When Apple lost more than $75 billion in market value last week after a surprise announcement that it is expecting lower iPhone sales than originally projected, the company put most of the blame for its troubles on China, where a slowing economy and the trade war with the United States have hurt sales.
But a bigger issue for Apple might exist much closer to home, in a small, leafy town in Ohio.
That’s where my mom lives. She’s a relatively tech-savvy retiree and a longtime Apple fan who has used many of the company’s products over the years. I learned to type on an Apple IIGS at her office, and she was an early adopter of the original turquoise iMac. These days, she uses her iPhone to check Facebook and Instagram, talk with her friends and relatives, and play solitaire and “Words With Friends."
Her phone isn’t the latest model — it’s a 3-year-old iPhone 6S — and it’s missing some of the latest features. She can’t take portrait mode photos using a dual-lens camera, a feature introduced in the iPhone 7 Plus, and she can’t unlock her phone using Face ID, which was introduced in the iPhone X in 2017. Her phone’s battery life could be better, and the device sometimes runs out of storage space.
But she’s happy with it, and doesn’t feel the need to upgrade. She also has a first-generation Apple Watch and a several-versions-ago MacBook Air, neither of which she’s planning to replace anytime soon.
“The phone I have does just about everything I need," she said when I called her to ask why she hadn’t upgraded to one of the newer models. “Why pay $800 for a new one just to be up to date? My needs aren’t that complicated."
Most of the journalists who write about tech for a living (including me) are early adopters — power users who like having the latest gadgets, and who are willing to fork over money for a slightly better experience. For some of these people, Apple’s announcement has come as a shock that portends potential disaster for the company.
But for my mom, and the many people who are probably in her situation, the company’s slowing iPhone sales aren’t at all a disaster. In fact, they make total sense, and they don’t have much to do with China.
In a letter to investors explaining the lower forecast, Tim Cook, Apple’s chief executive, nodded to smaller-than-expected demand for iPhone upgrades, saying that consumers were “adapting to a world with fewer carrier subsidies" and “taking advantage of significantly reduced pricing for iPhone battery replacements." The company declined to comment for this column.
Apple is also facing competition from rivals like Samsung and Huawei, which have flooded international markets with lower-cost Androids that are, in many cases, just as functional as iPhones. And, yes, there are issues related to President Donald Trump’s trade war with China, and an overall economic slowdown in the country.
But the most consequential hit to Apple’s bottom line may be from people who are holding on to their phones for longer. Back in 2015, iPhones were being replaced after roughly two years, on average, according to BayStreet Research, a firm that tracks smartphone sales. That period has jumped to roughly three years, and is expected to grow even more.
“We’re going to move to longer replacement cycles, principally because the cost is higher," said Chris Caso, a tech analyst with Raymond James.
Many of Apple’s issues are common to smartphone makers. The components inside newer phones, such as added memory and improved screen technology, are more expensive than older components. Refurbished and used phones are also more easily available, and carriers like Verizon and AT&T aren’t subsidizing new phone purchases as heavily as they once did, meaning that the upfront cost to the customer is higher.
“It used to be that for $650, you got all new features, a better screen, everything," Caso said. “Now, to put more features in the phone, it costs money."
There are Apple-specific variables, too. The newest version of Apple’s mobile operating system, iOS 12, was designed to improve the performance of older devices. (This was a refreshing change from previous iOS updates, which tended to grind older models to a halt.) With better water resistance and sturdier screens, iPhones are more physically resilient than they used to be. And the list of must-have new features has shrunk. With a few exceptions — like Face ID and animated emojis — there is nothing you can do on a new iPhone that you can’t do on one from several years ago.
Apple has also taken a hit from its battery replacement program, which offered steep discounts to many customers after the company was accused of slowing down older iPhones. That led some users to replace their batteries rather than their entire iPhone.
All of this is worrying short-term investors, who want people to buy as many new iPhones as possible. But it’s great for people like my mom, who get to keep phones they’re happy with and replace them less frequently. It’s great for the environment — according to Apple’s latest sustainability report, each new Apple device produced generates an average of 90 kilograms of carbon emissions.
A more durable iPhone could even be great for Apple’s long-term profitability. As Brian Barrett points out at Wired, “An iPhone that lasts longer keeps customers in the iOS ecosystem longer," and more willing to keep their paid subscriptions to Apple Music, iCloud and other Apple services.
Apple’s longer replacement cycle may be a temporary phenomenon, if newer technologies — such as compatibility with 5G mobile networks, which is expected to arrive in iPhones in 2020 — lead to popular apps that don’t run on older phones.
“If there’s an app — maybe it’s Fortnite 2 — that I can’t run on my existing iPhone, a new iPhone will be on every teenage boy’s shopping list," Caso said.
But for now, while investors might be unhappy with the company’s short-term sales, the rest of us should cheer it as a sign of progress in giving customers what they want: sturdy, reliable phones that don’t become obsolete as soon as a new model arrives.
When I asked my mom what would get her to upgrade to a newer iPhone, she said she might do it if a new, killer feature came along, or if her favourite apps no longer worked. But in the end, she admitted that wasn’t likely.
“Until I drop it and break it, I’ll probably keep it," she said.