Apple reaches peak iPhone

published 28 January 2016

778-iPhone-634 — The iPhone: from must-have to meh?

Tech giant Apple has predicted falling sales for the first time since 2003. The culprit is the iPhone, which accounts for around two-thirds of revenues. In the three months to 26 December, sales of the must-have gadget grew at the slowest pace since its introduction in 2007 barely 1% up year-on-year. Overall profit rose to $18.3bn on revenue of $76bn. In the current quarter, Apple expects to make sales worth around $50bn-$53bn.

Still, all this hardly means Apple is about to fall off the tree. Apple has always had the knack of getting people to pay "luxury prices for commodity goods", said Shira Ovide on Bloomberg.net. Apple sells just 14% of the world's smartphones, yet secures more than 90% of the market's profits. The cost of Android-powered handsets has fallen, but iPhone prices have barely changed in years. "The enduring price premium will let Apple continue to gobble outsized revenue and profits."

This suggests that Apple should be able to get maximum mileage out of the iPhone 7 this autumn, especially if, as rumoured, it has some snazzy new features, such as wireless headphones and waterproofing. But longer term, if it is to regain its buzz, said Chris Caso and Liz Pate of SIG Susquehanna, Apple will have to "invent something new" something with the appeal and impact of the iPod, iPhone, or iPad.

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Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.

After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.

His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.

Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.