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« Lets Discuss the iPhone 6 Models - Apple now in 'me-too' mode only following the leaders | Main | Notes from the Smartphone Wars - Panasonic, Blackberry, Jolla, Xiaomi, Tizen »

September 22, 2014

Comments

abdul muis

@AppleTurfer

Thank you!!! What you said is actually MY WHOLE POINT of the debate. Apple is on the DECLINE. The CLIFF as tomi say it. Even iPhone 6 & 6+ with big screen WON'T HELP apple.

abdul muis


Apple response to bendtest made by Computer Bild

computerbild.de/artikel/cb-News-Handy-Apple-boycotts-COMPUTER-BILD-An-open-letter-to-Tim-Cook-10953399.html

RottenApple

Ha ha ha!

So it's just happening like I predicted. That whole thing - no matter how real it really is isgoing to haunt Apple badly.

AppleTurfer

@Ab - that's not news. Apple has been "declining" in total unit market share for years AS the growth in the premium sector has matured while the bottom end is growing massively. So if you include a markets that Apple doesn't compete in, has no intention or desire of competing in....and that market is growing fast...you have Apple's falling market share.

And yet....Apple's sales are increasing. Apple's customer base is increasing. Apple's profits are increasing. Apple's margins are always healthy and they will be increasing as will their ASP. Apple's ecosystem is vibrant and healthy and still generating twice the revenue for developers that Androids does.

Compare this to Nokia (as people are wont to do). When Nokia's market share was falling....it's ASP's were falling, it's margins were falling, it's profits vanished and became losses. That was because Nokia was losing to iPhone and Android in areas it was actually trying to compete in.

So, by Tomi's one-note tune, "Peak Apple" happened long ago. And so the company that makes more money than EVERY OTHER COMPANY COMBINED....is a loser and "in trouble" and in desperate need of taking his advice to do everything that Samsung is already doing. Samsung, meanwhile, is declining in SALES (not just market share), ASPs are down, margins down, profits down.

RottenApple

@AppleTurfer:

"Apple's margins are always healthy and they will be increasing as will their ASP."


And there we have again that faulty belief that Apple can keep their high prices and with them their high profits in a constantly growing market.

But since this is an economical impossibility it'll mean that there's two scenariow which are:

1. Apple stays high price, which will inevitably result in loss of sales, loss of customer base, loss of market share - and obviously declining profits.
2. Apple adjusts their prices downward. That'll mean that the may increase sales, increase customer base, keep market share - while still having declining profits.

Apple's current growth curve is plain and simply not sustainable in a mature market.

Of couse, declining profits, while being the most normal thing that can happen here, have a tendency to cause turmoil in the stock market if they come from a company that's used to have constantly growing profits.


AppleTurfer

@Rotten - how can it be impossible for Apple to do what they have been doing for decades.

Did you not see those lines and the record breaking weekend opening? There has been no decline in the popularity or demand for Apple's phones nor has Apple dropped the prices. To the contrary, the iPhone 6+ is more expensive. Also, there is extra incentive to not get the 16gb entry models when for $100 more you get 64gb. I predict those two forces will take Apple's ASP up.

Apple's product has not been commoditized. Apple is the lone supplier of iPhones. iPhones are part of an ecosystem including Apps, iTunes, Macs, iPads, iPods, Apple Tv whose sum is greater than the individual parts particularly for Apple's target market (those with money).

It's Samsung who is falling prey to those normal forces you mention as it's product is NOT differentiated (enough). Not only do others sell direct replacements for the Galaxy S and Note phones....but the "good enough but much cheaper" phones like the Nexus and Moto X (not to mention the Chinese like Xiaomi) are taking sales away from the high end. Just not Apple's part of the high end.

Every year we get the same "Apple can't do what it does" arguments, and every year Apple keeps right on trucking along. If Apple's differentiation was NOT actually true, then what you said would have come to apps around the time of the iPhone 4

RottenApple

@AppleTurfer:

" how can it be impossible for Apple to do what they have been doing for decades."

Because they haven't! They nearly went bankrupt 20 years ago.

Apple can remain profitable for a long time, sure, but what Apple cannot do is grow endlessly. Especially in the mobile phone market which is nearly saturated - and even more if the ASP of the entire smartphone market sinks further. At some point the competition will be so much cheaper that paying the price just to stay with Apple is not going to work out anymore.

