The ever growing number of iPhone SKUs...long term problem for Apple?

Discussion in 'iPhone' started by MacDevil7334, Sep 29, 2017.

  1. MacDevil7334 macrumors 65816

    MacDevil7334

    Joined:
    Oct 15, 2011
    Location:
    Austin TX
    #1
    First of all, this is not an “Apple Is Doomed™” post, just some food for thought.

    One of the more well-known parts of the story of how Steve Jobs turned Apple around when he returned to the company in 1997 was how he radically cut the number of products the company was producing. At its peak before Jobs’ return, Apple had 350 ongoing projects. He cut that number to 10. Jobs himself explained it best at WWDC in 1998:

    This year, Apple introduced two new families of iPhones (8 and 10) and also kept the 6S in the lineup, bringing the total number of iPhone families to five (SE, 6S, 7, 8, and X), as well as several sub families of regular and plus models. It got me thinking about bloat in the product line, something I think has been creeping back in pretty steadily since Jobs passed away in 2011. To be sure, Apple grew in the 2000s under Jobs as it moved into new product categories (iPod, iPhone, iPad). But, within each category, it remained relatively focused with only a handful of models.

    I decided to do a little research on how the number of iPhone SKUs Apple sells has changed over time. Even though I was aware of how the product line has grown, the results surprised me. I did two calculations. The first was counting the number of SKUs a consumer sees, which includes the iPhone family and size (6S, 6S+, 7, 7+, etc.) plus the color plus the storage capacity. This method does not account for variations in cellular radios (which the average user does not care about). The second count includes all the variations in cellular radios (which jacks up the number of SKUs quite a bit when we hit the LTE era) and shows a bit more of the manufacturing requirements on Apple’s end. Note that these numbers are the SKUs available at the iPhone launch event each year. So, they don’t account for mid-year changes like the introduction of the CDMA iPhone 4 in 2011, the launch of the iPhone SE in March 2016, or the Product (RED) iPhone 7 earlier this year.

    2A26B168-0F50-4904-9259-C963F6D91091.png

    This chart blew me away. The number of iPhone SKUs visible to the consumer was never higher than 9 when Jobs was alive. Today, there are 60(!!!) different combinations for the consumer to choose from. Also, the products are named somewhat confusingly. What does SE stand for? Is it related to the 6S? Is the iPhone 8 better than the iPhone 7 Plus? Why isn’t there an iPhone 9? Admittedly, the names of the iPhone lines were somewhat confusing even when Jobs was at the helm. But, I have to imagine the average Apple customer is at least a little confused when browsing the Apple store website.

    When you account for different SKU variants, the numbers are even more jarring. Clearly, the move to LTE in 2012 created new production challenges for Apple due to variations in the technology around the world. Going from a single “world phone” with the iPhone 4S, there were three different cellular variants of the iPhone 5, and seven variants of the 5C and 5S (thus the jump in SKUs in 2013). Apple started to get the number of cellular models back under control with the iPhone 6 in 2014 (only four variants). But, starting in 2016, Apple started keeping more models in the lineup, driving that number of SKUs back up.

    Why is all this bad? First, it creates confusion for the consumer. If you follow Apple closely, and pour over the spec sheet comparisons on their website, it is possible to figure out the differences between the various iPhone models. But for the average consumer, the matrix of iPhone possibilities has to be a bit intimidating. Is the Neural Engine in the A11 chip worth forking over $150 over the A10 in the iPhone 7? How about the wide color display in the 7? Is that a significant upgrade over the 6S?

    The second issue is it creates a huge manufacturing challenge for Apple. They now have to estimate demand for 216 different SKUs. How many people are going to want a gold iPhone 7 32 GB on a GSM network in North America vs CDMA? How about 128 GB vs 32 GB? I’m sure it’s not entirely to blame, but I have to imagine having so many SKUs at least partially contributes to the supply problems that accompany every iPhone launch.

    Now, I am fully aware that the situation of Apple today is not the same as it was in 1997. For one, Apple is now one of the most profitable companies in the world, thanks in large part to a decade of iPhone sales. So, clearly consumers aren’t being driven away from the company by this situation. On the other hand, 60 different SKUs is starting to seem like bloat in the product line to me. If that’s a sign that Apple is starting to lose focus (there are other signs from around the company that it is), that’s not a good state of affairs over long-term. Tim Cook has done a great job at driving sales numbers. But, I am really starting to worry Apple is not positioning itself well for the future.

    Anyway, just my (rather lengthy) two cents. I found this analysis interested and figured I’d share. What does everyone else think?
     
  2. macsrcool1234 macrumors 65816

    Joined:
    Oct 7, 2010
    #2
    Yeah, I absolutely think this is something Steve would have hated if he was here today.

    That being said, I can also see it from the current leaderships point of view, they'd rather people who don't want to spend a lot of money on the latest and greatest have some iphone instead of none.
     
