Who will be paying for it? If Apple sells a $800 phone and gets paid 1/24 of the total price per month, they won’t bag the entire price until after 2 years. This will take more than two years to ramp up until Apple starts collecting the same amount per month as they would if they sold the iPhone outright.
I don’t know if this can be considered a sign of strength. From the automotive perspective, when a company does 0% financing, its usually a sign of weakness via-a-vis consumer demand for the cars. When there’s strong demand, automotive manufacturers usually don’t offer 0% interest deals.
Apple is basically lending money to their customers for free, which is not something that any manufacturer would ever do unless they are expecting sagging demand for their product. The 0% financing is a way to stimulate demand. Apple pays to manufacture the iPhone upfront, but doesn’t get to recoup its costs for over a year and doesn’t make all the profit until after two years.
The more I think of that, the more I see this as a desperate measure to prop up sales.
Apple has this deal already using 3rd party credit providers so may not be getting all the sales value upfront anyway. So they are moving it in-house and getting a bigger slice of the pie as they cut out another middle man.
Bonus they get additional revenue out of each customer from general spending on card.
When they do it via third-party providers, Apple gets paid 100% upfront. The third-party provider lends the money to the customer and charges an interest on the loan.
This is totally different. With this new scheme, Apple doesn’t get paid the whole amount upfront. Instead, they get paid 1/24 of the amount after a month, and 1/24 of the total amount every consecutive month until they get paid the entire amount in 2 years.
Their is no interest on either Barclays Visa or with Citizens Bank upgrade program. In the case of Barclay Card with Apple if you don't pay it off within the time frame then there is a interest charge. Not on citizen bank zero interest
I wasn't familiar with any of these programs, as I pay outright for everything that I buy. Even if I buy with a credit card, I pay off the monthly bill so I never pay any interest.
Now that I looked up the conditions of the Citizen bank loan, do you think a commercial bank is giving you a free loan?
The loan requires that you maintain AppleCare or AppleCare Plus, which means that Apple forces you to buy a service that you may or may not want in order to have this 0% interest loan. This is only more proof that Apple has been involved in propping up the sales for a while now by clever marketing tricks. Of course, Apple wants you to get on the monthly installments and keep paying them forever and with this Citizens Bank loan, Apple also puts you on monthly installments payment plan for AppleCare.
I wonder if there are so many people out there who are suckers to be milked monthly and indefinitely for a privilege to use a smartphone. Do you realize that if you are in your 20s or 30s and will be using a smartphone for 40 years, you will end up paying Apple $30,000 (in today's dollars) just so that you can have a smartphone? Now, if you are married, this becomes $60,000. If you have two kids, that's $75,000 (40 years for you and your spouse plus 10 years for each of your kids, while they are living with you).
Now, consider what happens if you buy a new phone, keep it for 4 years, and then get another new phone (while selling your existing phone). You will end up paying about $10,000 for your phone in 40 years; $20,000 for you and your wife; and about $27,000 for you and two of your kids (40 years for you and your wife and 10 years for both of your kids).
Who will be paying for it? If Apple sells a $800 phone and gets paid 1/24 of the total price per month, they won’t bag the entire price until after 2 years. This will take more than two years to ramp up until Apple starts collecting the same amount per month as they would if they sold the iPhone outright.
I don’t know if this can be considered a sign of strength. From the automotive perspective, when a company does 0% financing, its usually a sign of weakness via-a-vis consumer demand for the cars. When there’s strong demand, automotive manufacturers usually don’t offer 0% interest deals.
Apple is basically lending money to their customers for free, which is not something that any manufacturer would ever do unless they are expecting sagging demand for their product. The 0% financing is a way to stimulate demand. Apple pays to manufacture the iPhone upfront, but doesn’t get to recoup its costs for over a year and doesn’t make all the profit until after two years.
The more I think of that, the more I see this as a desperate measure to prop up sales.
Apple has this deal already using 3rd party credit providers so may not be getting all the sales value upfront anyway. So they are moving it in-house and getting a bigger slice of the pie as they cut out another middle man.
Bonus they get additional revenue out of each customer from general spending on card.
When they do it via third-party providers, Apple gets paid 100% upfront. The third-party provider lends the money to the customer and charges an interest on the loan.
This is totally different. With this new scheme, Apple doesn’t get paid the whole amount upfront. Instead, they get paid 1/24 of the amount after a month, and 1/24 of the total amount every consecutive month until they get paid the entire amount in 2 years.
It’s not a scheme - they’re giving a discount, much like when they pay you for your trade-in. They’re building brand loyalty for the iPhone and for their card. It’s brilliant.
A scheme doesn’t have to have a negative connotation.
I doesn’t have to be negative - but it sure sounded negative in the context of the original post. Creative marketing is not usually referred to as a “scheme” or “plot”.
Back in the day they announced new products about every three months. That is about the time it takes to replenish discretionary funds in the believers bank accounts. They also timed the releases to make or break the quarterly numbers.
Who will be paying for it? If Apple sells a $800 phone and gets paid 1/24 of the total price per month, they won’t bag the entire price until after 2 years. This will take more than two years to ramp up until Apple starts collecting the same amount per month as they would if they sold the iPhone outright.
I don’t know if this can be considered a sign of strength. From the automotive perspective, when a company does 0% financing, its usually a sign of weakness via-a-vis consumer demand for the cars. When there’s strong demand, automotive manufacturers usually don’t offer 0% interest deals.