You are falling into the same trap as all the other Apple proponents here: You see the last 7 years which were an incredible success story and your only extrapolation from the past is that it will continue undeterred. Rest assured: That won't happen as the market starts to change.

I think it's quite clear how things will develop:

- the Chinese will first put Samsung and the other Android high end manufacturers under pressure.
- Samsung et.al. will be forced to lower prices
- this means a significant price gap between high end Android and iPhone will develop (which does not exist yet - this currently saves Apple's ass big time!)
- a part of Apple's current customers become more price conscious and 'defect'. This part doesn't even need to be large - just enough that it gets registered on market charts.
- Apple comes under pressure due to loss of customers
- Apple will be forced to lower prices - at least to the point where they'll be able to counter these losses.

... rinse and repeat.

Don't ever think that Apple won't be affected if Samsung is forced to compete on price with the Chinese! Apple will inevitably be pulled into this spiral - not to the point where they become unprofitable but certainly to the point where their profit margins sink.

Apple will be safe as long as Samsung can manage to sell their flagships for the same, or at least almost the same price as Apple can sell the iPhone. But once that changes I promise you that these galactic profits are a thing of the past!

abdul muis

@Piot

"... not your native language. (Do forgive me if that is not the case)."

No need to apologize for this. I know my english is bad.

"to be replaced by the blind belief that Apple will fail. More than that... MUST fail."

No, I NEVER said that Apple will fail / MUST fail. I said Apple done great things in the era of iphone 2G/3G/3GS that resulting them to SKYROCKET their marketshare and the number of unit sold. BUT the competitor (Android - Google + etc) have up the ante, and apple has been singing the "I have success in the past, I will success in the future" song. This is NOT RIGHT, and WILL hurt apple in the wrong run. Apple need to change/Adapt otherwise they can't survive.

I don't know if you already read tomi's article about the cliff or not. But seeing the history of Nokia & BB, we could easily see that there is some INFLECTION POINT, A POINT OF NO RETURN. Apple need to change fast before they hit the inflection point. Otherwise Apple will be the next bb/nokia.

And NO, the current money in apple bank won't help apple survive another 10 year if apple hit inflection point. Once they hit the inflection point, they will have to fight inside (investor - share owner) and outside. and it will be very though.

AppleTurfer

@RottenApple - 20 year ago Apple and today's Apple are not comparable.

What is comparable is today's PC market to where tomorrow's smartphone market are heading....with some differences that are all in Apple's favor.

Today PC's are dominated by a non-Apple OS (Windows) with more than 90% share. Apple with something around 6% share sells PC's at much higher prices with much higher margins. Today's windows PC is a commodity. While there are a few "Mac Air/Pro priced alternatives" they don't sell well. Apple completely dominates the $1000 and up laptop market. Apple makes more money on it's 6% share than the top 5 Windows PC makers combined.

Smartphones are becoming a commodity where more than 90% run a non-Apple OS. Apple still sells premium phones at premium prices and it's sales continue to rise. Samsung is the only Android manufacture that sells a premium phone in any significant numbers with a profit but Samsung's ability to continue to do this is in jeopardy. A couple years out, and there will only be Apple able to command premium prices.

The differences are -- the base of sales in mobile is far larger than PC's. Apple's ecosystem is dominant in mobile where Windows is dominant in PC's. Far more money is made in the Windows software ecosystem than Mac. Far more money is made in the Apple ecosystem on mobile than Android. Apple's share of the smartphone market is much larger than their share of PC's and that, again, is based on a MUCH larger smartphone market.

As the disparity grows between the average Apple customer than the average Android customer, the stronger Apple becomes. The iPhone is delivering the prime customers to the carriers. Apple is delivering more profit for far less work to it's ecosystem. Apple's customers become even more valuable when compared to Android as the next billion of the poorest people get their Android phones.

Let's not forget, Apple has amazing pricing power. They are not like the American car companies that COULD NOT produce cheaper cars at quality compared to the Japanese of the '80s. Apple makes it's phone at scale with monopsony buying power. Any time Apple would need to lower their price, they could.

In the mean time, Apple recognizes the maturing of it's targeted smartphone market and is expanding into new areas with the Apple Watch. I don't expect earth shattering results right out of the gate. But just compare the original iPhone to today's iPhone in only 7 years. 87 times the computing power. Larger, beautiful, higher resolution screens. Much better battery life. Thinner, lighter, with millions of apps. What will we see in the Apple Watch platform 5 years from now?

