Foxconn Reports First Ever Profit Decline on Back of Slow iPhone Sales in 2016

[8692574]

I say where the value lies is support (OS updates, etc.) it may not be and feature rich or super customizable but it's more likely to last longer.

I bought an Android that cost 150$ wich runs the 2nd last os, and guess what? i can upgrade 1 time each year for the next 5 years and still have A the latest OS and B newer phone (wich means better internal, new battery and such) C I would have spent less than buying 1 iPhone......
Last longer than what? after 2-3 os update your phone will start lagging and become slow, by the time i would be using my 3rd phone still on its first os and running like new

There used to be a time where iPhone was worthed that much, now not anymore...(and it is sad to say so)

 

[Mildredop]

There's just no compelling reasons to upgrade from iPhone 6. So much that in fact I just switched my battery fro £25 and I have a brand new phone, no need to spend several hundred £ for the 7

And most people stick their iPhone in a case. New battery, new case and you really do have a new phone.

Buying the iPhone 7 would just empty your bank account and make your headphones useless.
[doublepost=1484143463][/doublepost]

Sales has nothing to do with the removable of headphone jack. Soon it will disappear from every company.

I know of three sales that Apple didn't get purely based on the removal of the headphone jack. Me, my sister and my brother-in-law. And I can't believe they're the only ones.

 

[spacemnspiff]

I think the point is, this is the first time we're seeing Apple go on 3 years with the same design implementation.

Nobody is saying they need to change shape. But there's very little compelling about the 7 if you're already on the 6s, and possibly the 6.

The design of the two. from a visual perspective is identical, except for slightly adjusted lines. So here Apple released a new full version number (and not an S cycle) product, that shares the same visual design as the last version.

The external aesthetics is a silly reason to base a purchase on, maybe high schoolers do that, but adults who use the phone as a functional device need not be emotional about their purchase. iPhone 7 functionally is in every aspect superior to every iPhone before it, that alone should be the merit. Adults making purchase decisions should make rational decisions, that would be the prudent thing to do.

Every Macbook Pro released in the last 5 years almost looks the same, the aesthetic design has matured enough that no major changes can be implemented without changing functionality.

Changes to iPhone aesthetic shape can be a change of few chamfers and radii here and there, but the overall shape of a slab is not going to change.

People complaining about bezels sounds silly without providing what part of the functionality does it affect, the current side bezels cannot be smaller which directly affects how one holds and uses the phone. The top and the bottom bezel is least intrusive in the usability, yet impish requests to reduce the top and bottom bezels and no design change are always so called 'top reasons' why children don't buy iPhones anymore.

The real reason is market saturation and performance plateau for the use case for a smartphone. The phone doesn't need to be more powerful that it has been in the past couple of iterations for the general use case. But that doesn't mean adding more performance will possibly lead to use cases not imagined yet.

You are correct. That's why the iPhone can't be stagnant, it has to be dynamic and change and allow for advances where the consumer is Drawn to something different.

There has to be some sort of change other than just implementing a new color or a few marginal enhancements. Which leads me to believe, the 10th anniversary iPhone hopefully will offer something completely rendered different from what we've seen before with display, design, and other technological advances we haven't seen yet. But time will tell.

For some people sentimentality is the reason for changing the phone, can we step outside the emotional bubble and rationally imagine and state what the next iteration should be.

 

[smacrumon]

That will never happen, if anything the price will go up and they'll use the OLED screen to justify it.

And many less will consider buying. Customers truly have reached their limit.

 

[bigjnyc]

And many less will consider buying. Customers truly have reached their limit.

Agreed. Do you think another year of declined phone sales will cause Apple to lower prices, throw the kitchen sink in to a radical new phone, or continue on with the arrogance?

 

[smacrumon]

Agreed. Do you think another year of declined phone sales will cause Apple to lower prices, throw the kitchen sink in to a radical new phone, or continue on with the arrogance?

It's truly hard to tell. Truly hope it's not arrogance. I'd go agressive cuts on pricing for six-twelve months to recapture attention, and release brand new groundbreaking devices and services at the exact same time. Apple had such a supreme lead, great momentum, focused attention of customers and prospective customers, and what have they done for the past few years, complete inertia. Now that inertia is starting to transpire into a change in direction, and the complete wrong direction. It really disappoints me.

 

[LordVic]

The external aesthetics is a silly reason to base a purchase on, maybe high schoolers do that, but adults who use the phone as a functional device need not be emotional about their purchase. iPhone 7 functionally is in every aspect superior to every iPhone before it, that alone should be the merit. Adults making purchase decisions should make rational decisions, that would be the prudent thing to do.

