Foxconn's Profits Slide 31% as iPhone Sales Continue to Drop

[captain cadet]

That describes how I feel about my 6s and the iPhone in general right now. I like it a lot and it serves me well. But incremental updates as of late aren't as exciting as they once were and, at this point, I'm questioning whether or not I will upgrade to the 2017 iPhone when my 2 years are up with the 6s. Maybe I will, maybe I won't; it all depends on the condition of the 6s and whether or not the 2017 iPhone will debut some amazing, must have, feature or not.

I am on a 2 year contract myself. I might keep it for an extra year to make it 3 year but doing iOS development I am in the few people who have a legitimate reason unlike most people who think "it do for an extra year." Also battery depuration bothers me which if I am going to have to spend £60 on a new battery and lose my phone for a few weeks as I am quite outgoing. And condition of the phone. Battery packs may be a solution for me?
But think about this. If apple has sold 1 billion iPhones and they only take up 20% of the market it works out that there is 5 billion smart phones are out there or 5/7 people have phone.
Also look at this: http://www.pewglobal.org/2016/02/22...age-continues-to-climb-in-emerging-economies/
Most people will have phones already in developed countries and the main gap is in Africa which is missing the infrastructure and usually cannot afford an £300 smart phone - £99 is a stretch for them

 

[jamesin702]

No Amoled, big bezels, same design. Of course there will be a better camera, of course it will be faster... But it's all soooooo 2014 compared to for example Galaxy S7 edge and Note 7.

agreed. add to that no fast/wireless charging and os thats been using the same app grid interface for 10 versions and offers 0 customization options (1 dynamic wallpaper lol) all at a premium price. sad how far apple has fallen behind.

 

[Thunderhawks]

If Apple ever got another visionary at the helm, core users would be jumping ship in droves. Another visionary would doubtless take Apple in new and scary directions; places Steve Jobs would NEVER go. The new Apple wouldn't be Steve Jobs' Apple.

Steve did plenty of negative things hurting the company, which is why he got ousted etc.
(Which made him adjust)

The "hindsight halo" is not completely deserved.

But, he did change the way we do things.

 

[TechZeke]

Not surprising. The market is saturated, phones have gotten so fast that there is little reason to upgrade, and they took away 2 year contracts. People are looking for hand-me downs more than ever now. Pretty much the only way Apple could see gains at this point is getting current owners to upgrade, which is why Apple is trying to hard in China and India.

Also prices are way too f-king high in 2016. Thanks to One Plus, there are nice phones all over the android world for $400-$500. Even as a die hard iPhone user, I'm having a harder time justifying shelling $850 for another 64GB iPhone Plus.

 

[doelcm82]

Even the biggest Apple Fanboys don't seem to be able to make a case for the new phone. If you are, please do!

I'm not the biggest Apple Fanboy, but I'll likely be upgrading. I usually upgrade every other year. I'd like to be able to use 3D Touch and 4K video. And I'm interested in the dual-lens camera. Also, with 4K video, I'll likely want the 256GB storage model.

Next year's model sounds interesting, if it's everything we've heard, I may upgrade again next year. But some of what we've heard in the rumors may not make it into what Apple releases in 2017, so I'm not willing to wait another year with my iPhone 6+.

 

[EricTheHalfBee]

They're talking about profits decline. Not products decline. You just can't stand critic comments about any of Apple. If Apple was this great, how come there is such negativity lately from even diehard Apple fans like myself?

Foxconn assembles Apple products. Apple pays them a per-unit fee to do this. What Foxconn makes is DIRECTLY tied to the NUMBER of devices they assemble for Apple, not the VALUE of those devices.

So please explain how drops of 7-15% on unit sales for Apple translates into a 31% drop in profits for Foxconn. Or admit you're wrong (which you clearly are in this).

 

[mw360]

Bluetooth earpods are very much the opposite of the music lover's wishes. If there is one category they will NOT be able to sell the iPhone 7 to , it's precisely the music lover. They all have invested in expensive quality headphones and they all now need to carry at all times a dangling fragile adapter.

Also, there is no such thing as a "digital quality" earphones. Our ears are analog and all digital information has to be converted into analog before reaching the earphones.

You don't need to tell me...

 

[doelcm82]

Steve did plenty of negative things hurting the company, which is why he got ousted etc.
(Which made him adjust)

The "hindsight halo" is not completely deserved.

But, he did change the way we do things.

Agreed. Even Steve Jobs couldn't live up to his mythology. I remember quite a few "Steve's not the man he was" comments when he was still around.

 

[Funkybunch]

For the tech savy, it is easy to find the lack of innovation frustrating. But, 99% of the iphone buyers are people that have no clue what tech is out there. They only use 10% of the features of their phone. As long as they can send messages, make calls, check their email, take good pictures, use maps, surf the web, use the latest and greatest apps,etc. than they are satisfied. This group will keep buying iphones because there is no reason not to. What is better out there for these needs? The only reason to switch would be price, so that may slow how often they upgrade but will keep them with Apple.

