Despite the slump in iPhone revenue, MacBook and iPad sales numbers are pretty strong.
Apple’s smartphone business had taken a significant hit in the last couple of years. Today, the once-great iPhone that catapulted the Cupertino-based company to financial success makes up for less than half of the company’s total revenue. Despite Apple’s many lucrative other hardware products and services, the iPhone has always made up for more than half of the company’s business since 2012.
Little more than a week after Apple announced the drop in its iPhone revenue during its fiscal Q3 earnings call, IHS Markit reported iPhone shipments were down 14.6-percent in the second quarter of 2019. The report also goes on to state that the entire global smartphone market saw a 4-percent dip in revenue.
IHS Markit confirms Apple has dropped to fourth place in the overall smartphone market, with an 11-percent global market share. Samsung, Huawei, and Oppo now have larger market shares than the American tech goliath. Fifth place Xiaomi has also grown considerably in the last couple of years and could easily unseat Apple from fourth.
However, Apple declining numbers in smartphone revenue haven’t impacted the company’s growth. Despite the slump in iPhone revenue, MacBook and iPad sales numbers are pretty strong. Moreover, Apple’s various services are seeing year on year growth. While a drop in iPhone sales could impact the company’s reputation, it may not be all that negative.
We have not seen major innovation in the smartphone industry for a while now. Most average customers are ready to wait three years before replacing a phone, especially one that cost over 50K. However, services are a different ball game. Services ensure a continuous flow of revenue while ensuring the customer is hooked on to the ecosystem.
Services also require significantly less revenue in R&D as compared to innovative hardware tech. Apple has also confirmed that it would double its services income by the year 2020. Additionally, the rise of the Chinese players has also seen profit margins on smartphones sink, which subsequently gave rise to the rumours of an affordable iPhone.This doesn’t mean Apple can just snub its smartphone business, as you still need users on your ecosystem to use your services. All it means is that the smartphone market is in decline and dropping down the ladder to fourth place may not be as bad as it seems.Subscribe to Moneycontrol Pro and gain access to curated markets data, trading recommendations, equity analysis, investment ideas, insights from market gurus and much more. Get Moneycontrol PRO for 1 year at price of 3 months at 289. Use code FREEDOM.