Apple is basically lending money to their customers for free, which is not something that any manufacturer would ever do unless they are expecting sagging demand for their product. The 0% financing is a way to stimulate demand. Apple pays to manufacture the iPhone upfront, but doesn’t get to recoup its costs for over a year and doesn’t make all the profit until after two years.
The more I think of that, the more I see this as a desperate measure to prop up sales.
Apple has this deal already using 3rd party credit providers so may not be getting all the sales value upfront anyway. So they are moving it in-house and getting a bigger slice of the pie as they cut out another middle man.
Bonus they get additional revenue out of each customer from general spending on card.
When they do it via third-party providers, Apple gets paid 100% upfront. The third-party provider lends the money to the customer and charges an interest on the loan.
This is totally different. With this new scheme, Apple doesn’t get paid the whole amount upfront. Instead, they get paid 1/24 of the amount after a month, and 1/24 of the total amount every consecutive month until they get paid the entire amount in 2 years.
It’s not a scheme - they’re giving a discount, much like when they pay you for your trade-in. They’re building brand loyalty for the iPhone and for their card. It’s brilliant.
A scheme doesn’t have to have a negative connotation.
I doesn’t have to be negative - but it sure sounded negative in the context of the original post. Creative marketing is not usually referred to as a “scheme” or “plot”.
You wrote (verbatim), "Creative marketing is not usually referred to as a "scheme" ..."
Here's a screenshot from the English dictionary that is part of both macOS and iOS:
I don’t know if this can be considered a sign of strength. From the automotive perspective, when a company does 0% financing, its usually a sign of weakness via-a-vis consumer demand for the cars. When there’s strong demand, automotive manufacturers usually don’t offer 0% interest deals.
Apple is basically lending money to their customers for free, which is not something that any manufacturer would ever do unless they are expecting sagging demand for their product.
The more I think of that, the more I see this as a desperate measure to prop up sales.
That's a fair point but you are neglecting to note that Apple is sitting on hundreds of billions in cash reserves and the money is otherwise not earning much. This could be a good way to tap those reserves. Most auto companies aren't sitting on hundreds of billions in spare cash.
I’m not saying that Apple is doomed or that they are going to run out of their cash reserves. I’m only pointing out that letting millions of customers pay for their new phones over the course of 24 months without charging interest is not a sign of strong confidence in the sales numbers for the immediate future.
Additionally, as it was pointed out earlier, Apple recognizes profits on the subscription accounting method over the course of 24 months (pure coincidence?). So, the ever-decreasing quarterly sales (year-to-year) must be taking an increasingly larger chunk out of profits, which is the opposite effect to how profits were snowballing a decade ago, when this accounting principle was introduced. The effect on the profits that the sagging sales are causing that we are witnessing today is the result of what happened 2 years ago. So, in the past two years, we have seen a dramatic drop in the sales numbers, which means that the effect on the profits of those lower numbers of phones sold year to year is yet to show up in the reports.
It seems that Apple is now trying to stop the bleeding that this accounting method caused once the sales peaked a few years ago and then started gradually decreasing.
Apple is not a charity. They understand that they have painted themselves in the corner with the 38% profit margins. To maintain the profit margins, they have to price their phones high, which lowers the sales once the phone price approaches $1,000. If they lower the price to boost the sales (as they tried with the iPhone 11), they will bring down their profit margins. We haven’t seen this happen yet because the iPhone 11 was on sale for only 2 weeks in the quarter for which they have just reported. So, you are right. They decided to leverage the cash they have on hand to encourage more people to buy more expensive phones by letting them spread out the payments over 24 months with no penalty for doing so. It’s a smart move to prop up sales but it’s not a good sign of strength in projected sales numbers.
Incidentally, Americans and iPhone buyers in other developed countries have been able to pay for their phones monthly without any interest charged through their carrier’s financing. So, the sales numbers that we are seeing today are mostly propped up by similar no-interest financing schemes. It appears that it’s becoming increasingly difficult to make people keep buying new phones. Pretty soon, people will have to be incentivized to buy these phones (perhaps free 2-year 1TB iCloud storage plan with the purchase of a new iPhone every 2 years).
Someone will have to cough up the incentives to keep the folks interested, and because carriers are brand agnostic, the burden will fall on the phone manufacturers.
Your concern is noted, but for a fact, there is no "ever decreasing quarterly sales (year to year) must be taking an increasingly larger chunk out of profits".
What you are seeing is iPhone buyer holding onto their iPhones longer, now some 39 months (according to the link following) and then most likely purchasing yet another iPhone, which along with used iPhones on the market, is one of the reasons that the iPhone user base keeps expanding. It also looks like that replacement cycle has about peaked.
As for the zero interest loan using the Apple Card, that's near a rounding error when you consider the cost of money to Apple, and given that cardholders will be using those same cards for other purchases, Apple will almost certainly gain any zero interest sale.
Who will be paying for it? If Apple sells a $800 phone and gets paid 1/24 of the total price per month, they won’t bag the entire price until after 2 years. This will take more than two years to ramp up until Apple starts collecting the same amount per month as they would if they sold the iPhone outright.
I don’t know if this can be considered a sign of strength. From the automotive perspective, when a company does 0% financing, its usually a sign of weakness via-a-vis consumer demand for the cars. When there’s strong demand, automotive manufacturers usually don’t offer 0% interest deals.
