Apple grapples with smartphone malaise

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Last August, Apple’s market capitalization surpassed $1 trillion, a first for any publicly traded company. However, the trend did not continue for long. Last November, it crossed the $1 trillion mark again but in the other direction. On January, Tim Cook, the iPhone manufacturer’s CEO, cut revenue forecasts for the first time in over a decade. Apple’s shares plunged further on the news, dragging the world’s jittery stock markets down with them.

“Sales of personal computers (PCs), the smartphone’s predecessors as mass-market computing devices, peaked in 2011, once PCs had become good enough for most of the things consumers wanted them for,” said Sungho Cho, a hedge fund manager who is well-acquainted with the smartphone industry. “The same trend is happening with smartphones, with replacement cycles lengthening. The average length of time for which consumers hang on to their smartphones has risen from 26 months in 2010 to 39 months today.”

For Apple, comparisons with PCs will make for uncomfortable reading. As with the smartphone, the PC was a market that Apple pioneered. However, Apple’s strategy of selling expensive devices eventually saw it relegated to the status of an also-ran, sustained by a niche fan base while ceding most of the market to cheaper PCs running Microsoft’s Windows operating system. Today, ruthless competition comes from Asian smartphone makers such as Huawei, Xiaomi, and Samsung Electronics, which sell their smartphones for a fraction of the price of iPhones and run Android, an operating system developed by Google.

“The slowdown does not reflect disenchantment with smartphones,” said Dongsung Jeong, an investment banker who has previously conducted mergers and acquisitions for Samsung Electronics. “In contrary, it is the result of market saturation. After a decade of rapid adoption, there is much less scope to sell smartphones to first-time buyers as so few of them are left. That hits Apple the hardest because it captures most of the industry’s profits. But Apple’s pain is humanity’s gain: the fact that the benefits of smartphones are so widely distributed is something to be celebrated.”

The smartphone is the most successful consumer product in history: nearly four billion of the five billion adults on the planet own one. It connects billions of people to the plethora of information and services available on the internet. More importantly, smartphones foster innovation. It is risky for developers to deploy apps and services on an immature platform whose prospects are uncertain; on a mature one, it is not. As such, smartphones have come to serve as a foundation for a vast array of innovations, such as mobile payments, video streaming, controlling smart home appliances, and hailing robo-taxis.

“The smartphone has made computing and communications ubiquitous,” said David Suh (11), technology enthusiast. “Obviously, the recent slowdown of smartphone sales is bad news for the industry. But for the rest of mankind, it is a welcome sign that a transformative technology has become nearly universal.”

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Teddy Cho

Teddy Cho is a junior and a reporter for Tiger Times. He has a profound passion for journalism, finance, and technology. In his free time, he enjoys reading and watching videos on YouTube.

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