Posted by Matt Egan 22 October 2014
The iPhone is doomed. Doomed to be marginally less successful than a very successful thing.
Don't believe the hype. Or the anti-hype. Apple's latest earnings call tells us only that things are about to get interesting for the iPhone. (See also: Just another opinion about Apple's new iPhone.)
Apple's quartely earnings calls have become events in their own rights. Fiscal compliance dressed up as a massive PR- and marketing opportunity. My favourite part of the process is the post-call analysis. In which the pro- and anti-Apple lobbies (you have to be one or the other) opine that Apple is set for world dominance/doomed. Delete as appropriate.
This is especially tricky for those of use who work for PC Advisor, Tech Advisor and Macworld UK. For one thing we pride ourselves on independent and impartial tech coverage. And for another we write Macworld UK for Apple fans, and the other publications for everyone else. Lack of an organisational bias makes it tough to know who to believe. So we'll follow the money and come to our own conclusions.
This week we heard what on the face of it is a strong story from Apple. With my (pro-Apple) Macworld UK head on I am delighted to reveal that in its 2014 Q3 call Apple announced a record quarter. We heard about 39.2 million iPhones sold, and $42.1 billion revenue. Given that the most optimistic analysts were forecasting 40 million iPhone sales in a quarter that had only 10 days of the new iPhones on sale, that is pretty special stuff. (Consider also that the new iPhones weren't yet available in China when those figures were generated.)
There is not a single consumer tech company on the planet that wouldn't swap places with Apple right now. Not one. Not Microsoft, Google, Dell, Lenovo. Apple is hugely profitable, and enjoys a very gentle ride from both consumers and critics. It is high and rising.
But not rising as fast as it used to. As ever, the devil is in the detail here, but Apple's call did reveal some interesting trends. Let's focus on the iPhone.
The iPhone: doomed. Or not doomed.
Apple's call revealed that the year on year iPhone figures were better in the Q1 of this year than in the recently closed Q3. This is simply explained, and broadly positive. At the end of 2013 Apple started selling iPhones in China for the first time. This was hugely popular, and those new Chinese users represent a huge growth opportunity for Apple and the iPhone.
However, those Chinese early adopters were mostly buying iPhone 5s or iPhone 5c handsets. It is unlikely that the majority of them will jump straight to the iPhone 6, so we may not see the expected bump in iPhone figures in China when the Q4 figures come out. Or we might. I've heard the figure of '10 million pre-orders' used in reference to China and the iPhone 6 and -6 Plus lauch, so let's wait and see.
It matters. The bump in global iPhone sales generated by each successive iPhone launch is going down. Or - to put it another way - the growth in iPhone adoption is slowing. Still growing, but growing slower than ever.
This is only natural. In the territories in which Apple is strong, most people who want them, have smartphones. You rarely *need* a new smartphone within two- to three years. And when you have been on top as long as Apple has, growth is going to slow. Rivals copy and undercut, and markets get crowded.
China is the last great unconquered territory for the Apple phone. A country of billions of people, many of whom are newly affluent. And a country in which Apple phones have next-to-no market share. If Apple wants the iPhone to continue to grow, it needs China.
Meanwhile back on home territory the largest group of iPhone users are still on the iPhone 4 and iPhone 4s, and after an encouraging start Apple will hope to convert them to the iPhone 6 and 6 Plus. Which is why the relatively flat iOS 8-adoption figures make very interesting reading.
Neither Apple nor the iPhone is 'doomed', no matter what you read. Far from it. Both the company and the product line are set fair for a uniquely profitable short- and medium-term future. But these are interesting times for Apple watchers, and the Q4 figures will make for very interesting reading. US upgrades and China sales will tell us whether Apple is set for another iPhone surge. And whatever you think about the big beast of Cupertino: you wouldn't bet against it. (More here: iPhone 5s vs iPhone 6 comparison review and here: iPhone 6 UK release date, price, specs and new features: gets 4.7in screen, faster processor and NFC.)