Apple is basically lending money to their customers for free, which is not something that any manufacturer would ever do unless they are expecting sagging demand for their product. The 0% financing is a way to stimulate demand. Apple pays to manufacture the iPhone upfront, but doesn’t get to recoup its costs for over a year and doesn’t make all the profit until after two years.
The more I think of that, the more I see this as a desperate measure to prop up sales. This is also a way to push the premium product downmarket to the people who would not normally consider expensive toys like these and try to squeeze the profits out of them using this zero interest rate trick.
Why wouldn’t most people take advantage of this deal? Even if I have a grand or more to blow on a new Apple iPhone, why would I not instead pay Apple a little per month? I don’t get any benefit for paying for the iPhone outright anymore. I won’t get punished for financing the phone.
But what happens if people take this deal in masses? This could result in a huge hit to the bottom line in the first two years.
So much hand wringing over MONEY MONEY MONEY!!
The message I get from this program is that Apple is thinking different with respect to enabling and encouraging more new and more existing customers to experience its new products—sooner than later.
The Apple user experience has been the most important factor for me over the last three decades, or so, in keeping me a loyal customer. It also accounts, I think, for the consistently high numbers of switchers to Apple.
I personally love the entire current Apple ecosystem of products and services!
I don’t know if this can be considered a sign of strength. From the automotive perspective, when a company does 0% financing, its usually a sign of weakness via-a-vis consumer demand for the cars. When there’s strong demand, automotive manufacturers usually don’t offer 0% interest deals.
Apple is basically lending money to their customers for free, which is not something that any manufacturer would ever do unless they are expecting sagging demand for their product.
The more I think of that, the more I see this as a desperate measure to prop up sales.
That's a fair point but you are neglecting to note that Apple is sitting on hundreds of billions in cash reserves and the money is otherwise not earning much. This could be a good way to tap those reserves. Most auto companies aren't sitting on hundreds of billions in spare cash.
I’m not saying that Apple is doomed or that they are going to run out of their cash reserves. I’m only pointing out that letting millions of customers pay for their new phones over the course of 24 months without charging interest is not a sign of strong confidence in the sales numbers for the immediate future.
Additionally, as it was pointed out earlier, Apple recognizes profits on the subscription accounting method over the course of 24 months (pure coincidence?). So, the ever-decreasing quarterly sales (year-to-year) must be taking an increasingly larger chunk out of profits, which is the opposite effect to how profits were snowballing a decade ago, when this accounting principle was introduced. The effect on the profits that the sagging sales are causing that we are witnessing today is the result of what happened 2 years ago. So, in the past two years, we have seen a dramatic drop in the sales numbers, which means that the effect on the profits of those lower numbers of phones sold year to year is yet to show up in the reports.
It seems that Apple is now trying to stop the bleeding that this accounting method caused once the sales peaked a few years ago and then started gradually decreasing.
Apple is not a charity. They understand that they have painted themselves in the corner with the 38% profit margins. To maintain the profit margins, they have to price their phones high, which lowers the sales once the phone price approaches $1,000. If they lower the price to boost the sales (as they tried with the iPhone 11), they will bring down their profit margins. We haven’t seen this happen yet because the iPhone 11 was on sale for only 2 weeks in the quarter for which they have just reported. So, you are right. They decided to leverage the cash they have on hand to encourage more people to buy more expensive phones by letting them spread out the payments over 24 months with no penalty for doing so. It’s a smart move to prop up sales but it’s not a good sign of strength in projected sales numbers.
Incidentally, Americans and iPhone buyers in other developed countries have been able to pay for their phones monthly without any interest charged through their carrier’s financing. So, the sales numbers that we are seeing today are mostly propped up by similar no-interest financing schemes. It appears that it’s becoming increasingly difficult to make people keep buying new phones. Pretty soon, people will have to be incentivized to buy these phones (perhaps free 2-year 1TB iCloud storage plan with the purchase of a new iPhone every 2 years).
Someone will have to cough up the incentives to keep the folks interested, and because carriers are brand agnostic, the burden will fall on the phone manufacturers.
Your concern is noted, but for a fact, there is no "ever decreasing quarterly sales (year to year) must be taking an increasingly larger chunk out of profits".
What you are seeing is iPhone buyer holding onto their iPhones longer, now some 39 months (according to the link following) and then most likely purchasing yet another iPhone, which along with used iPhones on the market, is one of the reasons that the iPhone user base keeps expanding. It also looks like that replacement cycle has about peaked.
As for the zero interest loan using the Apple Card, that's near a rounding error when you consider the cost of money to Apple, and given that cardholders will be using those same cards for other purchases, Apple will almost certainly gain any zero interest sale.
Are you saying that the iPhone sales numbers didn't peak a couple years ago and haven't been coming down significantly since then on a quarterly basis when compared to the same quarter of the previous year? Like, for example, the 4th quarter of 2019. Are you saying that the iPhone sales numbers didn't come down 9%?
As for more and more people owning iPhones, a lot of those people in third-world countries buy used iPhones, so they are the ones who are buying the iPhones that you trade in to Apple or to carriers every year. The Chinese may not be buying their next iPhone, especially when the 5G launches in China shortly and the Chinese manufacturers start supplying premium handsets with 5G in them to the Chinese market. Don't forget that in China, the primary way to access the Internet is from a smartphone and via cellular (not via Wi-Fi). So, for the Chinese, 5G is much bigger than it is for the US, where we have pervasive landline Internet, so 5G is really not that important to us. Additionally, we are not out of the woods with the trade war yet. Let's not forget how the Chinese tiptoed the party line last year by boycotting Apple.
