Bleak smartphone industry could lead to double-digit iPhone decline in 2019

Posted:
in iPhone
The entire smartphone industry may be under a great deal of strain in 2019, with the biggest impact felt at the higher end as manufacturers like Apple and Samsung are poised to take a big hit, assuming a market analysis by J.P. Morgan is correct.

iPhone XS Max


"We expect iPhone unit[s] to decline by double digits y/y [year-over-year] in 2019, due to prolonged replacement cycles and lackluster demand in China," the firm wrote in a note seen by AppleInsider. December-quarter smartphone shipments in China are estimated to be down 20 percent versus the same time a year ago, and the overall industry is predicted to see sales shrink between 4.8 and 5.5 percent this year, compounding a 2.9 to 3.3 percent loss in 2018.

A recovery isn't anticipated until 2020, when more 5G phones should be available, prompting people to upgrade for faster internet speeds. Even then the industry's growth rate is now forecast at 0.9 percent instead of 1.9 percent.

Apple's primary competition, Samsung, is expected to see its own shipments fall in 2019 in the low single digits. One advantage it has is a willingness to build affordable low- and mid-range phones, albeit dramatically sacrificing profit margins in the process.

The smartphone market is seen growing in places like India, Africa, and the Middle East, but sagging in China. It could fall 13 percent in 2019, only marginally better than last year's 13.5 percent.

In announcing a $5 billion revenue shortfall for the December quarter, Apple CEO Tim Cook primarily blamed weak Chinese iPhone sales, but also factors like "foreign exchange headwinds," "economic weakness in some emerging markets," and 2018 battery discounts meant to apologize for throttling iPhone performance. Earlier this month Cook revealed that about 11 million batteries were swapped during the repair program -- as much as 11 times what Apple had planned for.

Problems in the Chinese market stem from a combination of factors, including the rise of local brands like Huawei and Xiaomi, which now have quality devices selling for hundreds less than iPhones. Apple simultaneously raised its prices even higher, starting its cheapest new model -- the iPhone XR -- at $749 in the U.S. That translates to a very costly sum in China, where iPhones were already sometimes as much as a person's monthly salary.

The memo conflicts with the opinion of former Apple retail head Ron Johnson, who earlier today said he "can't imagine a better buy for your portfolio for the next decade," and that iPhone sales should rebound in 2019.
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Comments

  • Reply 1 of 23
    coolfactorcoolfactor Posts: 1,427member
    "Bleak smartphone industry"? That's awfully general. How about "Weaker sales of new smartphones" instead? It's not like there isn't already millions of smartphones in use that many companies are benefiting from month after month. The overall industry is very healthy.
    edited January 16 mwhitewatto_cobra
  • Reply 2 of 23
    Where i’m standing it does look like a downturn is coming.  The housing industry has stalled, the auto looks the same, and electronics are getting there.

    The source of the problem is the feud with China.  I’m all for enforcing IP rights and protecting IP, but the lack of progress is alarming.  

    We truly have a global economy, and while China discourages investment in China, they do purchase a shit-ton of foodstuffs.  Our farmers are struggling to find other markets.  A lot of these can’t be fixed by crop rotation, the farmers have made long term investments (take a look at how long it takes to grow citrus tree or nut bearing trees.  These guys are getting @#$’d by politics...

    Increased China “inspections” are causing food to spoil before getting to market (for example), and farmers have to grin and bear it.

    Anyways, for Apple they’re being slowing shut out of one of their key growth markets.  That said, most of this is “priced in” if you want to place a good bet I’d wait for a P/E of 10, at that point there’s little downside risk and tons of upside.


    robbyxDAalsethchasmpalominewatto_cobra
  • Reply 3 of 23
    “bleak” ?  How about calling it “normalized” due to market saturation ?   Many future phones may be bought when a user wants or needs one but not just because a new model comes out every year like clockwork.
    bonobobdesignrwatto_cobra
  • Reply 4 of 23
    AppleExposedAppleExposed Posts: 623unconfirmed, member
    mac2net said:
    no doubt about it - little timmie cookie has been a one trick pony and the circus is over - say bye bye timmie
    Nothing in an analysis about the future is factual.

