Apple has had an interesting past year. Between becoming the first US company to hit $1 trillion in market value, lackluster new product launches (how many of your friends own a HomePod?), unshipped product promises (AirPower anyone?) and being one of the only major tech companies to avoid a major breach or scandal, Apple made news for a number of reasons in recent months. For a start, the iPhone XR, the company’s new “phone for everyone,” went on sale a few weeks after it debuted. Company CEO Tim Cook also issued a warning letter to shareholders about slowing iPhone sales and missed earnings benchmarks because of tougher competition from China.
This signaled a huge potential shift for a company that has increasingly staked its success on the iPhone. The result was a nearly double-digit percentage drop in Apple’s stock price after the earnings forecast adjustment. When Yahoo called it “mind-blowing,” it was barely hyperbole.
Apple is far from doomed, but there’s a lot more going on than meets the eye here — and certainly more going on than “China did it.” What does the future of Apple look like in a world that’s buying fewer iPhones? It contains equal parts challenges, changes and opportunities.Let’s dive in.
Apple’s Best Strength to Date
In a lot of ways, Apple’s future hinges on the changing relationship between hardware and software.
When Steve Jobs was building Apple, it was with the vision of creating a new kind of computer — one where the hardware and software were inextricably linked. For a long while, this has been Apple’s strongest competitive advantage. Depending on whom you ask, it still is.
However, in 2019, Apple is trying to operate in not one but probably a dozen different industries that are changing as fast as we can blink. Services. Entertainment. News. Set-top boxes. Navigation. Digital assistants. Gaming. Desktop and laptop computers. Smartphones. Tablets.
People increasingly don’t want their services to be confined to one company’s plastic slab or another. It’s not necessarily enough anymore for Apple to count on its hardware drawing people into the ecosystem any longer. There has to be something else. In 2019, innovation isn’t just hardware and nothing showcases that more than Apple TV becoming a service and not just a device.
That means coming up with services compelling enough to sway undecided consumers as well as keep existing ones who are only hanging on because of the quality of the hardware.
Let’s be honest: We’ve also undoubtedly hit “peak smartphone” if we’re starting to worry about getting them to fold in half.
But is Apple’s decision to focus less on hardware just a move based on the service oriented digital world we live in or has Apple’s hardware hit a wall?
From a Hardware Company to a Services Company
Apple has spent most of the last couple of decades betting that its hardware would always be enough to draw people into — and then keep them inside — the company’s technology ecosystem. The real-world durability of Apple products has been a subjective matter — for every frayed charging cable and shattered glass screen, there’s somebody else who’s been using the same PowerBook or iMac for five, seven or 10 years.
However, the last months and years have shattered the illusion that Apple has a monopoly on fine design and unimpeachable quality control. You may have seen some of the stories yourself:
- Some MacBook Pro users are reporting malfunctioning keyboards and backlights. This was due to a flaw in the butterfly keyboards.
- Some iPad Pro users are reporting their tablets arrived bent out of shape in the box, which according to the company is a side effect of the manufacturing process and not a defect.
- Some iPhone users took issue with Apple automatically throttling legacy devices to prevent older batteries from causing unexpected shutdowns. The coverage pressured Apple to add a toggle for this battery management feature.
Some of this looks like bad industrial design. Some of it looks like poor quality control. Some of it even looks like planned obsolescence. The result is very bad optics, all of it about hardware, for a company that became famous because of the quality of its hardware.
Then, in the middle of all these quality control and design issues, we have a changing technology landscape that appears to be gravitating, without any intentions of changing course, toward a service-based industry. Netflix, Hulu, Amazon, Google and Apple are landlords now. We pay them a monthly fee and they turn on a spigot that delivers content.
Increasingly, people don’t seem too concerned with buying a new iPhone each year just to watch the same movies and TV shows and YouTube videos, when the one they have does the trick well enough already. Growth may be slowing, but brand loyalty doesn’t seem to be wavering. A number of studies indicate people are hanging onto their iPhones longer than they used to. Once again, this phone confirms that Apple is either future-proof or very much putting all its eggs into the same basket.
From Constant Growth to an Uncertain Future
The facts that Apple is charging so much for telephones these days, and that it’s slowed the pace of major design changes, and that it seems to be creating software and hardware for longevity seems to indicate it is well aware that the iPhone can’t deliver constant growth any longer. That’s despite the fact it’s delivering fairly consistent customer satisfaction.
Moreover, the company seems to have tacitly acknowledged that there is a moral, rather than merely financial, case against building billions of new smartphones each year at a time when mass consumption is sawing whole branches off the tree of ecology.
We shouldn’t be buying iPhones as often as we do — and Apple fans don’t seem to want to anyway. All this brings us back to the pivot to services. Apple could once again position itself for major growth if it makes good on the rumors of Apple-branded news, television and gaming subscription services. Consumers are already spoiled for choice here — so making something industry-redefining is a very tall order.
In the end, it may turn out that the only people for whom news of slowing iPhone sales is actually bad are shareholders. For the rest of us, increased competition from other hardware makers, plus the pressure to pair hardware with compelling services, will only serve to bring Apple back down to earth a little bit.
Article contributed by Nathan Sykes:
Nathan Sykes writes about the latest is business and technology news online. Check out his blog to read his latest articles.
