NEW YORK (AP) – Behind Apple's enchanting news of weak iPhone sales lies a more innovative truth: The technology industry has hit the Peak Smartphone, a tip when anyone who can afford one already owns one or no breakthrough forces them to upgrade as often as they once did.
Some manufacturers have increased prices to maintain profits. But Apple's deficiency highlights the boundaries of this strategy. The company said the demand for iPhone is declining, and sales in the quarter 2018 will fall well below forecasts, a decline being mainly traced to China.
Apple's shares dropped 10 percent Thursday on the news – the worst loss since 2013. The company hides $ 74.6 billion in market value, among a broader set of technology companies, which had its worst loss in seven years.
Apple's news is an "industry call", says analyst Dan Ives from research firm Wedbush Securities.
And it's not just Apple. The demand has been thin across the board, Ives said. Samsung, for a long time, the leading seller of smartphones, has been hit even harder, as its phone calls dropped 8 percent over the 1
"The smartphone industry goes through significant headwinds," Ives said. "Smartphone makers used to be like teenagers, and the industry was on fire. Now it feels like they are more like older people with regard to maturity."
Technical innovations in phones grew in leaps earlier in the 2010s, with dramatic improvements in screen size, screen resolution, battery life, cameras and processor speed every year.
But the industry is a victim of its own success. Innovation began to slow down around 2014, when Apple increased the screen size with the iPhone 6 and 6 Plus models. While the phones were improving, new features tended to be incremental, such as a new flash technology for already good phone cameras. They are the ones consumers will not usually notice – or will cover.
"Since the iPhone 6 you've seen, it's been hard to innovate to continue raising the bar," Ives said.
Apple customers are now upgrading every 33 months on average longer than the 24 or 25 months three years ago, he said.
Apple's reduced growth forecasts, driven by growing sales in China, have fueled fears that the world's second largest economy is losing steam. $ 1000 iPhone is a tough sale to Chinese consumers, with the economic downturn and trade war with the United States. They also have a number of cheaper smartphones from home competitors such as Huawei, Xiaomi and Oppo to choose from.
The fact that even Apple's iPhone juggernaut suffers cements a bigger trend for all major smartphone makers. After a steady growth in decades, worldwide smartphone shipments fell 3 percent to 1.42 billion in 2018, the first annual decline, according to International Data Corp., which tracks such movements. IDC estimates that shipments will increase by 3 per cent in 2019 to NOK 1.46 billion, but this continues to fall to 2017 levels.
It doesn't help top phones come with 4-digit price tags – $ 1,100 for iPhone XS Max and $ 1000 for Samsung's Galaxy Note 9. Top model Max model sells for $ 1,450 in the US
"They're getting more expensive while offering fewer and fewer new, innovative features that I really want to use, "he said. Zachary Pardes, a tech-savvy 31-year-old in Fairfield, Connecticut. "I want to upgrade when the battery stops working. When I'm forced to buy a new phone, I'll buy a new phone."
Vivian Yang, a manager of a Beijing technology company, also hit the price. "No one needs such a phone," she said.
IDC analyst Ramon Llamas said the cycle could come down and start growing again in 2021 or 2022, when people's current phones are beginning to reach the end of usability. "People will still replace their phones. It's going to happen over time," he said.
But there is no "silver bullet" that will stimulate growth to levels seen in the past as the industry was less mature.
Foldable smartphones, with screens that unfold as a wallet to increase screen size, are one thing that can stimulate excitement, but they are expensive and not overdue to at least the end of the year.
Another thing that can spur growth: 5G, the next generation that telecom companies are currently building, is expected to be faster and more reliable than the current 4G network. The first 5G-compatible phones come out this year.
"There is more pressure on 5G as the next-wave smartphone," since the sale is so diverse, Ives said. "It will be a fight royal for 5G phones."
But 5G will take years for wide, nationwide deployment, so the new 5G smartphones coming out this year won't likely do much of a splash immediately either.
Analysts say that smartphone manufacturers have to push in under-saturated areas like Africa and elsewhere, and also sell more services such as cloud storage, streaming music and phone software. But the days of glory with uneven growth seem to be over.
"It's going to be a slow blow," Llamas said. "By no means is this the end of the smartphone market. But this is an indication that the smartphone market can be a victim of its own success."
Associated Press authors Tali Arbel in New York and Joe McDonald in Beijing contributed to this report.