    Tim Cook has made Apple 5x larger than when Steve was alive.

    If you take out the iPhone "trick" from Apples revenue, they're still one of the biggest companies in tech history.

    Clown.
    StrangeDaysgenovellegilly33JFC_PAchasmLordeHawkpalominewatto_cobra
  • Reply 5 of 23
    lennlenn Posts: 36member
    Time for Cook and his sidekick Schiller to be replaced. Their time has come and gone. Apple needs a true visionary and not another bean counter. Apple has turned into the BMW of the tech world. Over engineer everything and charge outrageous prices and tell people we know exactly what you need.
  • Reply 6 of 23
    Where i’m standing it does look like a downturn is coming.  The housing industry has stalled, the auto looks the same, and electronics are getting there.

    The source of the problem is the feud with China.  I’m all for enforcing IP rights and protecting IP, but the lack of progress is alarming.  

    We truly have a global economy, and while China discourages investment in China, they do purchase a shit-ton of foodstuffs.  Our farmers are struggling to find other markets.  A lot of these can’t be fixed by crop rotation, the farmers have made long term investments (take a look at how long it takes to grow citrus tree or nut bearing trees.  These guys are getting @#$’d by politics...

    Increased China “inspections” are causing food to spoil before getting to market (for example), and farmers have to grin and bear it.

    Anyways, for Apple they’re being slowing shut out of one of their key growth markets.  That said, most of this is “priced in” if you want to place a good bet I’d wait for a P/E of 10, at that point there’s little downside risk and tons of upside.


    Very true. I have relatives back in the US Midwest. Their friends that grow soybeans are in deep s***. Not only is China not buying their product, they are signing long term contracts with other sources outside of North America. These people not only have a history growing soybeans, all of their equipment is set up for soybeans. Switching over to wheat or corn or oats isn't just putting different seeds in the ground. And the thing is China IS finding other sources. This is why I've said from before this started the US can't win a trade war with China. We want and need their stuff, they can find other suppliers for what they require.
    designrchasmpalomine
  • Reply 7 of 23
    A recovery isn't anticipated until 2020, when more 5G phones should be available, prompting people to upgrade for faster internet speeds.
    I don't think 5G will be widespread by 2020. This might be a selling point the companies use, but I suspect many people will either not worry about it,. or will hold off upgrading until 5G is available. 5G phones perform no better without a 5G network to run them on.
    edited January 16 designrchasmmatteblack13watto_cobra
  • Reply 8 of 23

    Problems in the Chinese market stem from a combination of factors, including the rise of local brands like Huawei and Xiaomi, which now have quality devices selling for hundreds less than iPhones. Apple simultaneously raised its prices even higher, starting its cheapest new model -- the iPhone XR -- at $749 in the U.S. That translates to a very costly sum in China, where iPhones were already sometimes as much as a person's monthly salary.
    This is a bit misleading. First because Apple does sell cheaper models and the knockoffs do sell expensive models. 

    Also, while an top-tier iPhone may cost a month’s salary, Ben Thompson said it’s a month salary of a poorer demographic in China and not the demographic that is actually buying iPhones. The middle class and upper class grew so much that China has more new billionaires than America does. 
    edited January 16 chasmwatto_cobra
  • Reply 9 of 23
    A deleted user violating the multiple accounts after a ban rule said:
    Some really stupid crap.
    Idiotic, low-value post very likely from a new troll account. Apple has several major revenue lines, each bigger than other entire tech firms. 