Also, it was easier for Apple to add innovation to their phones in the early stages when sales were much lower. Now, Apple has to be able to manufacture to the highest quality 200M phones per year. That is what slows the pace of innovation more than a lack of technology. If they tried to put out the phone that everyone wants before it is ready to mass produce, this audience would also complain. Can't have it both ways people.

IMO, this is why they are segmenting into regular and "Pro" versions. The "Pro" versions will get the best tech they can put in that the average consumer does not need, while the regular versions are more than good enough for the masses. The tech savy people that need the latest and greatest tech will get it, but will have to pay for it. The regular versions will compete with the rest of the market. They did with the iphone SE and always have done it in the tablet market for years by offering older models at much lower prices.

 

[9081094]

Foxconn assembles Apple products. Apple pays them a per-unit fee to do this. What Foxconn makes is DIRECTLY tied to the NUMBER of devices they assemble for Apple, not the VALUE of those devices.

So please explain how drops of 7-15% on unit sales for Apple translates into a 31% drop in profits for Foxconn. Or admit you're wrong (which you clearly are in this).

I'm not implying that Apple is responsible for the total 31 decline in Foxconn's profits but will be responsible for the biggest chunk out of that decline. And as we both don't know the exact numbers for that decline, we're both speculating and that's why I'm not admitting I'm wrong. We disagree, that's one thing certain

 

[Berwtmans]

Macs were down 11%. iPads were down 7%.

Sorry, you're still wrong.

It's very well possible that Foxconn loses 30% in profit when orders (by Apple) decline by 'only' 15%. Depends on cost structure and definition of 'profit' (gross, net, ebitda,...).

Just as an example, suppose Foxconn's fixed costs are 1000$ and they make 1$ on each iPhone produced.
If Apple orders 1500 iPhones, Foxconn's profit is 1500$ - 1000$ = 500$
If Apple orders only 1275 iPhones (only 15% less), Foxconn's profit is 1275$ - 1000$ = 275$, a decline of 45%!

PS I DO NOT think this is the scenario unfolding here, just wanted to show that these percentages don't have to be aligned by any means.

 

[usersince86]

Looks like Foxconn is going to have to 'hang in there' until next year. There really isn't much of a need to get the iPhone 7 unless you had a iPhone 6 or older.

I have a 5 - not even a 5S – and will skip this "update," too.

Apple had better hit a grand slam with the 10th year anniversary iPhone, AND produce new Macs, or they're going to continue to lose marketshare at an accelerated and accelerating pace.

 

[EricTheHalfBee]

I'm not implying that Apple is responsible for the total 31 decline in Foxconn's profits but will be responsible for the biggest chunk out of that decline.

The chairman of Foxconn (Terry Gou) stated it was due to a declining PC industry and the mobile industry is stable. So much for everyone blaming the iPhone.

 

[bjet767]

I hope Apple is not blaming Foxconn or their employees for this decline, the blame falls squarely in the head of Apple's CEO, Tim Cook.

The blame goes to what is a common business cycle paradigm and not Cook. The truth is from the first iPhones to today's 6 a whole lot of hardware advancement has happened and that has peaked where the "need" to upgrade jusy isn't as strong as it was. My iPhone 6 by all benchmarks is slower than my wife's 6+ S, but the actual difference in hardly, if at all, perceivable.

Look at all the "new" and "improved" android based phones, one can hardly keep up or even take "note" of all the changes they keep cranking out, but like the iPhone the three year old model still works really good.

What Apple needs to do (and they keep trying to) is to come up with some hardware/software combination which only works with the new model and everyone "has to have." However, if playng 'Pokeman' is the major reason to own a "smart phone" then the market is pretty well saturated with product. The results are a slowing of new phone sales.

 

[usersince86]

For example: no more tangling cables, AirPods included in the box.

It's possible, but a wired lightning cable seems much more likely.

 

[9081094]

The chairman of Foxconn (Terry Gou) stated it was due to a declining PC industry and the mobile industry is stable. So much for everyone blaming the iPhone.

Let the numbers of the declining iPhone speak for themselves and for the long-awaited hyped iPhone 7 too. We're all speculating... that's the purpose of MR

 

[mbh]

I hope Apple is not blaming Foxconn or their employees for this decline...

What a bizarre strawman concern.

 

[Zirel]

agreed. add to that no fast/wireless charging and os thats been using the same app grid interface for 10 versions and offers 0 customization options (1 dynamic wallpaper lol) all at a premium price. sad how far apple has fallen behind.

The iPhone 6s Plus charges as fast as a S7 Edge if using the iPad charger.

"Fast" charging only compared to their older products.

And no cosrumization same grid? Doesn't iOS 9 add 3D Touch menus? iOS 10 isn't Assing pop-up widgets? Widgets on iOS have surpassed those on Android, Android widgets can't be that active, can't show video, etc.