Who will be paying for it? If Apple sells a $800 phone and gets paid 1/24 of the total price per month, they won’t bag the entire price until after 2 years. This will take more than two years to ramp up until Apple starts collecting the same amount per month as they would if they sold the iPhone outright.
I don’t know if this can be considered a sign of strength. From the automotive perspective, when a company does 0% financing, its usually a sign of weakness via-a-vis consumer demand for the cars. When there’s strong demand, automotive manufacturers usually don’t offer 0% interest deals.
Apple is basically lending money to their customers for free, which is not something that any manufacturer would ever do unless they are expecting sagging demand for their product. The 0% financing is a way to stimulate demand. Apple pays to manufacture the iPhone upfront, but doesn’t get to recoup its costs for over a year and doesn’t make all the profit until after two years.
The more I think of that, the more I see this as a desperate measure to prop up sales. This is also a way to push the premium product downmarket to the people who would not normally consider expensive toys like these and try to squeeze the profits out of them using this zero interest rate trick.
Why wouldn’t most people take advantage of this deal? Even if I have a grand or more to blow on a new Apple iPhone, why would I not instead pay Apple a little per month? I don’t get any benefit for paying for the iPhone outright anymore. I won’t get punished for financing the phone.
But what happens if people take this deal in masses? This could result in a huge hit to the bottom line in the first two years.
You know interest rates are virtually zero for banks and large corporations.
Are you saying that the iPhone sales numbers didn't peak a couple years ago and haven't been coming down significantly since then on a quarterly basis when compared to the same quarter of the previous year? Like, for example, the 4th quarter of 2019. Are you saying that the iPhone sales numbers didn't come down 9%?
As for more and more people owning iPhones, a lot of those people in third-world countries buy used iPhones, so they are the ones who are buying the iPhones that you trade in to Apple or to carriers every year. The Chinese may not be buying their next iPhone, especially when the 5G launches in China shortly and the Chinese manufacturers start supplying premium handsets with 5G in them to the Chinese market. Don't forget that in China, the primary way to access the Internet is from a smartphone and via cellular (not via Wi-Fi). So, for the Chinese, 5G is much bigger than it is for the US, where we have pervasive landline Internet, so 5G is really not that important to us. Additionally, we are not out of the woods with the trade war yet. Let's not forget how the Chinese tiptoed the party line last year by boycotting Apple.
So, if Apple has a better FY 2020 Q1, and a better year, over 2019, then wouldn't your "ever decreasing quarterly sales (year on year) must be taking an increasingly larger chunk out of profits" be decidedly false?
Most analysts are expecting iPhone FY 2020 revenues to exceed FY 2019 revenues, and Apple's next release of iPhone with 5G is expected to continue strong upgrade sales.
As for 5G in China, unless you have data to show that current Chinese iPhone users are moving in any significant numbers to Huawei, which is the favorite of Nationalist Chinese, I'm not seeing anything that portents "doom and gloom" in China. Your admission that Chinese citizens "tiptoed the party line last year by boycotting Apple" isn't necessarily true to begin with, China actually being in a financial crisis at the time, which interestingly enough, is actually worsening. Data suggests that Chinese buyers just paused on buying iPhones, not abandoned them.
In the meantime, Apple has mostly recovered wrt revenue in China, though of course, there is still a great deal of risk in China.
I wonder if we'll see this for other Apple purchases, too.
I hope for this too, either promo money off Apple gear and/or Interest Free 12-36 months...basically only reasons I'd consider adding another Credit Card.
Are you saying that the iPhone sales numbers didn't peak a couple years ago and haven't been coming down significantly since then on a quarterly basis when compared to the same quarter of the previous year? Like, for example, the 4th quarter of 2019. Are you saying that the iPhone sales numbers didn't come down 9%?
As for more and more people owning iPhones, a lot of those people in third-world countries buy used iPhones, so they are the ones who are buying the iPhones that you trade in to Apple or to carriers every year. The Chinese may not be buying their next iPhone, especially when the 5G launches in China shortly and the Chinese manufacturers start supplying premium handsets with 5G in them to the Chinese market. Don't forget that in China, the primary way to access the Internet is from a smartphone and via cellular (not via Wi-Fi). So, for the Chinese, 5G is much bigger than it is for the US, where we have pervasive landline Internet, so 5G is really not that important to us. Additionally, we are not out of the woods with the trade war yet. Let's not forget how the Chinese tiptoed the party line last year by boycotting Apple.
So, if Apple has a better FY 2020 Q1, and a better year, over 2019, then wouldn't your "ever decreasing quarterly sales (year on year) must be taking an increasingly larger chunk out of profits" be decidedly false?
Most analysts are expecting iPhone FY 2020 revenues to exceed FY 2019 revenues, and Apple's next release of iPhone with 5G is expected to continue strong upgrade sales.
As for 5G in China, unless you have data to show that current Chinese iPhone users are moving in any significant numbers to Huawei, which is the favorite of Nationalist Chinese, I'm not seeing anything that portents "doom and gloom" in China. Your admission that Chinese citizens "tiptoed the party line last year by boycotting Apple" isn't necessarily true to begin with, China actually being in a financial crisis at the time, which interestingly enough, is actually worsening. Data suggests that Chinese buyers just paused on buying iPhones, not abandoned them.
In the meantime, Apple has mostly recovered wrt revenue in China, though of course, there is still a great deal of risk in China.