What would happen if Apple's growth came to a stand still or declined? Not "market share" but "unit sales"? There are still tens of billions of dollars PER QUARTER to be made at it's current sales.

Any time Apple wants to own the market share they can. The only thing Android phones have ever been able to win in sales against the iPhone is price. Nothing is keeping Apple from coming out with a $200 or a $300 iPhone. It's just not their business model. They don't need to.

abdul muis


Another day, Another bendgate. This time Samsung bend test.
https://www.youtube.com/watch?v=UrhCz6PnT78

RottenApple

@AppleTurfer:

I really think you need to retire your unbroken belief that Apple has the inherently better product, that - all other things being equal - will win by default.

Of course with such a faulty foundation it's impossible to discuss anything because your basic beliefs obviously make you immune to the cold hard facts - and these are that in many, many countries, customers are showing Apple the cold shoulder - not because of price but because of choice.


Huber

@Apple Turfer:

If you think that Apple is doing well, look at the smartphone market share by country:

http://www.tech-thoughts.net/2014/09/smartphone-market-share-and-usage-by.html#.VC0md_l_sRE

In most European countries, Apple is at 10% or less. In South America, iPhone's market share is a rounding error. Also, Android has overtaken iOS regarding Usage Share, too.

The trend for iOS is downwards in almost all countries.

So the big question is: Will iPhone6 and 6+ change this trend? If not, Apple is in trouble. It's as simple as that.

AppleTurfer

2 million pre Orders in China in the first 6 hours.

@Hubor - what trend? Sales or Marketshare? No contest that the explosive growth in the bottom end where Apple doesn't compete means that Apple's share goes down. Any trend that Apple is losing ground in the market it compete's in? The premium phones by Samsung, HTC, Sony, Lenovo/Motorola?

@RottenApple - I have not once posited that Apple products are inherently better, certainly not for every person or every budget. But when handicapping Apple's chances in the market, you fail to appreciate that Apple is already doing what say they can't and it's business as usual for them.

adi purbakala

@rottenapple

Sad but true
Some will buy seiko watch with apple logo glued to it: http://youtu.be/v9JQsXPd41U

Tomi T Ahonen

AppleTurfer

Very big thanks for the first-hand review. We all appreciate it. We know you are loyal Apple user but that is of course perfectly valid, and the comments were very revealing personal viewpoints to what you thought after the first weekend. Really valuable comment, thanks!

Also generally good debate here, haha, fun that you are now getting also into specific numbers forecasting haha... Pls keep the discussion going

Tomi Ahonen :-)

Tomi T Ahonen

About Apple 2014 numbers and Oct-Dec quarter..

Apple is growing unit sales at about 12% to 15% rate on an annual basis (any quarter compared to same quarter a year ago, averaged for past 4 periods). This is about half the rate of the industry which is growing now at about 25% to 30% per year. This is why iPhone is reporting record unit sales every quarter but also is losing market share in smartphones. To do 15% growth from 2013 numbers, Apple should hit 175 million this calendar year (January to December) and that means roughly 37 million iPhones now in Q3 (Jul-Sep) and about 58 million iPhones sold for Christmas. If Q3 is better, then Q4 doesn't need to be as good and vice versa. 175 million total iPhones sold in 2014 would mean 14% market share, a decline from 15.5% market share in 2013.

58 million iPhones sold for Christmas Quarter would be only a jump of 14% from same quarter in 2013. That however, is a considerably ask because last year same period, iPhone only grew 8% from the Christmas quarter of 2012. This year iPhone 6 models should perform a bigger jump than last year, even as the prices of iPhones went up considerably and the gap to competition is far less - and for first time ever, several iPhone rivals are now recommended in comparison articles. I don't think 58 million is not do-able but I think its rather safe to say, Apple won't hit 200 million iPhones sold this year and 175 million or so sold this year would be a good performance. Incidentially for Apple to hold onto its 2013 market share, it would need to do about 195 million total iPhone unit sales from January to December 2014.

Now the new higher price levels mean that Apple revenues will be up far more than the unit sales - and very likely this means (even with the minor hiccups of the launch hassles) far better profitability in the iPhone business. So we should expect a very safely 'Apple record' in revenues and profits in Q4. Obviously almost every quarter is always a new iPhone unit sales record too and Christmas 2014 will be no exception to that.

