Apple iPhone Shipment Numbers’ Disparity Tells a Far More Alarming Story

the disclosure of Apple’s iPhone revenue figure appears to have caused some confusion. As the earnings calls started raining in, so did the smartphone shipment figures and estimates from market research firms. The most notable updates came from IDC, Strategy Analytics and Counterpoint Research, all of which have disclosed global smartphone shipment numbers in light of the recent earnings call. While the overall market trend and OEM rankings remain constant in all of the three reports, the numbers for Apple’s iPhone shipments appear to vary by a fair margin.

According to IDC, Apple has shipped a total of 36.4 million smartphones in the first three months of 2019, down by a staggering 30.2 percent from the 52.2 million units (company-disclosed figure) that it sold in Q1 2018. Strategy Analytics, meanwhile, states that Apple shipped 43.1 million phones in Q1 2019, down 17.4 percent YoY. At the same time, Counterpoint data suggests Apple shipped 42 million units, down 19.5 percent YoY. On this note, Strategy Analytics and Counterpoint’s data happen to be close enough, and within the typically acceptable range of variation.

Why this matters
While a difference of 3-5 percent in data between market research firms is typically acceptable, a staggering difference of 18.4 percent in the number of iPhones shipped in Q1 2019 is well beyond normal, and worth investigating. The reason is that it also hints at a problem that can be Apple’s biggest long-term problem — the inability to sell its latest flagships. During its latest earnings call, Apple announced that its iPhone-generated revenue was down by 17 percent, to $31.1 billion. If IDC’s data is to be considered, then the average price of every iPhone sold across the world in Q1 2019 stands at $855 (~Rs 59,300). However, if Strategy Analytics happens to be more accurate with the data, the average selling price of an iPhone in the same period stands at $720 (~Rs 49,900).

IDC phone shipments Q1 2019

This median price difference is of great significance. Apple has always been known for pushing the barrier in terms of how expensive a smartphone can be. For instance, the very first generation iPhone, launched in 2007, cost $499 — outrageous for a mobile phone back then. Today, the latest, least expensive, 64GB iPhone XR starts selling at $749 (Rs 58,500 in India, a premium of ~Rs 6,500 over forex rate). The most expensive one, a 512GB iPhone XS Max, sells at a staggering $1,449 (Rs 1,44,900 in India, a massive premium of ~Rs 44,500 over forex rate).

Strategy Analytics phone shipments Q1 2019

While falling number of devices sold is one thing, the market data suggests that Apple may no longer be adept at moving the market and pushing the barrier for price points, which in turn chips away at the significance of the iPhone in today’s industry. If IDC’s data is more accurate, Apple’s median iPhone selling price of $855 across the world still falls north of the iPhone XR by at least $100. This would still mean that at least one of Apple’s latest iPhones are being picked up by many users, thereby keeping the iPhone relevant even today.

Counterpoint phone shipments Q1 2019

If, however, Strategy Analytics happens to be closer to the actual figure, it is a bigger concern for Apple, since its quarterly median selling price is below the minimum price of the iPhone XR. This essentially signifies that even among the iPhone units that still sell, more people are picking up the older iPhones, and the new iPhones no longer have the same attraction that allowed Apple to steadily command higher prices (which its buyers happily paid).

This may be because of increased competition, in which case Apple’s solution can be more straightforward. However, this can also be because Apple’s latest flagships do not offer a feature set that is significant enough to pay a huge premium for. Worst of all, it may also be because the product perception of the iPhone is starting to fade, and a once-elusive premium gadget has started losing a bit of its glamour. Apple would dearly hope that it is not the latter.

Grave implications
Apple has never been one to bend to industry norms, and has in fact been a trendsetter for the larger part of recent history. However, it is a bit concerning that the most prominent trend that Apple has managed to set is of the notch on phone displays — something we may have gotten used to, but do not necessarily like.

If Apple’s median price of the iPhone is indeed lesser than its cheapest new generation iPhone, Apple stands at risk of making its smartphone innovation redundant, and thereby inviting rivals to thrive in its own backyard. Was this the odd, weak quarter of sales? Maybe. But, if the iPhones can no longer command its extra edge that urged people to spend more, Apple may have a bigger problem to solve — the problem of building something that urges people to spend $1,500 on a phone, and still be happy about it.

Apple Has Confirmed That it is Shipping Only Qualcomm Powered iPhones to German Stores

Apple Inc said Thursday that it will resume selling older iPhone models in its stores in Germany, where they were banned last year due to a patent infringement ruling. The iPhones will be sold in Germany only with chips from Qualcomm Inc, instead of a mix of chips from Qualcomm and Intel Corp. Qualcomm is in a global legal battle against Cupertino-based Apple over patent licensing, and the German case was part of the chip supplier’s efforts to rack up smaller wins ahead of a major lawsuit with Apple that goes to trial in April in San Diego. Qualcomm last year also won a ban on sales of some iPhones in China.

Apple said it had “no choice” but to stop using some chips from Intel Corp in iPhones headed to Germany in order to comply with the patent infringement ruling. Qualcomm, the world’s biggest supplier of mobile chips, sued Apple in Germany alleging that some older iPhone 7 and iPhone 8 models violated Qualcomm patents around so-called envelope tracking, a feature that helps mobile phones save battery power while sending and receiving wireless signals. The alleged patent violation stemmed not from Intel chips but yet another Apple supplier – Qorvo Inc – whose chip was only present in older phones with Intel modems.

The court sided with Qualcomm and banned sales of some iPhone models that used Intel modem chips, leading Apple to pull the devices from its 15 retail stories in Germany and its online store in the country. The ban was a victory in Qualcomm’s legal conflict with Apple. The iPhone maker has alleged that Qualcomm engaged in illegal patent licensing practices to protect a monopoly on so-called modem chips, which connect mobile phones to wireless data networks. Qualcomm has in turn alleged that Apple has infringed its patents. A major case between the two goes to trial in the United States in April. Apple began phasing in Intel’s modem chips in 2016 after years of using chips exclusively from Qualcomm. In last year’s iPhone models, Apple dropped Qualcomm’s chips completely in favor of Intel’s. But Qualcomm has continued to supply Apple with chips for older models, and Apple on Thursday said it would use only those for German iPhone 7 and 8 models. “Qualcomm is attempting to use injunctions against our products to try to get Apple to succumb to their extortionist demands,” Apple said in a statement to Reuters. Qualcomm and Qorvo did not immediately respond to requests for comment. Newer iPhones with Intel chips remain on sale in Germany. “Intel’s modem products are not involved in this lawsuit and are not subject to this or any other injunction,” Steven Rodgers, Intel’s general counsel, said in a statement.

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