2019 Q1 (fiscal) was especially bad for Apple. So, if there's an uptick in iPhone sales in 2020 Q1 compared to 2019 Q1, this would be one exception from the slowing trend. However, we will have to wait and see if there's actually an uptick. Nothing fundamentally changed between 2019 Q1 and 2020 Q1. There's still a great uncertainty about the outcome and the duration of the trade war with China. The Fed has just signaled no more interest-rate cuts in the foreseeable future, and the least expensive iPhone today (iPhone 11) is only $50 less than the least expensive iPhone (iPhone XR) cost a year ago. Provided that the Chinese have allowed their currency to depreciate significantly against the US dollar since last year, the price of iPhone 11 in Chinese yuan should be higher than it was last year for iPhone XR.
The reason that the iPhone sales numbers in China dropped 20% in 2019 Q1 compared to the year before was due to the heated anti-American trade-war sentiment in China last year and not due to an economic slowdown. The Chinese economy has continued to slow down since then. There were reports all over the media of the Chinese consumers boycotting Apple, and even though the Apple apologists tried to debunk those rumors, Tim Cook himself had to issue a warning about serious problems that Apple was having in China. The situation with the tariffs and the trade war has not improved at all since then. Trump is trying to manipulate the market by issuing overly positive tweets, but can we believe Trump on the progress of the negotiations with China when he is lying dozens of times every week about everything else? How much trust can we have in what Trump says about how close the China trade agreement is? In fact, I'm surprised the markets are even paying attention to what Trump is saying at this point, since he has squandered all of his credibility a long time ago. And this comes from a former Trump's supporter.
Are you saying that the iPhone sales numbers didn't peak a couple years ago and haven't been coming down significantly since then on a quarterly basis when compared to the same quarter of the previous year? Like, for example, the 4th quarter of 2019. Are you saying that the iPhone sales numbers didn't come down 9%?
As for more and more people owning iPhones, a lot of those people in third-world countries buy used iPhones, so they are the ones who are buying the iPhones that you trade in to Apple or to carriers every year. The Chinese may not be buying their next iPhone, especially when the 5G launches in China shortly and the Chinese manufacturers start supplying premium handsets with 5G in them to the Chinese market. Don't forget that in China, the primary way to access the Internet is from a smartphone and via cellular (not via Wi-Fi). So, for the Chinese, 5G is much bigger than it is for the US, where we have pervasive landline Internet, so 5G is really not that important to us. Additionally, we are not out of the woods with the trade war yet. Let's not forget how the Chinese tiptoed the party line last year by boycotting Apple.
So, if Apple has a better FY 2020 Q1, and a better year, over 2019, then wouldn't your "ever decreasing quarterly sales (year on year) must be taking an increasingly larger chunk out of profits" be decidedly false?
Most analysts are expecting iPhone FY 2020 revenues to exceed FY 2019 revenues, and Apple's next release of iPhone with 5G is expected to continue strong upgrade sales.
As for 5G in China, unless you have data to show that current Chinese iPhone users are moving in any significant numbers to Huawei, which is the favorite of Nationalist Chinese, I'm not seeing anything that portents "doom and gloom" in China. Your admission that Chinese citizens "tiptoed the party line last year by boycotting Apple" isn't necessarily true to begin with, China actually being in a financial crisis at the time, which interestingly enough, is actually worsening. Data suggests that Chinese buyers just paused on buying iPhones, not abandoned them.
In the meantime, Apple has mostly recovered wrt revenue in China, though of course, there is still a great deal of risk in China.
2019 Q1 (fiscal) was especially bad for Apple. So, if there's an uptick in iPhone sales in 2020 Q1 compared to 2019 Q1, this would be one exception from the slowing trend. However, we will have to wait and see if there's actually an uptick. Nothing fundamentally changed between 2019 Q1 and 2020 Q1. There's still a great uncertainty about the outcome and the duration of the trade war with China. The Fed has just signaled no more interest-rate cuts in the foreseeable future, and the least expensive iPhone today (iPhone 11) is only $50 less than the least expensive iPhone (iPhone XR) cost a year ago. Provided that the Chinese have allowed their currency to depreciate significantly against the US dollar since last year, the price of iPhone 11 in Chinese yuan should be higher than it was last year for iPhone XR.
The reason that the iPhone sales numbers in China dropped 20% in 2019 Q1 compared to the year before was due to the heated anti-American trade-war sentiment in China last year and not due to an economic slowdown. The Chinese economy has continued to slow down since then. There were reports all over the media of the Chinese consumers boycotting Apple, and even though the Apple apologists tried to debunk those rumors, Tim Cook himself had to issue a warning about serious problems that Apple was having in China. The situation with the tariffs and the trade war has not improved at all since then. Trump is trying to manipulate the market by issuing overly positive tweets, but can we believe Trump on the progress of the negotiations with China when he is lying dozens of times every week about everything else? How much trust can we have in what Trump says about how close the China trade agreement is? In fact, I'm surprised the markets are even paying attention to what Trump is saying at this point, since he has squandered all of his credibility a long time ago. And this comes from a former Trump's supporter.
You still haven't provided anything that supports your statement that Chinese consumers were boycotting Apple. That may be true, but is is also true that China was in a financial crisis at the time, and Chinese consumers weren't spending on much of any "luxury" imported goods.