One last comment, the 'big picture' truth is all phones not just smartphones. In that race Apple is still third largest handset maker but about to pass Microsoft-Nokia to become second largest handset maker in the world as Microsoft winds down the dumbphone-side of ex-Nokia handset business. Apple's overall total industry market share had been growing but slowly. If Apple finishes the year selling 175 million iPhones, its total handset market share for the year would be around 9%, up one point from last year. This is quite a remarkable market performance considering that the cheapest new iPhone 6 costs more than 20 times the average price of a dumbphone which still account for 1/3 of all phones sold this year. Apple has been amazing at building a massive new market for very-high-cost premium smartphones that certainly I never expected could be that big, a couple of years ago. Cudos to Apple for this. But that growth will end, there simply are not enough rich people on the planet who can afford to pay 650 dollars for a new smartphone (unsubsidised price).

Just some thoughts on the numbers..

Tomi Ahonen :-)

Tomi T Ahonen

PS

I think this also will be of interest to this thread. Slice analyzed the first-weekend US sales of iPhones again this year, and found that the majority of iSheep - sorry, my joke, they didn't use that term - majority of first-weekend iPhone 6 series buyers were 'white, rich, male'. 80% were male, 67% were white and 60% were that wealthy, that they earned 75,000 dollars per year or more.

So, good for Apple, they clearly attract the richest whitest malest customer segment to the iPhone (among passionate first-weekend buyers in America) but note, these numbers are again UP from the same period last year. So the iPhone is becoming ever less a smartphone appealing widely, and ever more requiring that indoctrination to the cult, which then brings out the extreme loyalty and yes, standing in line etc.. I do love my tech and gadgets but I wouldn't stand in line for the first weekend of any tech haha. I think I can wait a few days.. Even when a new James Bond movie comes out (and nowadays I make a point to fly to England for the opening week) I don't stand in the long lines for the premiere, I can wait till the Tuesday or Wednesday of the first week haha... And you guys know how passionate I am about my Bond stuff..

Incidentially that 75,000 dollar salary level, you know where it settles? At about the top 15% wage-earners in America. 85% of Americans earn a lower salary than that. So yeah, if you earn 100,000 dollars or a million dollars a year, who cares if the new phone costs 750 dollars and you can replace it every year and buy a nice iToy watch to go with it, whether you end up using the Apple Watch or not. But as we come down below the 75,000 annual salary level, into the US median 27,000 (ie 50% of Americans earn a lower salary than that) - suddenly the price of a rival Android device and its 'value' can become very significant indeed...

PSPS and the 75,000 dollar annual income, when we look at the 7.2 billion people on the planet, that level is above the 1% yes, more than 99% of the population on the planet earns less than that. But the iPhone loyal buyer skews ever more into the very affluent and consequently, the opportunities to expand unit sales are narrowing and if Apple is no longer able to deliver exceptional value in the new iPhone models, those customers may suddenly look elsewhere. The real addicted Apple loyalists will never leave but even new growth may start to dry up soon. Not yet this year and this Christmas haha, but soon...

Tomi Ahonen :-)

Tomi T Ahonen

About 'the Cliff' (thank you for mentioning my theory haha)

I have not said that Apple is over The Cliff (I did say Nokia and Blackberry have gone over The Cliff). The Cliff is how handset makers die.

Some say Samsung is on the verge of going over The Cliff. I think Samsung is exceptionally isolated from the threat of The Cliff (like Nokia was) and only way Samsung could go over The Cliff was if its CEO decided to push it into suicide (like Elop did at Nokia in February 2011). Why is Samsung exceptionally isolated? Because of the 'eggs in many baskets' theory. Even if one phone model totally flops, Samsung sells a huge array of devices, on rapid new launch cycles, in almost all countries and on almost all networks in the world.

Compare to Apple. Apple is VERY much at risk because they only release 2 new models per year, at the same time. If this bendygate for example had been a real problem, it could have decimated Apple sales (and reputation) with enormously costly replacements and/or recalls. I am not suggesting Apple is about to go over The Cliff but it is more vulnerable than say LG or Sony or Lenovo because of the limited product portfolio and slow cycle of releases. Now, Apple is also VERY good at design (best in the business) and has usually been anal at its attention to detail to ensure everything is perfection. It therefore, is by corporate culture unlikely to have a total meltdown in terms of releasing a dog of a phone like say Nokia N97 or Motorola Rokr. But on the theory of The Cliff, yes, Apple is far more vulnerable than Samsung.

