Apple CEO Tim Cook: Customers Are Holding on to Older iPhones 'a Bit Longer' Than in the Past

[MacRumors]

Apple saw lower than expected iPhone sales during its first fiscal quarter of 2019 (aka the 2018 holiday quarter) and one explanation provided by Apple was lower quarterly iPhone upgrades. During today's earnings call, Apple CEO Tim Cook delved into the reasons why Apple is seeing fewer upgrades.

First and foremost, he named foreign exchange rates. The strength of the U.S. dollar has made the iPhone much more expensive in many parts of the world, which is why Apple today said that it plans to lower prices in some emerging markets. In Turkey, for example, the iPhone became so expensive due to exchange rates that revenue fell $700 million from the previous year.

Cook also said that iPhone subsidies are becoming increasingly less common, which is impacting upgrade rates. In Japan, for example, it used to be common to have subsidies for smartphones, but local regulations have eliminated many of those. According to Cook, less than half of iPhones sold in Japan were subsidized compared to 3/4ths a year ago. The total value of subsidies has declined as well.

Cook's third reason for fewer iPhone upgrades was the battery replacement program that Apple offered across 2018, allowing customers to swap out the battery in their iPhones for $29. Cook said that this made it inexpensive and efficient to replace iPhone batteries and hold on to older iPhones for a longer period of time.

According to Cook, while analysts suggested Apple shouldn't do it, the company "strongly believes it was the right thing to do for [its] customers."

To combat fewer upgrades, Cook pointed towards Apple's trade-in program, which drives down the price of new devices when trading in older devices, and he highlighted the monthly payment options that Apple recently started promoting on its trade-in page. This page provides details on the monthly price of the iPhone XR and iPhone XS when trading in an older device.

The lower than anticipated iPhone upgrades along poor sales in China ultimately led to a 15 percent decline in iPhone revenue year over year.

Cook says that while iPhone upgrades were lower than anticipated, the company's business grew in the rest of the world, setting new records in the U.S., Canada, Mexico, Germany, Italy, Spain, and Korea.

According to Cook, investors should be aware of three factors long term: a loyal and satisfied customer base, a large and growing active installed base, and Apple's deeply ingrained culture of innovation.

Article Link: Apple CEO Tim Cook: Customers Are Holding on to Older iPhones 'a Bit Longer' Than in the Past

 

[KPandian1]

Yes, Tim. That is what they do when the cost of upgrading is so unrewarding!

 

[rachleff]

You don't say!

The industry just can't figure out why people don't buy phones every year. Hmmmmm I wonder?

Technology is rapidly advancing but in cell phones its plateaued. The processors are so fast you don't need to replace a phone every 6 months.

 

[mysterydate]

At least people can get a shiny new case to put on their older iPhone.

tee hee

 

[macduke]

Well if your phone is lasting longer and getting upgrades longer and it's more affordable to swap out the battery then yeah, people are going to buy AirPods, finally get an Apple Watch, or upgrade their iPad/Mac instead. The fact that iPhone was down 15% but overall they were only down 5% tells me that people are still buying Apple products in the rest of the world outside of China, just maybe not as many as the iPhone. It also doesn't help that when many people last upgraded the iPhone was $649 and fit in their pocket/hand easily and now their upgrade path is 6.1" and cost $749. People can't be expected to upgrade everything every year!

 

[mikzn]

Love my iPhone 4s ( and iOS 9.3.5) - still works great! (original battery too)

 

[goobot]

They forgot price, storage upgrades being designed to rip you off, and no small iPhone.

 

[dmk1974]

You mean we all aren't upgrading to a phone every year with the device cost inflating each time with relatively minor improvements????

 

[mittencuh]

Also helps that iOS 12 runs beautifully on older devices. My 7 Plus still feels very quick to me at least. The only real reason to upgrade in my opinion would be the new camera systems.

 

[Westside guy]

Since I'm planning to hold onto my 6S for at least a couple more years - looks like I'm saving either $549 or $799! Thanks Apple!