Obviously, something changed in early spring benefitting Apple, and there is a notable decrease in growth in the Chinese Market continuing today. That you still consider that Apple is at risk is fine, but don't be pulling stuff out of thin air to justify it.
BEIJING — China’s economy is slowing, and the slowdown is probably worse than Beijing says.
"Official numbers released on Monday show an economy that is posting new, but manageable, lows. For the last three months of 2018, growth came in at 6.4 percent compared with a year earlier. That’s the slowest pace since a decade ago, when China was grappling with the global financial crisis."
Are you saying that the iPhone sales numbers didn't peak a couple years ago and haven't been coming down significantly since then on a quarterly basis when compared to the same quarter of the previous year? Like, for example, the 4th quarter of 2019. Are you saying that the iPhone sales numbers didn't come down 9%?
As for more and more people owning iPhones, a lot of those people in third-world countries buy used iPhones, so they are the ones who are buying the iPhones that you trade in to Apple or to carriers every year. The Chinese may not be buying their next iPhone, especially when the 5G launches in China shortly and the Chinese manufacturers start supplying premium handsets with 5G in them to the Chinese market. Don't forget that in China, the primary way to access the Internet is from a smartphone and via cellular (not via Wi-Fi). So, for the Chinese, 5G is much bigger than it is for the US, where we have pervasive landline Internet, so 5G is really not that important to us. Additionally, we are not out of the woods with the trade war yet. Let's not forget how the Chinese tiptoed the party line last year by boycotting Apple.
So, if Apple has a better FY 2020 Q1, and a better year, over 2019, then wouldn't your "ever decreasing quarterly sales (year on year) must be taking an increasingly larger chunk out of profits" be decidedly false?
Most analysts are expecting iPhone FY 2020 revenues to exceed FY 2019 revenues, and Apple's next release of iPhone with 5G is expected to continue strong upgrade sales.
As for 5G in China, unless you have data to show that current Chinese iPhone users are moving in any significant numbers to Huawei, which is the favorite of Nationalist Chinese, I'm not seeing anything that portents "doom and gloom" in China. Your admission that Chinese citizens "tiptoed the party line last year by boycotting Apple" isn't necessarily true to begin with, China actually being in a financial crisis at the time, which interestingly enough, is actually worsening. Data suggests that Chinese buyers just paused on buying iPhones, not abandoned them.
In the meantime, Apple has mostly recovered wrt revenue in China, though of course, there is still a great deal of risk in China.
2019 Q1 (fiscal) was especially bad for Apple. So, if there's an uptick in iPhone sales in 2020 Q1 compared to 2019 Q1, this would be one exception from the slowing trend. However, we will have to wait and see if there's actually an uptick. Nothing fundamentally changed between 2019 Q1 and 2020 Q1. There's still a great uncertainty about the outcome and the duration of the trade war with China. The Fed has just signaled no more interest-rate cuts in the foreseeable future, and the least expensive iPhone today (iPhone 11) is only $50 less than the least expensive iPhone (iPhone XR) cost a year ago. Provided that the Chinese have allowed their currency to depreciate significantly against the US dollar since last year, the price of iPhone 11 in Chinese yuan should be higher than it was last year for iPhone XR.
The reason that the iPhone sales numbers in China dropped 20% in 2019 Q1 compared to the year before was due to the heated anti-American trade-war sentiment in China last year and not due to an economic slowdown. The Chinese economy has continued to slow down since then. There were reports all over the media of the Chinese consumers boycotting Apple, and even though the Apple apologists tried to debunk those rumors, Tim Cook himself had to issue a warning about serious problems that Apple was having in China. The situation with the tariffs and the trade war has not improved at all since then. Trump is trying to manipulate the market by issuing overly positive tweets, but can we believe Trump on the progress of the negotiations with China when he is lying dozens of times every week about everything else? How much trust can we have in what Trump says about how close the China trade agreement is? In fact, I'm surprised the markets are even paying attention to what Trump is saying at this point, since he has squandered all of his credibility a long time ago. And this comes from a former Trump's supporter.
You still haven't provided anything that supports your statement that Chinese consumers were boycotting Apple. That may be true, but is is also true that China was in a financial crisis at the time, and Chinese consumers weren't spending on much of any "luxury" imported goods.
Obviously, something changed in early spring benefitting Apple, and there is a notable decrease in growth in the Chinese Market continuing today. That you still consider that Apple is at risk is fine, but don't be pulling stuff out of thin air to justify it.
BEIJING — China’s economy is slowing, and the slowdown is probably worse than Beijing says.
"Official numbers released on Monday show an economy that is posting new, but manageable, lows. For the last three months of 2018, growth came in at 6.4 percent compared with a year earlier. That’s the slowest pace since a decade ago, when China was grappling with the global financial crisis."
I'm not rejecting your claim that the Chinese economy was slowing down last year compared to the year before. All I'm saying is that is has continued to slow down since then. The growth was 6.4% then (as you correctly stated), but it's now at 6.0% (as of October 18, 2019). Look at this graph. It's not getting any better; in fact, it's getting worse.
Also, the slowing Chinese economy doesn't immediately result in the Chinese consumers avoiding purchasing luxury items. Unless a sudden crisis occurs that results in massive layoffs, consumers continue to spend money on luxury items even when the economy slows down. And if they reduce their spendings on luxury items, it's a very gradual reduction and not the precipitous one that we witnessed in China vis-à-vis the iPhone in 2019 Q1 (fiscal).