On Samsung, they are now falling 'back to earth'. Before the Nokia collapse, Samsung was only very borderline profitable often posting loss-making quarters in its handset unit. They gained out of economies of scale when they became biggest handset maker (and biggest smartphone maker) but what they saw the past 2 years is an anomaly. Nokia wasn't reporting that level of profits in its handset unit in the last 2 years before Elop torpedoed the handset business. Samsung will now settle into the 'normal' level of profits of the mass market leader. Nice but not astronomical profits. Apple can continue to command ridiculous level of profits - because of the immense loyalty of the Apple fans. Samsung has to fight in the mass market wars against all rivals at every price point in all markets. But Samsung may have thought that the last 2 years were 'the new normal' - it wasn't. It just was the windfall profits out of Nokia's collapse.

Now that regular rules of competition are returning, we see the mid-tier players jostling into and out of profits (Sony, LG etc) and Samsung's profit margins will settle to far lower levels than we saw recently. It may be a culture shock there to adjust to that. But it is NOT a problem as long as every quarter Samsung's handset business does report a profit. The biggest player should be able to rather easily report at least a modest profit every quarter. So 'reduced profit' news is not bad news (except for investors, we don't care about Wall Street here). Apple will always make the biggest profits in the handset business. But if Samsung suddenly reports a loss in handsets, then it has a serious problem. Even then, it won't be going over The Cliff any day soon. That would take idiotic actions by the CEO and you can be sure, if that happens, I will be yelling and screaming on this blog just like I did with Nokia, Blackberry, Motorola etc

Tomi Ahonen :-)

abdul muis

@Piot & @Apple Turfer

Piot said:
" "BUT if Apple manage to sell about 10% more"

Just don't care any more.... desperate arguments by seemingly angry, bitter people.
"

AppleTurfer said:
"No, my prediction is 7-10% with the POTENTIAL for an outsized blockbuster next quarter"

Tomi said:
"Apple is growing unit sales at about 12% to 15% rate on an annual basis (any quarter compared to same quarter a year ago, averaged for past 4 periods). This is about half the rate of the industry which is growing now at about 25% to 30% per year."

So, I was rigt, if apple ONLY manage to sell 10% more phone (insert my argument here). Even at 20%, it is only a modest success (insert my argument here)

AppleTurfer

Everyone gets to define their own metric for success. Tomi compares unit market share has his number one. I look at profit and ecosystem. Maybe you, @abdul, think 30% growth is your line.

Appreciate Tomi acknowledging that Apple has found far more "rich" customers than he thought existed. Mind you, I think that particular "first weekend breakdown" says little about "all year sales" as clearly the iPhone is popular all over the world. The iPhone is every bit the cult status in Japan - so I really doubt the 80% "white males" for opening weekend. Look at those photos of lines outside the Apple stores...photos from around the world...not just white men.

Tomi isn't making enough of a point about the iPhone 6s ASP going UP. Who else is going to see their ASP's going up? Only an extremely desirable product and company can raise it's price in an increasingly commoditized market. Goes in the face of Apple facing a cliff.

Apple does break it's own records every year (so far). The most profitable and expensive phones selling more year after year. Surely that is cause for confidence in a company's future prospects. 175million phones this year and 200 million next...15% might be a niche, but it's [email protected] big and sustainable market.

But let's imagine the first weekend of sales are not indicative of the year long staying power of this year's iPhone. Apple runs out of "more than last year's number of rich people". Now growth, or shockingly, an actual decline in sales.

If Apple sold 20% fewer phones this year than last -- Apple would still make more money than Samsung and the rest of the companies combined. There would still be more money made in it's ecosystem than Android's. There would still be more commerce transacted on iPhones than Androids.

Apple would still be a healthy company with a LOT of options. They could sacrifice margins, drop the prices and boost sales with EASE. Apple showed they could do that from the very first iPhone. Out the door the cost was $400 on contract. After 6 weeks, Apple cut the price by $200 and gave refunds to those who had bought earlier. Apple is no GM/Ford with huge uncompetitive cost structures that make lowering price impossible without incurring losses.

Apple doesn't have an Elop as CEO...even without Steve Jobs, Apple is a supremely well run company.

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