I dont think you realize, that except for us geeks and techies, most people buy their gadgets with a heavy emphasis on looks. you think your average user knows the difference between the A9 or A10 CPU? between NAND storage and NVME? or behind LCD v OLED? They don't. They go into the store and look at the products, and they look at the device and how it looks and feels in hand.

 

[terraphantm]

This could be true. I know I have a problem justifying the cost these days. I guess this began to happen for me when they released the plus models and suddenly my iPhone habit became more costly than before.

Not to mention the end of contracts / upgrade pricing. If I was paying the same monthly rate no matter what and had no plans of leaving my carrier, it made no sense for me to keep my old phone. But now that I have to pony up about $1k for a new phone instead of just $400, I have to think twice

 

[spacemnspiff]

I dont think you realize, that except for us geeks and techies, most people buy their gadgets with a heavy emphasis on looks. you think your average user knows the difference between the A9 or A10 CPU? between NAND storage and NVME? or behind LCD v OLED? They don't. They go into the store and look at the products, and they look at the device and how it looks and feels in hand.

I completely agree that people go for looks and/or make a status statement. But that will only lead to boredom if they don't really like using the device, which to me is impish. They have been falsely placing their insecurities on a phone or a product and expect to be satisfied.

And for the most part, people put a case on the phone. How then does it matter what the phone looks like? It doesn't.

It's just like buying cars, badge and looks matter more than anything else. No wonder auto industry had historically lacked groundbreaking innovation, they are feeding the tuned and repackaged stale product for decades. All that seems to matter is that people's ego are fed, they feel special about their purchase, i.e. targeting emotional insecurities.

I am off my soapbox.

 

[LordVic]

I completely agree that people go for looks and/or make a status statement. But that will only lead to boredom if they don't really like using the device, which to me is impish. They have been falsely placing their insecurities on a phone or a product and expect to be satisfied.

And for the most part, people put a case on the phone. How then does it matter what the phone looks like? It doesn't.

It's just like buying cars, badge and looks matter more than anything else. No wonder auto industry had historically lacked groundbreaking innovation, they are feeding the tuned and repackaged stale product for decades. All that seems to matter is that people's ego are fed, they feel special about their purchase, i.e. targeting emotional insecurities.

I am off my soapbox.

don't get me wrong, I agree With what you're saying. It's fickle and impish. But it's reality.

People constantly buy products based on brand / look that don't suit their needs. this is nothing new.

And everyone buying smoething for looks, than putting it in a case baffles me.

"this PHONE IS THE GREATEST LOOKING PHONE EVER, SIUPER THIN AND LIGHT, IT'S AMAZING, NOW LOOK AT THE 5" THICK OTTERBOX CASE I'M PUTTING IT IN!"

>.<

 

[panleya]

Following a year filled with doom and gloom stories surrounding Apple and its first revenue decline in thirteen years, major iPhone supplier Foxconn Technology Group has reported its own first ever sales decline since the company went public in 1991. In a report by Nikkei, "lukewarm demand" for the iPhone 7 and a "saturated smartphone market" are said to be to blame for Foxconn's downturn.

In total for 2016, Foxconn's revenue of 4.356 trillion New Taiwan dollars (approximately $136 billion) was down 2.8 percent from its 2015 earnings. As a slight bright spot, its revenue for December grew 9.8 percent year-on-year because of increased user spending for the approaching Chinese New Year holidays, "and the relatively robust demand for the 5.5 inch iPhone 7 Plus model."

Apple's overall revenue decline in 2016 also included the company's first year-over-year decline in iPhone sales -- the first ever dip in profit for the iPhone. The lowering of demand for the smartphone directly impacted the company's manufacturing partners, with analyst Vincent Chen reporting that in total 207 million iPhones were shipped in 2016, down from 236 million in 2015. That's even lower than what Nikkei predicted midway through last year -- believing shipments would total between 210 and 220 million.

There's expected to be a turn around this year, however, with Chen predicting Foxconn's revenue to grow between 5 and 10 percent on the back of "healthier demand" for the tenth-anniversary iPhone. Apple and its products account for more than 50 percent of Foxconn's revenue.
A lack of "compelling" features for the iPhone 7 was said to be the main reason why many Galaxy Note7 owners decided to stay in the Samsung family when those devices began malfunctioning. After the events of the Samsung Galaxy Note7 crisis began subsiding, analysts criticized Apple for failing to capture new customers into its ecosystem from the churning Note7 user base.