    Funny how the trolls never sneer at Google’s or Facebook’s “one trick pony” of ad sales, or Netflix of subscriptions, or Gillette’s razors, etc. But but but...!
    edited January 17 tenchi211gilly33chasmwatto_cobra
  • Reply 10 of 23

    lenn said:
    Time for Cook and his sidekick Schiller to be replaced. Their time has come and gone. Apple needs a true visionary and not another bean counter. Apple has turned into the BMW of the tech world. Over engineer everything and charge outrageous prices and tell people we know exactly what you need.
    Clueless. Most CEOs are not product visionaries or product managers, they are businessmen who work on building the business. Jobs died, get over it. Under Cook Apple has grown into the biggest, most successful public company in human history, cementing him as one of the greatest modern CEOs in history. Deal with it. 

    Also clueless - the prices are hardly outrageous. As Warren Buffet said, the iPhone is likely more valuable to people, considering all the jobs-to-be-done it serves. Additionally, there are alternatives now to the top-tier models in their product lines. iPad begins st $329, iPhone at $449, Mac at $799, etc... If you can’t afford those, you simply aren’t in the game. Sorry. 
    LordeHawkwatto_cobra
  • Reply 11 of 23
    gatorguygatorguy Posts: 20,264member
    mac2net said:
    no doubt about it - little timmie cookie has been a one trick pony and the circus is over - say bye bye timmie
    Idiotic, low-value post very likely from a new troll account. Apple has several major revenue lines, each bigger than other entire tech firms. 

    Funny how the trolls never sneer at Google’s or Facebook’s “one trick pony” of ad sales, or Netflix of subscriptions, or Gillette’s razors, etc. But but but...!
    Of course they do! There's no lack of "trolls" as you call them, including a few right here at AI, who search for any opportunity to sneer at Google's revenue model depending primarily on ads.
    edited January 16 muthuk_vanalingambeowulfschmidt
  • Reply 12 of 23
    I don't begrudge any tech company. I say "Welcome to the party, pal!"
  • Reply 13 of 23
    lenn said:
    Time for Cook and his sidekick Schiller to be replaced. Their time has come and gone. Apple needs a true visionary and not another bean counter. Apple has turned into the BMW of the tech world. Over engineer everything and charge outrageous prices and tell people we know exactly what you need.
    But yet BMW outsell all luxury makes except wait for it...Mercedes. Apple is the Mercedes of Tech. Not GM or Hyundai. If you believe their prices are outrageous, do you have a problem  Google, Samsung and LG who have the same and even higher priced phones to compete in the high end market with Apple? 
    watto_cobra
  • Reply 14 of 23
    jasenj1jasenj1 Posts: 912member
    A recovery isn't anticipated until 2020,

    2020?! The horror! A whole... year from now. Entire civilizations could rise & fall by then!

    watto_cobra
  • Reply 15 of 23
    gilly33gilly33 Posts: 237member
    mac2net said:
    no doubt about it - little timmie cookie has been a one trick pony and the circus is over - say bye bye timmie
    Idiotic, low-value post very likely from a new troll account. Apple has several major revenue lines, each bigger than other entire tech firms. 

    Funny how the trolls never sneer at Google’s or Facebook’s “one trick pony” of ad sales, or Netflix of subscriptions, or Gillette’s razors, etc. But but but...!
    Well said my friend. Oh the trolls are out en masse. 
    JFC_PAwatto_cobra
  • Reply 16 of 23
    entropysentropys Posts: 1,616member
    DAalseth said:
    Where i’m standing it does look like a downturn is coming.  The housing industry has stalled, the auto looks the same, and electronics are getting there.

    The source of the problem is the feud with China.  I’m all for enforcing IP rights and protecting IP, but the lack of progress is alarming.  

    We truly have a global economy, and while China discourages investment in China, they do purchase a shit-ton of foodstuffs.  Our farmers are struggling to find other markets.  A lot of these can’t be fixed by crop rotation, the farmers have made long term investments (take a look at how long it takes to grow citrus tree or nut bearing trees.  These guys are getting @#$’d by politics...

    Increased China “inspections” are causing food to spoil before getting to market (for example), and farmers have to grin and bear it.

    Anyways, for Apple they’re being slowing shut out of one of their key growth markets.  That said, most of this is “priced in” if you want to place a good bet I’d wait for a P/E of 10, at that point there’s little downside risk and tons of upside.