As for the rumors of the Chinese boycott of the iPhone, the news about it was plastered all over the media, including the three big Apple rumors sites. There were also refutals of those rumors published by the same sites. It was a tug of war between the analysts trying to sink the price of AAPL and those trying to keep it afloat. That was until Tim Cook himself went public and pretty much confirmed that the Chinese consumers were buying Apple's gadgets and especially the iPhone in significantly lesser numbers than even Apple expected. You can object to the "boycott" rumor, but the sudden fall in the iPhone sales numbers in China cannot be attributed to anything other than the negative sentiment about the US (and by extension Apple) among the Chinese consumers, which was obviously stirred up by the Chinese government.
Last thing, during the conference call yesterday, Tim Cook said that the sales of the iPhone 11 got off to "a very very good start". Having followed AAPL for a long time now, a really good number is usually "phenomenal" in the Apple jargon rather than "very very good". So, Tim Cook didn't feel like characterizing the sales as "phenomenal," which tells me that they are pretty lackluster by the Apple's own estimate. Tim didn't provide realistic guidance numbers for 2019 Q1 last year, and he waited until the quarter was over to issue his warning to the investors that the guidance was way too optimistic. This time around, he is much more cautious about 2020 Q1.
This is already possible, albeit indirectly. I'm on Apple's Upgrade program and my Apple Card is the designated card to be billed each month by Citizen One ... and Apple gives me 3% back on each payment.
What’s your interest rate on the Citizen One loan?
0% ... which is the same for all members of Apple's Upgrade plan. As long as I make my monthly Apple Card payment, my interest remains 0% and I net 3% cash back on each monthly payment.
I wasn't familiar with any of these programs, as I pay outright for everything that I buy. Even if I buy with a credit card, I pay off the monthly bill so I never pay any interest.
Now that I looked up the conditions of the Citizen bank loan, do you think a commercial bank is giving you a free loan?
The loan requires that you maintain AppleCare or AppleCare Plus, which means that Apple forces you to buy a service that you may or may not want in order to have this 0% interest loan. This is only more proof that Apple has been involved in propping up the sales for a while now by clever marketing tricks. Of course, Apple wants you to get on the monthly installments and keep paying them forever and with this Citizens Bank loan, Apple also puts you on monthly installments payment plan for AppleCare.
I wonder if there are so many people out there who are suckers to be milked monthly and indefinitely for a privilege to use a smartphone. Do you realize that if you are in your 20s or 30s and will be using a smartphone for 40 years, you will end up paying Apple $30,000 (in today's dollars) just so that you can have a smartphone? Now, if you are married, this becomes $60,000. If you have two kids, that's $75,000 (40 years for you and your spouse plus 10 years for each of your kids, while they are living with you).
Now, consider what happens if you buy a new phone, keep it for 4 years, and then get another new phone (while selling your existing phone). You will end up paying about $10,000 for your phone in 40 years; $20,000 for you and your wife; and about $27,000 for you and two of your kids (40 years for you and your wife and 10 years for both of your kids).
Actually, you don't have to get applecare. there is an option to decline it. And outside of paying your first monthly payment and sales tax the installment payment is spread out over 23 interest free months. The other part is IF you pay off 12 months of the loan you can return the previous device and start over so you take an iphone like our XS Max's at $1500.00 value and only pay $750 for one year . And get another one again at half price.
Or you can do what my wife does which is she pays it off and then trades it in and gets $600 off a new phone so its just $600 plus tax for a brand new device. does not need applecare so its not as expensive. I keep mine for two years, buy another and give my old one to friends who need a new one. I could just buy full price and trade my old one in so I miss out on some savings.
The analogy of years of purchase is irrelevant, if you buy every year a new top of the line iphone at $1500.00 in 40 years its $60,000.00 for single or $120,000.00 for my wife and I. Thank god no kids. If you trade it in is $30,000.00 or $60,000.00 which is half those numbers. If you don't want to have any new phone then its zero. But it makes no difference if you buy every year or every other year or every five years is the only way to stay technology updated it will cost something. Cannot be avoided. Interest free payments are not bad and it is beneficial to those that want to shell out less over time. We all have choices.
Comments
The loan requires that you maintain AppleCare or AppleCare Plus, which means that Apple forces you to buy a service that you may or may not want in order to have this 0% interest loan. This is only more proof that Apple has been involved in propping up the sales for a while now by clever marketing tricks. Of course, Apple wants you to get on the monthly installments and keep paying them forever and with this Citizens Bank loan, Apple also puts you on monthly installments payment plan for AppleCare.
I wonder if there are so many people out there who are suckers to be milked monthly and indefinitely for a privilege to use a smartphone. Do you realize that if you are in your 20s or 30s and will be using a smartphone for 40 years, you will end up paying Apple $30,000 (in today's dollars) just so that you can have a smartphone? Now, if you are married, this becomes $60,000. If you have two kids, that's $75,000 (40 years for you and your spouse plus 10 years for each of your kids, while they are living with you).
Now, consider what happens if you buy a new phone, keep it for 4 years, and then get another new phone (while selling your existing phone). You will end up paying about $10,000 for your phone in 40 years; $20,000 for you and your wife; and about $27,000 for you and two of your kids (40 years for you and your wife and 10 years for both of your kids).
Here's a screenshot from the English dictionary that is part of both macOS and iOS:
Ironic, isn't it?