Article Link: Foxconn Reports First Ever Profit Decline on Back of Slow iPhone Sales in 2016

[doublepost=1484169454][/doublepost]How many American workers could be employed at middle class wages for 136 billion dollars / year?

 

[LordVic]

[doublepost=1484169454][/doublepost]How many American workers could be employed at middle class wages for 136 billion dollars / year?

If to assume a living wage of 35k, 136b could keep food on the table for

3.6 million Americans

 

[JaySoul]

I say where the value lies is support (OS updates, etc.) it may not be and feature rich or super customizable but it's more likely to last longer.

That used to be the case but is increasingly less of an issue.
[doublepost=1484218032][/doublepost]

When did they increase the price of the iPhone?

Pretty much every year for the past half a decade in the UK. It's reached insane levels now, honestly.

 

[Carnegie]

That used to be the case but is increasingly less of an issue.
[doublepost=1484218032][/doublepost]

Pretty much every year for the past half a decade in the UK. It's reached insane levels now, honestly.

If you don't mind: What's the current standard price of the iPhone 7 32 GB? And what was the price of the iPhone 6 16 GB when it came out?

I'm curious whether the change correlates more or less with currency exchange rates. The British Pound has collapsed (relative to the U.S. dollar) over the last 2-1/2 years.

 

[kdarling]

Following a year filled with doom and gloom stories surrounding Apple and its first revenue decline in thirteen years, major iPhone supplier Foxconn Technology Group has reported its own first ever sales decline since the company went public in 1991.

When Foxconn signed on with Apple, their revenues went up due to sheer quantity.

However, Foxconn's profit margins dropped at the same time, due to Apple's hard core price per device negotiation, even while Apple's profit margins soared.

 

[JaySoul]

If you don't mind: What's the current standard price of the iPhone 7 32 GB? And what was the price of the iPhone 6 16 GB when it came out?

I'm curious whether the change correlates more or less with currency exchange rates. The British Pound has collapsed (relative to the U.S. dollar) over the last 2-1/2 years.

From memory, I think it was £519 when it came out... And now the 7 starts at £599.

Basically I think Apple have been adding somewhere between £25 to £40 per annum, and that's really mounted up over the years.

 

[Carnegie]

From memory, I think it was £519 when it came out... And now the 7 starts at £599.

Basically I think Apple have been adding somewhere between £25 to £40 per annum, and that's really mounted up over the years.

Okay, thanks.

So that would be less than the depreciation of the Pound over that time period and less of a price increase than I would have expected. If those prices are correct, it means that Apple is getting something like $100 less per (comparable model of) iPhone than it was getting a couple of years ago. That is, in UD Dollar terms which is what matters on Apple's end.

So it's increased prices some to try to make up for the currency changes and to be able to keep decent margins, but not as much as it would need to to keep the margins roughly the same. It's basically split the difference - half the hit (of relative Dollar strength) has gone to increased prices (and the potential effect of that on demand) and half the hit has gone to reduced margins for Apple. That suggests to me that Apple doesn't think it could get away with increasing prices to what they would need to be for Apple to realize the same revenue (as it used to) from each iPhone sale without meaningfully impacting demand.

Again, thanks for the info.

 

[LordVic]

If you don't mind: What's the current standard price of the iPhone 7 32 GB? And what was the price of the iPhone 6 16 GB when it came out?

I'm curious whether the change correlates more or less with currency exchange rates. The British Pound has collapsed (relative to the U.S. dollar) over the last 2-1/2 years.

It's been roughly the same in Canada as well

When the first iPhone came out here (was the 3g, the first one wasn't available in Canuckistan), it was 499.

by the end of the 5s era, it was $650

when the 6 came out, it is now $899

The excuse for this IS the dollar exchange rate. Apple is adding 30% to Canadian Prices (and similar to UK prices) to account for the exchange from USD to CAD.

the problem with this is that it's for accounting purposes only and is not real life reflective.

Since Apple is a US based company, they want to report all of their numbers in US money. So in order to preserve on paper the margins, they raise prices in those markets close to the exchange rate.

The reason why this is "Paper" only, is because Apple doesn't traditionally bring that money back into the US, so it in fact, stays in those foreign countries, at those higher prices (meaning that Apple's margin's in other market's can actually be higher than reported in US).

Accounting is a wonderful, confusing, clustertruck of a mess that is and can be used to manipulate numbers.

so basically, instead of reporting each country as a different division in those countries own monetary forms, they convert it all to US on the balance sheet.

unfortunately, it means that countries like Canada and the UK are seeing regular price increases on Apple products accross the board. And since it's Apple, there are almost never any discounts.

