The global smartphone market is declining and that means troubled waters are ahead for the likes of Samsung and Apple. These two companies had ruled the high-end segment of the market for years. They have recently come under increasing pressure from Chinese rivals. The latest research from Strategy Analytics shows that the global smartphone market has declined for four consecutive quarters and is in a recession now, effectively.
Samsung’s phone shipments declined 13 percent in Q3 2018 compared to the same period last year, according to the same market research firm. Its shipments also declined in the previous three quarters. Its high-end devices have clearly not done enough to limit the damage. Samsung itself acknowledged that it’s struggling in the entry-level and mid-range segments as well.
It’s not smooth sailing for anybody in the high-end segment
Samsung has never provided actual sales figures for its devices. We have to rely on estimates from market research firms. On the other hand, Apple proudly boasted about the many millions of iPhones it sold every quarter and fiscal year, right up till the moment it seems that we have reached peak iPhone. Data shows that iPhone growth was flat in Q3 2018 as well. They have actually been flat for three straight years. Apple hasn’t topped the 231.22 million units that it sold in the fiscal year 2015.
It caught investors and Apple fans alike by surprise when the company’s CFO Luca Maestri confirmed on the earnings call after its quarterly results last week that Apple will no longer be reporting unit sales for the iPhone. It will also stop providing unit sales figures for iPads and Macs.
People would have shrugged it off had this been only about the iPad and Mac. The iPhone is Apple’s cash cow, always has been. It was nothing short of impressive for a company to sell that many units even when it had a very limited lineup consisting of just a few models. While Apple is now resorting to other methods to make more money there’s no denying the fact that overall iPhones sales are also going down and may continue on this path.
Apple sold 217.7 million iPhones in the fiscal year 2018. That’s only marginally better than the 216.76 million units sold in 2017 and the 211.88 million sold in 2016. The numbers show that there hasn’t been a surge in unit sales even though Apple introduced its first OLED iPhone in this period which many felt would push unit sales higher. Apple has masterfully shifted its reliance on unit sales to drive revenue by launching more expensive versions of the iPhone. Not only that, but it has also been able to convince customers to spend more money on those models. That’s a major reason why even though iPhone sales remained flat this past quarter, its revenues from sales were up an impressive 29 percent.
The iPhone average selling price reached an all-time high of $793, up from $617.99 in 2017. Apple now wants investors to focus on how much money it’s making on iPhones and not so much on the number of units it is selling. Maestri added during the call that the number of units sold doesn’t show the full picture of the underlying business of a product. The fact that Apple used to revel in breaking iPhone unit sales records and made sure people knew about that was somehow lost on the executive during the call. In order to justify this decision Maestri even indirectly mentioned Samsung on the call. He said that Apple’s top competitors in smartphones do not provide quarterly sales information either. The only difference being that this isn’t something that Samsung has previously done.
Apple is making a pre-emptive strike against negativity
By deciding to not report unit sales in the coming quarters when they may decline, Apple has made a pre-emptive strike against any negativity that may be associated with it selling fewer iPhones. It was fine reporting the numbers as long as they were good and got it free publicity. It suddenly feels there’s no need to share the numbers when they may not be good enough. This isn’t the first time we’re seeing Apple do this. The company stopped sharing first weekend sales of new iPhones when the iPhone 7 was released in September 2016. It had done that previously and touted the many millions of new iPhones sold on launch weekend. It was happy with reporting those numbers as well when they were setting new records. Not when later models couldn’t break its own records.
The fact remains that Apple is also feeling the pinch in the high-end segment of the market. There isn’t something fundamentally wrong with Samsung’s strategy that it now has a tough time competing in this market. Chinese competitors like Huawei have aggressively targeted Apple and Samsung in this segment. They also offer great value for money in the affordable segment. No surprise that its shipments were up 32.5 percent this past quarter. It beat out Apple for the second spot on the list of top global vendors yet again. Moreover, as flagship smartphones get more expensive, people are holding on them for much longer. The $1,000 price barrier for these devices has been breached and the data shows that people spending that kind of money on smartphones will now retain their handsets for far longer than they used to before.
It is this confluence of factors that has led to the slowdown in growth. All of the dominant players are feeling the pinch. Apple may be making more money than Samsung. However, it too faces the same turbulent winds ahead as the Korean giant. So perhaps we can cut Samsung some slack.
The post Apple’s decision to not disclose iPhone sales shows it’s not only Samsung feeling the pinch appeared first on SamMobile.
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