Last 26 April, Apple announced that sales fell this quarter year-over-year for the first time in 13 years as the technology giant sold fewer iPhones than during the same period in 2015. The US$ 8 billion sales decline happened all around the world, but especially in China and the United States. Apple shares fell more than 8 percent after hours on the news.
What is odd is that by some metrics nobody expects Apple to be shrinking. On Apple's earnings call, CEO Tim Cook said the company set a record for the largest number of switchers from Android to iPhone over the last six months. Stealing market share is normally a good thing.
But many of the biggest smartphone markets are fairly saturated with iPhones already, which means now Apple needs to convince its past customers to upgrade. And they aren’t doing that as frequently. Cook said the iPhone 6s hasn’t inspired upgrades the way the iPhone 6 did when it came out in late 2014.
"If you compare to the 5s, the upgrade rate is slightly higher, with more people upgrading in a similar time period, at a higher rate," he said. "But if you compare to the 6, you arrive at the opposite conclusion."
Cook continued, calling the upgrade rate for the 6s "not a hair lower, it's a lot lower" than that of the 6. "If we had the same rate of success as we did on the 6, it would be time for a huge party, it would be a big difference," he said.
As Cook explains, Apple is partially the victim of its own success, as the larger iPhone 6 was a global blockbuster on an almost unparalleled scale. But it is also a victim of its own every-other-year major iPhone release cycle. The 6s had the exact same dimensions and design as the 6, and few major feature upgrades. Many iPhone users who bought the 6 or didn’t think it was a big enough upgrade from their iPhone 4s, 5, or 5s were given little reason to upgrade to the 6s.
And things seem to be getting worse for Apple, not better. At least in the 1st quarter the company still saw iPhone sales growth in China–but that's over for now. Cook said the company "no longer has the wind at our back" in the world’s largest smartphone market.
Unless the new iPhone SE can revive sales growth, Apple could be in for a long slump until the fall when they can bet on the iPhone 7 to rescue them.