhone 7 Plus will have been been shown to be on the money.

I might be dead wrong, but I’ll go with the latter.

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