Apple

One short observation from Tim Cook’s New Year’s letter to shareholders

Apple has publicly acknowledged that sales of new iPhones are falling due to the more affordable replacement of batteries in older ones.

In the fall of 2018, Apple began a difficult period. The company made such a big bet on the Chinese market, in October, Tim Cook even personally came to the country (and everyone wondered why), but Trump’s trade war with China had such an effect on the future Chinese economic expectations that they reduced consumption and began to buy fewer new ones iPhones.

Apple had to reduce the revenue forecast for the first quarter of 2019 and evenclassify the number of iPhones, iPads and Mac computers sold(although earlier Apple had a very transparent report on pieces of sold devices). Apple shareswent down and fell by 38% since their peak in October ($ 232 per share) to $ 146 at the end of December: although Apple’s shares did not fall as much as Facebook did in 2018 , it still fell out of the top three expensive companies in the world.

On January 2, a letter from Tim Cook appeared on the Apple site , addressed to Apple stockholders. Because of the New Year holidays, not so much attention was paid to it, but in general it is full of important details about Apple’s business: for example, Cook complained a lot about foreign economic factors that the company could not influence in any way, and convinced shareholders that the company is developing steadily. Shareholders reacted skeptically: shares just rebounded to $ 157 dropped to a record low of $ 142.

IPhone sales are still the core of Apple’s business, and Cook’s letter has a fairly detailed explanation of their downfall.

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]While the bulk of iPhone sales declined in Greater China and other emerging economies, the transition to new iPhone models in developed countries was also not as significant as we had expected. In many respects, the current situation is explained by macroeconomic factors. Other reasons that have affected the sales of the iPhone, we include smaller sales by a subsidized model by telecom operators, price increases associated with the strengthening of the US dollar, as well assignificant reduction in battery replacement cost. [/perfectpullquote]
Tim Cook
Apple CEO

Tim Cook didn’t say what was the matter, so you’ll have to do it for him: in a difficult economic situation, users don’t buy new iPhones but content themselves with old ones or take used ones, just changing the battery for them so that the smartphone continues to work as before . This situation does not suit Apple: the fact that replacing the battery has become more affordable, worsens its sales.

The fact that Apple has a tendency to resist battery replacement, the media paid attention in the first half of 2018. Then the BBC reported that the company refuses to pay for or free replacement of batteries in the iPhone, if it discovers that they have other breakdowns, demanding that they be fixed first – and pay for their repairs. For example, one of those who wished to replace the battery Apple pointed to a small dent outside the case, demanding for its elimination 200 pounds sterling (about 17 thousand rubles). To another owner of the iPhone, who had no external damage, the company announced the presence of internal – allegedly faulty microphone and dynamics, the replacement of which would cost 250 pounds. But because of the scandal with the slowing down of iPhones, thecompany reduced the prices for battery replacement, andAccording to the media , replaced about 11 million batteries in a year – 10 times more than a year earlier.

Apple has always made iPhones such that it is extremely difficult to replace the battery with them. Many criticized the iPhone, which was released in 2007, for a non-collapsible case, because at that time most smartphones had the back cover removed, allowing easy replacement of the battery. However, trends in the production of smartphones have made a monolithic design standard in which the replacement of a battery is a time consuming process, available only with complex specialized tools. And repairing iPhones in unauthorized service centers removes the manufacturer’s warranty.

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