E-Commerce

Is Apple losing its Sheen?

by VARINDIA 2018-02-20

Despite a 12.63 percent year-over-year growth, the iPhone sales witnessed a significant drop in Q1 2018, particularly due to the supply constraints of the device which had a pronounced impact on the brand’s revenue -

With ever evolving new technologies people often get perplexed in understanding which phone is better, the contemporary Android phones or the modish iPhones? Both the category of devices hold their special place in the market, both rule in their arena as the two have their own unique followers. However they may seem look similar but are very different from each other. The OS, hardware, support and factors like battery etc make the two a lot different from each other. Both the phones have their separate religious fanatics as some people who prefer more security and brand value opts for an iPhone over the Android handsets, while some people who like to have the latest updates with stylish features in their budget go for the Android phones over the iPhone devices.

Apple possesses a strong brand value in both national and international market regardless of a fall in revenue. According to market reports, Apple earned a hefty amount of profit on every iPhone sold over the third quarter, which is five times higher than what brands like Samsung phones earned during the same period.

However, regardless of its popularity, the brand has faced a tough Q1 globally in terms of sales as iPhone X didn’t make an appreciable difference in sales figures.

According to the market reports the total revenue of Apple in Q1, 2018 has increased by 12.63 percent year-over-year growth which means that the brand’s revenue has risen to $88.3 billion from $78.4 billion. Although, the revenue increased, sale of the iPhone has dropped.

The brand in a statement revealed that it sold 77.3 million iPhones in Q1 of 2018 — a decrease from the 78.2 million iPhones it sold at same time in previous year. It said that the average sale price for an iPhone jumped to $796 compared to the $695 in corresponding quarter of last year.

Also, last year Apple posted a message on its site apologizing to its customers for how its latest rolled-out update slowed down older iPhones. In order to make it up, the brand offered cheaper battery replacements. This action was taken when several customers started complaining that the new software update is slowing down their devices and impacting performance, as because of the software updates there were battery issues in older Apple devices. However, the company called this as part of a power management feature meant to prevent older batteries from shutting down suddenly. It has also been reported that many users are switching to the Android devices, most preferably to Samsung as they look for better performing devices.

To compensate this, the brand has also slashed prices for its iphone6 devices. As per the company, the slower process contributed to the chemical aging of the lithium ion batteries. In its defence the brand said that the batteries were meant to be replaced and upgraded to a new battery which will also solve such slowdowns related to these updates. But this doesn’t seem to be easy due to the complicated design of iPhone devices or limited Apple stores in some regions.

Apple in India...
Since its inception in the Indian market, brand Apple has recorded amazing sales numbers, and the brand’s revenue has been dominated majorly by the iPhone devices. According to Counterpoint’s report, “the Indian premium smartphone segment (priced Rs 30,000 and above) grew 20 percent annually by volume and 28 percent by value in CY 2017." Brands such as Apple, OnePlus and Samsung contributed 94% to the overall premium market segment. While OnePlus was the fastest growing brand in the year, the report has named Apple as the segment leader with 47% share in the October-December quarter and 38% share for the entire calendar year, driven by strong shipments of iPhone 7 as compared to the premium range devices of OnePlus and Samsung. Apple iPhone 7 was also the top selling smartphone globally during the first six months of 2017.

But despite topping the charts there were several issues in many iPhone devices, which might are contributing in the sales slump of the devices. Also, the iPhone X sales were not as much as everyone expected. According to the media reports this is due to the high cost or can be because of the supply constraint as Foxconn couldn’t ship satisfactory amounts.

The brand has witnessed a drastic percentage dip in iPhone users from Q1, 2017 to Q3, 2017. According to a report published on a website, “For the October-December quarter, iPhone sales in India fell to 810,000 units from 890,000. However, for the full year 2017, iPhone shipments grew 23 per cent in India at 3.2 million units from 2.6 million units in 2016.”

Apple, OnePlus and Samsung continue to dominate the Indian premium smartphone segment with total 94% share but Apple succeed to maintain its top spot in the chart with its 47% share in the October-December quarter and 38% share for the entire 2017 calendar year in spite of a decline in sales.

Table Source: Bloomberg

Price (iPhone X 64GB) In USD
India Rs 89,000 $1390.82
China 8,388 yuan $1283.83
UAE 4,099 UAE Dirham $1115.98
Canada C$1,319 $1085.95
US $999 $999
Price of iPhoneX in different countries

Counterpoint too in its latest report said that the iPhone sales slumped in the October-December quarter. The brand has witnessed a drop of 9 per cent in volume terms and 7 per cent by revenues during the quarter compared to the same quarter of last year.

It is believed that the dip in sale is led by factors such as high price and limited promotion. The sale of Apple iPhones is believed to further get dampened with the Finance Minister Arun Jaitley announcing an increase in the customs duty on phones to 20 per cent from 15 per cent in his budget 2018. This applies only to devices that are not assembled in India such as the iPhones.

And so...
One cannot ignore the fact that the brand continued to maintain its top spot in the global smartphone shipments which is mostly contributed by the dedicated fans of the Apple devices. Apple users continue to use Apple devices owing to their loyalty towards the brand and upgrade their handsets with the brand’s latest devices. Also some people consider using Apple devices as a status symbol while some prefer these more over the Android phone due to its rich security feature, hence contributing to significant revenue of the brand.

The brand in comparison to the devices and in context of its market share definitely succeeded in maintaining its premium position but compared to its own revenue of corresponding quarters of previous year, the sale of iPhone devices are not as appreciable as it was. Now the big question that arises here is: Has Apple's poor performance in India been on account of high excise duty or the significant decline in number of its users?

Abha Singh
abha@varindia.com