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Reaching Peak Smartphone?

When Apple announced that falling demand in China had forced the company to lower its iPhone sales forecast for the first time in 15 years, equally significant was the loss of market share in China from a peak of 12.5% in 2015 to 7.8% today. The company blamed vastly slowed economic growth there as well as the recent and probably temporary tariff war between China and the U.S., but the problems at Apple run much deeper.

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Less economic growth does translate to less buying power for consumers, and at Apple's hefty price point, it isn't hard to see why Chinese consumers might opt for a less expensive brand. In fact, many of iPhone's competitors in the global market now offer feature-competitive offerings at far lower price points. Apple marketers have failed entirely in India, a price-conscious market that is expected to surpass China in population, where the company has only garnered 1% of market share.  This is not merely a "Chinese" problem for marketers.

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Apple is also experiencing some trouble in domestic markets as consumers, tired of purchasing expensive new models that have incremental upgrades, continue to extend the life cycle of their phones. This means fewer units sold in a category that represents a nice chunk of Apple's revenue. But if Apple's sales are finally slowing, has the industry itself reached peak smartphone?

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Probably not. Everyone uses a smartphone, and they do wear out albeit not as quickly as smartphone marketers would prefer. There is still room for growth, but overall growth will slow as the category reaches full maturity. Moderate growth can be sustained by multiple smartphone marketers over a long period of time as technology improves and competition results in incremental changes in function, quality and price. Costs will continue to come down, and so Apple's prestige brand strategy ultimately might not be a great fit in some international markets, as China's rising nationalism leads to an increasing preference among consumers for Chinese brands and Indian consumers opt for far less expensive options. That's almost half the world right there.

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This isn't yet a complete disaster, however, since by now everyone knows that Apple has been resting a bit too comfortably on its highly profitable iPhone laurels for quite some time now, and marketers there certainly know that they must find another home run product. And soon. In the meantime, marketers at Apple might have to quell their ambitions of taking over the planet, at least for now. And rather than spending efforts on drawing more profit out of the iPhone, it might be a good idea if strategists shift R&D and product development efforts towards product categories that afford better opportunities and somewhat away from iteration after iteration of a product that, however ubiquitous, is nonetheless, getting a bit tired.


Discussion: What categories of consumer goods do you see emerging that Apple might tap into? Do you see any business-to-business opportunities?