Bleak smartphone industry could lead to double-digit iPhone decline in 2019
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.
"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.
"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 $749 in the U.S. That translates to a very costly sum in China, where iPhones were already sometimes as much as a person's monthly salary.
The memo conflicts with the opinion of former Apple retail head Ron Johnson, who earlier today said he "can't imagine a better buy for your portfolio for the next decade," and that iPhone sales should rebound in 2019.
Comments
The source of the problem is the feud with China. I’m all for enforcing IP rights and protecting IP, but the lack of progress is alarming.
We truly have a global economy, and while China discourages investment in China, they do purchase a shit-ton of foodstuffs. Our farmers are struggling to find other markets. A lot of these can’t be fixed by crop rotation, the farmers have made long term investments (take a look at how long it takes to grow citrus tree or nut bearing trees. These guys are getting @#$’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.
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.
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.
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...!
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.
2020?! The horror! A whole... year from now. Entire civilizations could rise & fall by then!
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.
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."