$899 for the 32gb base 4.7" iPhone, and in Ontario, with Tax, thats $1,015. That's too much to pay for a phone. So while the iPhone's price went up 30% overnight when the 6 was launched, guess what, most Canadian's income didnt go up 30% to match

this happened accross the board for Apple products. When non-US consumers say "Apple is too expensive", its because on top of the premium apple usually asks, they've gone up even more.

The 2015 MacBook STARTS at $1,649
The 2016 13" MacBook Pro non touch starts at $1,899
the 2016 13" MacBook Pro with touch starts at $2,299
the 15" MacBook Pro starts at $2,999
the 2015 21.5" iMac starts at $1,399
the 2015 27" iMac starts at $2,299
the 2015 ipad Pro 10" starts at $799 and the 12.9" is $1049
and as mentioned, 4.7" iPhone starts at $899, the Plus is $1049

these prices are well beyond what I'm willing to pay for the level of product Apple is providing.

 

[Juicy Box]

The reason why this is "Paper" only, is because Apple doesn't traditionally bring that money back into the US, so it in fact, stays in those foreign countries, at those higher prices (meaning that Apple's margin's in other market's can actually be higher than reported in US).

Interesting post, but I don't agree with the above statement.

Apple typically raises and lowers foreign prices based off of projected future currency exchanges. They keep these exchange rates for a really long time, and adjust them periodically. It has nothing to do with bringing money back to the US.

Sometimes foreign customers pay less than US customers, and sometimes they pay more (when taking in account the exchange rate at the time of purchase).

 

[LordVic]

Interesting post, but I don't agree with the above statement.

Apple typically raises and lowers foreign prices based off of projected future currency exchanges. They keep these exchange rates for a really long time, and adjust them periodically. It has nothing to do with bringing money back to the US.

Sometimes foreign customers pay less than US customers, and sometimes they pay more (when taking in account the exchange rate at the time of purchase).

Yes, it's up and down. however, last time Canadian Dollar was par with USD, Prices didn't go down. Apple ate the profit difference. But this isn't jus Apple, it's a problem we've always had with US based companies doing business in canada. They're very fast to raise prices based on exchange, but never drop prices once the dollars get closer.

However, I'm not sure if you've ever worked/studied accounting. This is very much an accounting based performance behaviour and not actually reflective in real world dollars. Apple converts all foreign business on paper to USD for US accounting.

This is also where the whole tax avoidance discussion somewhat comes in. If Apple is claiming $X amount of money as US profit, But 90% of that money is in foreign money that they don't bring back to the US and therfore never convert to USD, is it truly reflective of Apple's monetary position? if Apple only wants to pay Tax on US soil based profits, why do they convert foreign profits to USD for the USD balance sheets?

there's a whole whack of accounting behind all of this. it's actually a very VERY interesting side affect of the international / globalization of businesses. How does a company accurately report financial data from international resourcse. Should a US based company be able to claim foreign income as US income? should each countries independent Apple subsidiaries not report their own?

As accounting isn't really a science, and more an "art", these questions have no real answers, since unless there's specific regulations to address/deal with them, there is no "legit" answer

But as someone in one of those Non US based locals, the question is why is our prices set based on US prices and USD equivelancy, when in fact, Apple is paying their staff here in Canadian. Their rent and expenses are in Canada. EVERYTHING to operate in Canada is in Canadian. But the pricing is based on USD. the products come from China (they're shipped directly). very little part of this touches US Apple. SO why is that what the price? it's an artificial pricepoitn that's not being set by the supply/demand here, it's got an artificial price floor that Apple is setting independant of the market's actual behaviour here. And honestly it IS affecting them here because Apple sales outside of the US are going down. In Canada, especially with the death of subsidies and the ridiculous price we already pay for Telcom (we're one of the highest for prices for data), we're already balking.

we don't often see "market share" numbers from just Canada, but if Anecdotal evidence is anything, iPhone use is dropping fast in Canada. Mid range Android phone usage is skyrocketting.

 

[Carnegie]

It's been roughly the same in Canada as well

When the first iPhone came out here (was the 3g, the first one wasn't available in Canuckistan), it was 499.

by the end of the 5s era, it was $650

when the 6 came out, it is now $899

The excuse for this IS the dollar exchange rate. Apple is adding 30% to Canadian Prices (and similar to UK prices) to account for the exchange from USD to CAD.

the problem with this is that it's for accounting purposes only and is not real life reflective.