 

[rodytoon]

Thats what happens when you get caught slowing people's phones down and they realize that their phone is not slower because its older but because you quietly did so in purpose and a battery replacement would resolve the issue. How many people would have chosen to replace their batteries in the past had they known that their phones would function as fast as when they first started instead of spending hundreds on a new device. Apple kept this hidden long enough, reap what you sow and live with the consequences as it is only going to get worse. I am an apple fan boy and I don't plan on upgrading any time soon as I don't care for any of the new gimmicks. I might even consider Android if I have to even though I will hate it at first but enough is enough, that's the only way to let apple realize that consumers deserve better.

 

[lunarworks]

I never understood people who upgraded their phone every year. I've always been on a three year cycle myself.

 

[Apple_Robert]

Sometimes, the CEO has to state the obvious so that those who love to project doom and gloom will be forced to have a moment of clarity, before they find something else castigate, as if there are no choices left in the free market.

 

[KPandian1]

Apple saw lower than expected iPhone sales during its first fiscal quarter of 2019 (aka the 2018 holiday quarter) and one explanation provided by Apple was lower quarterly iPhone upgrades.

Lower than anticipated iPhone sales along with troubles in China led to a 15 percent decline in iPhone revenue year over year.

Cook says that while iPhone upgrades were lower than anticipated in China in particular, the company's business grew in the rest of the world, setting new records in the U.S., Canada, Mexico, Germany, Italy, Spain, and Korea.

iPhone revenue is NOT down 15%. The Q4 income from iPhones is up 24%.

https://www.apple.com/newsroom/pdfs/Q4-18-Data-Summary.pdf

 

[typeoserv]

release a SE replacement and i’ll upgrade...

 

[Unity451]

"I just don't get it..." -Timmy

 

[Darmok N Jalad]

Smartphones have reached the same place that PCs did over a decade ago. Everyone now has one, and the generational upgrades are no longer significant enough to justify tossing your old device if it isn’t giving you trouble. It has little to do with pricing, IMO. If anything, Apple’s new pricing is for sustained profits to handle upgrades from committed customers. I’d be surprised if a new phone will move the needle. Folding screens might sound cool, but it adds complexity, and I’m pretty sure such tech won’t be solving the affordability issues people seem to have with existing flagships already.

 

[KPandian1]

Sorry, that should have said sales. I've fixed.

Unit sales are also flat year-on-year, and up 14% (Q4) sequentially.

 

[calzon65]

Yea Tim … because they cost too much … even in the United States.

 

[Patdt13]

Yeah no ****, Timmy. I'm not gonna drop a grand when my 2 year old iPhone 7 does everything I want and need it too. I love my phone.

 

[Slix]

I'm not surprised. Many people are indeed upgrading still (I see tons of non-tech people with iPhone X or Xr's despite not needing it or knowing all the improvements), but I'm perfectly happy with my iPhone 6 still. iOS 12 runs nicely on it, and the only thing I really want in a newer phone is a smaller screen and a better camera (for things like Live Photos and Portrait Mode). If Apple doesn't release a smaller iPhone sometime soon, I'll probably stick with my 6 until it dies. It's not worth spending over $700 for a newer iPhone that basically only has a better camera for me right now.

 

[Peperino]

Tim, the reason users are holding and not upgrading as often are the obscene expensive prices, even in the US, offering only minor improvements.

It is quite hilarious that Apple decides not to release unit numbers, but they release the number that is convenient to them (active devices...).

 

[laptech]

Hmmmm, interesting. Apple create a battery problem for it's users, Apple decide to rectify the problem but they are advised by some analysts not to do it because it will mean iphone owners will not upgrade their phone because now it will last longer due to having the battery changed!!!!

I think Apple need to disclose who these analysts are because to tell Apple not to rectify a problem they caused because it will affect their sales is downright disgraceful.

 

[nawnp]

Well duh, the fact that they went up in price, $350 by the way, and that cell phones were rapidly progressing way ahead of software, meaning a 3 year old iPhone (like my 6S+) will run any app, half as well compared to the XS explains it quite well. The same most certainly could not be said between the original iPhone and the 4, when hardware added features, and twice the speed yearly, with no new hardware or software for that matter on the XS, and it was only 15% faster than the X.

 

[usarioclave]

Thats what happens when you get caught slowing people's phones down .

Except that iOS 12 sped people's phones up.