“In a world where iPhone demand is on the wane, Apple Inc. has a Plan B. As customers wait longer between upgrades and the smartphone market saturates, Apple can fall back on charging higher prices for each handset and raking in more money from services such as streaming music, digital videos and data storage,” Jeran Wittenstein and Mark Gurman report for Bloomberg. “But there’s no back-up for many of the companies that supply components for the iPhone.”
“The latest evidence that what’s bad for Apple can be terrible for suppliers came on two continents within hours of each other,” Wittenstein and Gurman report. “Japan Display Inc., which gets more than half its revenue from the iPhone maker, cut forecasts. Then Lumentum Holdings Inc., a top maker of iPhone facial-recognition sensors, lowered its second-quarter outlook. On Tuesday, Hon Hai Precision Industry Co., the biggest assembler, missed estimates.”
“The 3-D sensing components from companies like Lumentum are found in iPhones that often cost more than $1,000. Fewer people can afford to pay that much for a new device. But when a sale does happen, suppliers get a one-time payment for their component, while Apple can generate hundreds of extra dollars per gadget,” Wittenstein and Gurman report. “In its most-recent quarter, Apple reported almost no increase in the number of iPhones sold, but revenue from that business jumped 29 percent from a year earlier.”
Read more in the full article here.
MacDailyNews Take: Apple has an installed base of 1.3 billion devices. When that number finally sinks in on Wall Street, hopefully sooner than later, Apple shareholders will benefit.
SEE ALSO:
Jefferies: Buy Apple stock for ‘massive’ services potential built on ‘stable iPhone business’ – November 2, 2018
Apple to stop reporting iPhone, Mac, and iPad quarterly unit sales – November 1, 2018
Apple beats Street with another record-breaking quarter – November 1, 2018
Morgan Stanley: Buy Apple shares on the ‘emerging power’ of its services – May 24, 2018
Apple as a service: Services offer growth, visibility, and profitability – May 15, 2018
AAPL’s paradigm shift – May 11, 2018
Apple Services: The nitrous in Cupertino’s profit engine – November 27, 2017
Inside Apple’s massive services results – August 9, 2017
Misunderstanding Apple Services – August 7, 2017
Dispelling the Apple Services myth – May 3, 2017
Apple’s Services business: $7 billion in revenue last quarter alone – May 3, 2017
Apple’s Services (App Store, Apple Music, Apple Pay) business is an unstoppable juggernaut that’s still just gathering strength – May 3, 2017
““In a world where iPhone demand is on the wane, Apple Inc. has a Plan B. As customers wait longer between upgrades and the smartphone market saturates, Apple can fall back on charging higher prices”
I disagree. There’s only so high prices can go before consumers say enough is enough. I already notice that happening.
Yep, it’s the phone. Most people aren’t going to pay $1500 for an iPhone two thousand dollars for an iPad Pro and two + thousand for MacBook Pro. Apples pricing is out of control.
“I already notice that happening.”
I totally agree with this. Beyond manipulative analysts and investors with wishful thinking (naturally), they should have seen this coming a long time ago, even when Apple released the X.
Poor suppliers cutting their productions and estimates are only a consequence and the symptom of “what’s really going on”, that they should have “analyzed”.
They should know what’s really going on at the market (consumers who actually pay Apple to buy thier products) level where more and more people are getting disgusted and disgruntled by what they see as the greed and arrogance exhibited by Apple (sealed devices do not help either). It is not just a matter of affordability. There are sufficient number of people (and parents) who are (or were) willing to pay premium for Apple’s products, particularly the iPhone. But Apple got carried away and went too far. Investors may not see the real world market reaction soon enough but suppliers start feeling the consequence of it with some time lag. Apple knew all these, but their attitude was to continue milking the market as much as possible and as long as possible. It’s about the time Tim Cook has to admit his “profit at all cost” street vendor-like attitude (too obvious to everybody) which is ruining the image of Apple.
I was surprised last week to see no lines at the iPad tables or iPhones tables last week at my new Apple Store. The store has been open about a month. There must have been 10 employees standing around with nothing to do at 5pm.
The Mac and Watch sections were busiest.
Apple should really pay more attention to the Mac. Customer loyalty to the Mac has kept the company afloat and prospering.
Of course, the iPhone and iPad have now greatly boosted Apple’s growth trajectory. Nevertheless, Apple needs to remember that if the Mac goes down, so will the other parts of the equation.
Looking at the Macs (iMac Pro, Mac Mini Retina MBA) that Apple has announced more recently, I think they’ve done a good job showing commitment to the Mac line and to Pro Mac users. Even though I’m not in the target market, this leaves me optimistic about what they will do with the Mac Pro.
There is something that is overlooked in the equation – new customers buy new apps and new services. Existing customers buy a new phone and reinstall their old apps and services.
In short, device sales to new customers drive app and services revenue. Now if Apple introduces some really compelling new services, then growth can come from those services.
Apple wants to push software subscriptions to provide a steady flow of revenue into the treasury. The big question – Will customers cooperate?
This customer will not. Subscriptions suck.
“Apple has an installed base of 1.3 billion devices. When that number finally sinks in on Wall Street, hopefully sooner than later, Appel shareholders will benefit.“
Appel? That’s appalling. Please lurn how tu spel impotente wurds propalee.
Thonks viri muchh
Tom Coock
Yeah, really, the hardware suppliers should just become service, retail and media companies. RAMchip Karaoke anyone?