What you are seeing is iPhone buyer holding onto their iPhones longer, now some 39 months (according to the link following) and then most likely purchasing yet another iPhone, which along with used iPhones on the market, is one of the reasons that the iPhone user base keeps expanding. It also looks like that replacement cycle has about peaked.
https://www.ped30.com/2019/10/28/evercore-apples-iphone-replacement-cycle-grown-39-months-ok/
As for the zero interest loan using the Apple Card, that's near a rounding error when you consider the cost of money to Apple, and given that cardholders will be using those same cards for other purchases, Apple will almost certainly gain any zero interest sale.
The message I get from this program is that Apple is thinking different with respect to enabling and encouraging more new and more existing customers to experience its new products—sooner than later.
The Apple user experience has been the most important factor for me over the last three decades, or so, in keeping me a loyal customer. It also accounts, I think, for the consistently high numbers of switchers to Apple.
I personally love the entire current Apple ecosystem of products and services!
Most analysts are expecting iPhone FY 2020 revenues to exceed FY 2019 revenues, and Apple's next release of iPhone with 5G is expected to continue strong upgrade sales.
As for 5G in China, unless you have data to show that current Chinese iPhone users are moving in any significant numbers to Huawei, which is the favorite of Nationalist Chinese, I'm not seeing anything that portents "doom and gloom" in China. Your admission that Chinese citizens "tiptoed the party line last year by boycotting Apple" isn't necessarily true to begin with, China actually being in a financial crisis at the time, which interestingly enough, is actually worsening. Data suggests that Chinese buyers just paused on buying iPhones, not abandoned them.
In the meantime, Apple has mostly recovered wrt revenue in China, though of course, there is still a great deal of risk in China.
The reason that the iPhone sales numbers in China dropped 20% in 2019 Q1 compared to the year before was due to the heated anti-American trade-war sentiment in China last year and not due to an economic slowdown. The Chinese economy has continued to slow down since then. There were reports all over the media of the Chinese consumers boycotting Apple, and even though the Apple apologists tried to debunk those rumors, Tim Cook himself had to issue a warning about serious problems that Apple was having in China. The situation with the tariffs and the trade war has not improved at all since then. Trump is trying to manipulate the market by issuing overly positive tweets, but can we believe Trump on the progress of the negotiations with China when he is lying dozens of times every week about everything else? How much trust can we have in what Trump says about how close the China trade agreement is? In fact, I'm surprised the markets are even paying attention to what Trump is saying at this point, since he has squandered all of his credibility a long time ago. And this comes from a former Trump's supporter.
Obviously, something changed in early spring benefitting Apple, and there is a notable decrease in growth in the Chinese Market continuing today. That you still consider that Apple is at risk is fine, but don't be pulling stuff out of thin air to justify it.
https://www.nytimes.com/2019/01/20/business/china-economy-gdp-fourth-quarter.html
BEIJING — China’s economy is slowing, and the slowdown is probably worse than Beijing says.
"Official numbers released on Monday show an economy that is posting new, but manageable, lows. For the last three months of 2018, growth came in at 6.4 percent compared with a year earlier. That’s the slowest pace since a decade ago, when China was grappling with the global financial crisis."Also, the slowing Chinese economy doesn't immediately result in the Chinese consumers avoiding purchasing luxury items. Unless a sudden crisis occurs that results in massive layoffs, consumers continue to spend money on luxury items even when the economy slows down. And if they reduce their spendings on luxury items, it's a very gradual reduction and not the precipitous one that we witnessed in China vis-à-vis the iPhone in 2019 Q1 (fiscal).
As for the rumors of the Chinese boycott of the iPhone, the news about it was plastered all over the media, including the three big Apple rumors sites. There were also refutals of those rumors published by the same sites. It was a tug of war between the analysts trying to sink the price of AAPL and those trying to keep it afloat. That was until Tim Cook himself went public and pretty much confirmed that the Chinese consumers were buying Apple's gadgets and especially the iPhone in significantly lesser numbers than even Apple expected. You can object to the "boycott" rumor, but the sudden fall in the iPhone sales numbers in China cannot be attributed to anything other than the negative sentiment about the US (and by extension Apple) among the Chinese consumers, which was obviously stirred up by the Chinese government.
Last thing, during the conference call yesterday, Tim Cook said that the sales of the iPhone 11 got off to "a very very good start". Having followed AAPL for a long time now, a really good number is usually "phenomenal" in the Apple jargon rather than "very very good". So, Tim Cook didn't feel like characterizing the sales as "phenomenal," which tells me that they are pretty lackluster by the Apple's own estimate. Tim didn't provide realistic guidance numbers for 2019 Q1 last year, and he waited until the quarter was over to issue his warning to the investors that the guidance was way too optimistic. This time around, he is much more cautious about 2020 Q1.
Or you can do what my wife does which is she pays it off and then trades it in and gets $600 off a new phone so its just $600 plus tax for a brand new device. does not need applecare so its not as expensive. I keep mine for two years, buy another and give my old one to friends who need a new one. I could just buy full price and trade my old one in so I miss out on some savings.
The analogy of years of purchase is irrelevant, if you buy every year a new top of the line iphone at $1500.00 in 40 years its $60,000.00 for single or $120,000.00 for my wife and I. Thank god no kids. If you trade it in is $30,000.00 or $60,000.00 which is half those numbers. If you don't want to have any new phone then its zero. But it makes no difference if you buy every year or every other year or every five years is the only way to stay technology updated it will cost something. Cannot be avoided. Interest free payments are not bad and it is beneficial to those that want to shell out less over time. We all have choices.