  3. Renho macrumors 68000

    Renho

    Joined:
    Sep 15, 2014
    Location:
    SR, CA
    #3
    Well a couple things. 1. Only ATT was the first to carry iPhones so they only needed to worry about them, now obviously that has changed thus creating more models.

    2. All it is, is keeping up with the times. Samsung has many models in there lineups and they own the most market share. You can’t just say we only have 2 choices to choose from and expect to bring people over from Android who has many choices. All it is is, is trying to have something for every type of human. small, big, rich or not as rich..lol
     
  4. sdwaltz macrumors 6502a

    Joined:
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    Location:
    Indiana
    #4
    I agree and have been thinking the same thing recently.

    While I don't think that the fate of 2017 Apple is the same as the fate of early/mid 90's Apple, we are beginning to see Tim Cook's Apple make some of the same mistakes that Apple made under Sculley/Spindler/Amelio. Luckily the world as a whole is FAR more educated on technology than they were in the 90s, making product fragmentation not as big of a deal because consumers generally know what they're buying, but I feel pretty strongly that Steve Jobs wouldn't have this level of fragmentation.
     
  5. BeefSupreme macrumors regular

    Joined:
    Sep 19, 2012
    #5
    I agree completely with your assessment.

    They can live with a large product line again and be successful at it if they stick to just in Time manufacturing. What killed them with that before was excess inventory that constantly had to be retired and recycled leading to huge losses.

    Personally I’d prefer they make 10 great products and leave it at that. Not including accessories of course.
     
  6. sdwaltz macrumors 6502a

    Joined:
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    Location:
    Indiana
    #6
    Not to split hairs but Samsung and Apple have virtually the same level of marketshare - Apple with 17.9% and Samsung with 17.8%. Source: https://9to5mac.com/2017/02/15/samsung-loses-market-share-to-apple-in-q4-2016/

    Android has far more marketshare than iOS does, though. By a long shot. Apple manufactures the most popular smartphone, while Google manufactures the most popular mobile operating system. Samsung has neither.
     
  7. Renho macrumors 68000

    Renho

    Joined:
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    #7
    Sorry I meant Android, it’s IOS vs Android. Android is like 60% I think..

    But now that Samsung is producing Apples screens, I think they took the lead..haha
     
  8. v0lume4 macrumors 68000

    v0lume4

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    Jul 28, 2012
  9. Renho macrumors 68000

    Renho

    Joined:
    Sep 15, 2014
    Location:
    SR, CA
    #9
    A06EC410-639D-4466-879F-82255EDD6FE9.jpeg C0426B15-164E-496E-ACAA-40E7EE755786.jpeg

    Samsung has the lead thanks to there latest launch..wow Japan loves IOS

    https://www.google.com/amp/s/9to5mac.com/2017/08/09/us-iphone-sales-ios-market-share-kantar/amp/
     
  10. sdwaltz macrumors 6502a

    Joined:
    Apr 29, 2015
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    Indiana
    #10
    Ah, the disadvantages of using even year-old data. Thanks for the correction.

    Seeing these statistics always blows my mind a little bit because literally every single person I know (which is a lot) with the exception of like, two of them, uses an iPhone. I'm just trying to figure out where all these Android users are hiding!
     
  11. BeefSupreme macrumors regular

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    Sep 19, 2012
    #11

    Third world countries rocking $20 shitboxes
     
  12. sdwaltz macrumors 6502a

    Joined:
    Apr 29, 2015
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    Indiana
    #12
    I'm referring to the USA, in which the chart shows 68.5% of people use Android...meaning basically 7 out of every 10 people use it, which has been the antithesis of my experience. Even my friends that are "poor" all use them. I'm not saying I don't believe the statistics but it just doesn't reflect what I've seen.
     
  13. xofruitcake macrumors 6502a

    Joined:
    Mar 15, 2012
    #13

    It was a different time and Apple is a different company today. At the time, Apple was losing money, it was hard to sell out all their product, and Apple had a hard time financing their inventory. Fast forward today, Apple is one of the strongest company financially in the planet and their cost of capital is basically zero since they have too much cash and doing massive buyback every year. Large inventory create 2 problems: 1) holding the excessive inventory cost money and cut down gross margin. 2) If they cannot sell out the excessive inventory at the end of the cycle, they have to do massive write down and dump the inventory to the market at a big loss. Apple has neither one of the problems. Cook is doing exceeding good in managine invenotry throughout the cycle. And they are able to keep selling the older generation device at decent price after the new phone come out. And Apple build an excellent JIT supply chain that can rave up and down production with minimum disruption (i.e. they don't over produce much of anyone until the demand is proven for a particular version of phone). Right now I am shopping for a 8+ simfree SG 256 GB in the SF bay area. It feel like catching a game of catching the next pokemon. It is there for a minute and then it is gone with the over 20 Apple store within 1- 1 1/2 hour driving distance (with traffic) for the last 5 days..
     
  14. C DM macrumors Sandy Bridge

    Joined:
    Oct 17, 2011
    #14
    Seems similar to a discussion at Apple is failing to learn the lessons of concerning way too many product models
     

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13 September 29, 2017