Since Apple is a US based company, they want to report all of their numbers in US money. So in order to preserve on paper the margins, they raise prices in those markets close to the exchange rate.

The reason why this is "Paper" only, is because Apple doesn't traditionally bring that money back into the US, so it in fact, stays in those foreign countries, at those higher prices (meaning that Apple's margin's in other market's can actually be higher than reported in US).

Accounting is a wonderful, confusing, clustertruck of a mess that is and can be used to manipulate numbers.

so basically, instead of reporting each country as a different division in those countries own monetary forms, they convert it all to US on the balance sheet.

unfortunately, it means that countries like Canada and the UK are seeing regular price increases on Apple products accross the board. And since it's Apple, there are almost never any discounts.

$899 for the 32gb base 4.7" iPhone, and in Ontario, with Tax, thats $1,015. That's too much to pay for a phone. So while the iPhone's price went up 30% overnight when the 6 was launched, guess what, most Canadian's income didnt go up 30% to match

this happened accross the board for Apple products. When non-US consumers say "Apple is too expensive", its because on top of the premium apple usually asks, they've gone up even more.

The 2015 MacBook STARTS at $1,649
The 2016 13" MacBook Pro non touch starts at $1,899
the 2016 13" MacBook Pro with touch starts at $2,299
the 15" MacBook Pro starts at $2,999
the 2015 21.5" iMac starts at $1,399
the 2015 27" iMac starts at $2,299
the 2015 ipad Pro 10" starts at $799 and the 12.9" is $1049
and as mentioned, 4.7" iPhone starts at $899, the Plus is $1049

these prices are well beyond what I'm willing to pay for the level of product Apple is providing.

It isn't merely an accounting issue. Currency exchange rates have real world impacts that many companies like Apple, companies that do business (including, e.g., sourcing, employment and sales) all around the globe, have to manage on an ongoing basis.

Yes, often enough profits realized in other nations are, as an accounting matter, held indefinitely in those other nations. Those profits aren't brought back to the United States. Further, typically, some portion of the revenue generated in other nations is spent in those nations. However, most of the revenue generated by Apple - whether in other nations or in the U.S. - doesn't represent profit. Most of it is used to pay Apple's expenses - e.g., the cost of producing the products it sells. And in some nations only a small portion of the revenue generated there needs to be spent there, e.g. the costs of the products sold there are incurred elsewhere and that is where those costs have to be paid.

So there's a difference between keeping an amount equal to (or less than) the profits attributable to a foreign nation in that nation and keeping all of the revenue realized in a foreign nation in that nation. Just because the former happens that doesn't mean that the latter happens. In Apple's case, for most nations, the latter can't happen.

If a company gets paid for its products or services in widgets (because that's what the people have where its products and services are sold) but needs to pay its bills in truffles (because that's what the people use, and those expect, where its bills are incurred), then the conversion rate between widgets and truffles very much has real world importance. If I get 100 widgets for each item I sell, but have to pay someone 70 truffles (in incremental and pro-rated fixed costs) for each, then I need the conversation rate between them to be in a certain range. If it isn't, then I may have to increase the amount of widgets I sell each item for. I also have to keep in mind that I'd like to have some widgets left over to call profit.

Apple sells products and services in nations around the world. But its expenses aren't distributed equally among those nations, not even relative to the revenue it generates in them. If Apple has to pay people (and other expenses) in the U.S., then it matters what the revenue generated elsewhere becomes when it is converted to U.S. Dollars. If Apple has to pay people in Asia (e.g. for iPhone assembly and parts sourcing), then it matters what the revenue generated elsewhere becomes when it is converted into the currency used there. So U.S. Dollar / Canadian Dollar, and US Dollar / British Pound, and US Dollar / New Taiwan Dollar exchange rates very much matter - for real world reasons, not just for 'paper' reasons.

If all of the revenue Apple generated in each nation could be used in that nation to pay Apple's expenses, and all of the profit that was left over was then held there indefinitely, then... yes, your point would be more or less correct. But that is not how it works. Expenses aren't necessarily incurred in the same places where revenue is generated.

 

[spacemnspiff]

Since Apple is a US based company, they want to report all of their numbers in US money. So in order to preserve on paper the margins, they raise prices in those markets close to the exchange rate.

Agree with what you said, that's how global marketplace works, and exchange rate plays a huge part in determining the actual price of the product. Loosely similar is crude, gold or any other commodity prices.

On the flip side, US consumer has not seen a price increase on the base price of an iPhone.

And as a matter of principle, Apple's stance is to not target sales numbers or low prices. So that sets the tone how Apple sets prices in non-US countries.