What will the world’s smartphone makers do when everyone on the planet has a smartphone already? Well, some will go out of business. Competition and market saturation tends to have that impact on the weaker links.
Funny thing, though, and a true story– most of the smartphone industry’s profits lie at the premium end of the product spectrum. Some guesstimators say Apple keeps 85-percent of the entire industry’s profits and nearly half the revenue. What happens when we reach peak premium smartphone?
Been There Already
Here’s another true story. We’ve been at peak smartphone for a few years already. Smartphone sales are not crawling into a cave the way traditional PC sales are going, but there isn’t much growth to note except in so-called emerging markets. Think low price smartphones because that’s all those folks can afford.
What about iPhone and the premium smartphone segment? Well, iPhone hit a plateau nearly a dozen quarters ago and arch rival Samsung hasn’t fared much better despite both building immensely improved gadgets every year. Sales are not exactly cratering, though. It’s more like hovering.
We’ve already called the game of peak smartphone and Apple won that one. So, let me be the first to call the game of ‘peak premium smartphone.’ Been there. Done that. We’re here already.
Since Apple owns most of the smartphone industry’s profits it has only one direction to go. Down. At least, that’s what anti-Apple criticoholic Adrian Kingsley-Hughes seems to think.
Apple has managed to keep the iPhone a premium brand for over a decade, but now it’s time to expand into lower-priced categories.
This is what happens when you don’t get out much and carry on conversations with the same people all the time. It’s like having macular degeneration of the brain. Narrow thinking.
How so? Because Apple already has lower priced iPhones. I know. I checked the website. See for yourself. At the high end of the scale– probably at the high end of all smartphone scales– iPhone X leads the way with a 256GB model priced at $1,149. That’s premium, folks. Alright, getting into reverse and driving backwards we come to the iPhone SE which starts at $349 for 32GB.
That’s a broad spread from high to low, Adrian. Almost $800. Try to keep up.
Can a premium smartphone customer find a premium smartphone for less than $349? No. You can try. But it won’t be an iPhone, won’t run iOS 11, won’t have as much privacy and security built-in, won’t get an OS upgrade every year, won’t have the same resale value in two years, and won’t actually improve next year (that’s one of the advantages of iOS– it makes a smartphone get better every year; Android smartphones at that price point just can’t say the same thing). Can you even buy an Android smartphone at $350 that has the latest Android OS?
I’ve said it before and I’ll say it again, if Apple wants to sell more iPhones — and quarterly iPhone sales are the metric that many are using to measure how the Cupertino giant is performing — then it needs to release a cheaper iPhone.
That’s techno drivel of the highest caliber. Marketshare is the worst of the major metrics. Even unit sales are not as important as profits. Remember, Apple sold fewer iPhones the past year but made more revenue and profits. That ain’t easy to do, folks.
The company’s health is measured in a great part by how many iPhones it can shift in a quarter, and right now sales are soggy.
Unit sales are flat. A company’s health seldom is measured in unit sales of anything. Health– often described as the stock price or shareholder value– is measured in growth and profits; not always in that order.
Releasing a cheaper version of the iPhone that looks like the expensive one would satisfy those users who want the latest look but don’t want to spend the big bucks. And there are a lot — and I mean a lot — of Android handsets out there in that $550 to $650 price range that are just awesome (there are handsets out there for a fraction of that price that are amazing, too), and Apple needs to acknowledge that and address it (if it wants those people to buy).
Methinks Mr. Adrian the monk just wants a less expensive iPhone. Right smack in the middle of Apple’s wide line of iPhones is iPhone 7. $549. $200 less still gets an iPhone running the latest iOS and capable of running next year’s iOS, the iOS a year after that, and another one the year after that.
Few of those sub $550 Android phones will be able to do that with Android.
Yes, we’ve reached peak premium smartphone, and with peak smartphone enveloping the planet we’re not likely to see rapid growth in any segment except entry-level, and since Apple’s iconic iPhone is an aspirational brand, $350 seems to be the cheaper iPhone that people are talking about but not buying in the same numbers as more expensive models.
Kingsley-Hughes is hugely out of touch.