Android still doesn't have good looking icons, on iOS every icon respects the same shape and most respect the same proportions and colors. On Amdroid it's a mess even with Google icons:

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I'm not implying that Apple is responsible for the total 31 decline in Foxconn's profits but will be responsible for the biggest chunk out of that decline. And as we both don't know the exact numbers for that decline, we're both speculating and that's why I'm not admitting I'm wrong. We disagree, that's one thing certain

Source for that "biggest chunk"?

 

[Roller]

I've upgraded my iPhone every other year since 2007. The only exception was when I went from a 5S to a 6 Plus because I wanted a larger screen. But the 6 Plus lags occasionally and I get frequent page re-loads in Safari (maybe a memory limitation), so I've been thinking that I'd get back to my former upgrade cycle.

I'm reserving judgement on the 7 until it's actually announced—it's possible, though unlikely, that it could have features like wireless charging that haven't been "confirmed" in recent leaks. I'm also waiting to see what the rumor mill says about timing for the iPhone 8 or whatever it's called. If there's a possibility that it'll hit the streets sooner than September 2017, I may wait unless the iPhone 7 is very compelling.

 

[hot spare]

The prices guys, the prices.

This is the begin of the end if Apple can't compete with Nexus cheaper models. I mean, why a new buyer should pay 600+$ instead of half the price for a 5X? And the 5X is not a bad smartphone at all. It's super good indeed!
I don't want to start realizing that there's no reality in the shareholders eyes. In this world Android is becoming more tough to beat, the iPhone cannot stand only on his name and on Steve's heritage. Ok Swift, ok good design, ok Apple, wow amazing! YOLO: but the troubles are emerging now more than ever.

Any Nexus or 5x has absolutely no significance in sales. Every Nexus is a sales flop in whatever way you measure. Only geeks use nexus just as a bragging right. Never ever in Android history that Nexus was even in top 10 of sales chart.

The top 3 selling Android phones in 2016 - S7 Edge, J2 and S7. Nexus are nowhere to be seen.

 

[ARK]

After reading all the rumors about the new iPhone I really don't even know how thy are going to advertise it.

No headphone jack is a huge no go for many people I have talked to, myself included.

And the rumors also point to most other things staying virtually the same.
The 6S is already blazing fast so a faster processor is unlikely to convince anyone to go out and upgrade their phone either.

wht is their strategy for the new phone? Only people with yearly free upgrade plans and expiring contracts?

What am I missing?

So far my 6 is performing just fine too. Normally Ive noticed major slow downs in my second year of ownership. If the 7 doesn't blow me out of the water I will be sticking with the 6 for my wife and I for another year.

 

[brinary001]

I wonder if the slump isn't just about a "lack of innovation" but maybe more, or at least partly, due to market saturation. So many people have iPhone's now and other smartphones that eventually sales would slow down at some point.

This whole "doom and gloom" sentiment seems silly to me at this point. The companies are still making money hand over fist here and they're not even close to going under or anything like that.

Yes yes yes! I've been saying this for months now. The iPhone is still the best value of a smartphone out there, it's just that everyone has it now! It isn't 2007 anymore when the iPhone was this uber big deal, astronomically expensive, and locked to just one carrier. Because of all those things it was highly coveted and sought after.

If Ferrari suddenly stopped making $250,000 cars and instead made $30,000 cars that many more people could afford, there is nothing to covet or envy anymore because so many would have it. Doesn't mean it would be of any less quality since it's still a Ferrari, but it just doesn't sit on that marketing pedestal that it once did.

 

[otternonsense]

I hope Apple is not blaming Foxconn or their employees for this decline, the blame falls squarely in the head of Apple's CEO, Tim Cook.
They need new leadership that's interested in innovating again instead of promoting social policies as their top priority.

They seem plenty interested in innovating, when it comes to the nutty Infinite Loop infrastructure, or the shiny gimmicks of Apple's new San Francisco store eg. turning the Genius Bar into a Genius Grove and replacing traditional doors with hangar-sized sheets of glass.

I suppose the outdated products are meant to just sell themselves in the meantime, right?

 

[usersince86]

Android still doesn't have good looking icons, on iOS every icon respects the same shape and most respect the same proportions and colors. On Amdroid it's a mess even with Google icons:

That may be true, but many, many people do NOT care (or even really notice).

Same arguments were made for MacOS vs. Windows. Who won marketshare battle?

Obviously Apple surpassed MS, but that is fading.

Hoping for a turnaround, but relying on older rather than recent history for that hope...

 

[otternonsense]

Yes yes yes! I've been saying this for months now. The iPhone is still the best value of a smartphone out there, it's just that everyone has it now! It isn't 2007 anymore when the iPhone was this uber big deal, astronomically expensive, and locked to just one carrier. Because of all those things it was highly coveted and sought after.

It could still be coveted and sought after. In the last few months no less than 4 colleagues of mine (in a team of 20) have jumped ship to Edge S7 and Nexus 6P. They just wanted something distinctly new, which apple isn't currently offering.