    Very true. I have relatives back in the US Midwest. Their friends that grow soybeans are in deep s***. Not only is China not buying their product, they are signing long term contracts with other sources outside of North America. These people not only have a history growing soybeans, all of their equipment is set up for soybeans. Switching over to wheat or corn or oats isn't just putting different seeds in the ground. And the thing is China IS finding other sources. This is why I've said from before this started the US can't win a trade war with China. We want and need their stuff, they can find other suppliers for what they require.
    They are doing it to Australian farmers too. It is more China using deals to foster close relationships with developing countries. The kind of relationship you expect to be had between a behemoth and a little guy.  
    US/China tariff issues are a handy excuse, and gives the advocates of trade imperialism in the chinese heirachy a leg up compared with those that are more open trade inclined.
    edited January 16 watto_cobra
  • Reply 17 of 23
    chasmchasm Posts: 1,259member
    I'd like to thank the AI forum admins for making it easy to ignore trolls.

    Meanwhile, back in reality-land ... it's a tough call for the rest of 2019. While I do expect some kind of an agreement with China eventually, it may not happen for quite a while due to the factors listed above, and I think another recession is definitely on the way.

    But I also think Ron is right when he says there's a big wave of upgraders over the next year or two coming. This year's December quarter is likely to be solid gold for Apple.

    And finally, for those who claim premium smartphones are too expensive -- not if they're replacing your need for a notebook or desktop 95 percent of the time, they're not. I'm seeing a lot of people switching to iPads and iPhones as their sole "computers."
    edited January 17 watto_cobra
  • Reply 18 of 23
    k2kwk2kw Posts: 1,692member
    Where i’m standing it does look like a downturn is coming.  The housing industry has stalled, the auto looks the same, and electronics are getting there.

    The source of the problem is the feud with China.  I’m all for enforcing IP rights and protecting IP, but the lack of progress is alarming.  

    We truly have a global economy, and while China discourages investment in China, they do purchase a shit-ton of foodstuffs.  Our farmers are struggling to find other markets.  A lot of these can’t be fixed by crop rotation, the farmers have made long term investments (take a look at how long it takes to grow citrus tree or nut bearing trees.  These guys are getting @#$’d by politics...

    Increased China “inspections” are causing food to spoil before getting to market (for example), and farmers have to grin and bear it.

    Anyways, for Apple they’re being slowing shut out of one of their key growth markets.  That said, most of this is “priced in” if you want to place a good bet I’d wait for a P/E of 10, at that point there’s little downside risk and tons of upside.


    A lot of those Farmers voted for Trump and still support him.  They got subsidy support from the Republicans last year.   Hopefully House Democrats don’t vote for this again.   You should reap what you sow.   
  • Reply 19 of 23
    gatorguy said:
    mac2net said:
    no doubt about it - little timmie cookie has been a one trick pony and the circus is over - say bye bye timmie
    Idiotic, low-value post very likely from a new troll account. Apple has several major revenue lines, each bigger than other entire tech firms. 

    Funny how the trolls never sneer at Google’s or Facebook’s “one trick pony” of ad sales, or Netflix of subscriptions, or Gillette’s razors, etc. But but but...!
    Of course they do! There's no lack of "trolls" as you call them, including a few right here at AI, who search for any opportunity to sneer at Google's revenue model depending primarily on ads.
    Touched a nerve, did he?
    watto_cobra
  • Reply 20 of 23
    k2kw said:
    A lot of those Farmers voted for Trump and still support him.  They got subsidy support from the Republicans last year.   Hopefully House Democrats don’t vote for this again.   You should reap what you sow.   
    and many of them are hurting because of the Government Shutdown. They can't get their subsidy checks from the Dept of Agriculture which will go towards buying the seed that they need to plant for this years crops.
    There are many lessons from history that America needs to learn
    One of these is:-
    - You can't win a trade war with a country that is bigger than you. China basically owns a huge part of Africa these days.
     
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