This past September, CEO Tim Cook took the stage and made an announcement that shook the house! He unveiled the new iPhone 11 saying it’s the most advanced phone Apple has ever made. That said, all the bells and whistles are not what shocked the audience, it was the cost for the phone!
For the first time in Apple’s history, it cut the price of the iPhone. It appears Apple made this decision out of desperation which might be saying they are no longer the dominant company on the market.
It has been a long time since Apple was a computer company, they are a phone company! The days of upgrading and improving their computers seem to be a thing of the past.
Ever since they introduced the first iPhone in 2007, they have sold over 22 billion phones which equates to over a trillion dollars in sales which more than any company in the world. Apple’s stock shot up over 2,037%, becoming the largest publicly traded company in the world.
Since 2007, Apple has earned a stunning $1.99 trillion dollars. On top of that, more than half of the profits came from the sale of their iPhones. Not only is the iPhone their hottest, best-selling product but it’s also the company’s most profitable product.
Every dollar an iPhone brings in, Apple earns $0.60 to 0.74 according to PhoneArena. Bounce that against their most profitable notebook, the MacBook Air, which earns only $0.20 on the dollar.
If their sales in iPhones were not as profitable as they are, Apple would not be in the position they are in today. Many believe that if they did not have the iPhone, Apple would only be a “so-so” computer company.
For so many years, iPhone revenues have climbed at an unbelievable pace. Then in 2015, Apple reached its apex. Since then, the iPhone has been slowly on a decline:
Apple sold 14 million fewer phones last year than three years ago, even though that’s not particularly unusual. When Apple unveiled its first iPhone, the smartphone was considered ground-breaking technology. Technology such as this has a life expectancy that goes like this -
Sales skyrocket then flattens out as the market matures, and finally, there is a downturn.
Believe it or not, according to IDC, only 12 years ago, there were only 120 million people who had cell phones. Today, there are over 5 billion who own smartphones.
Apple has always been a master at expanding its products’ life expectancy and the iPhone is no exception. Apple raised the cost for the iPhone to compensate for slowing sales while keeping revenue figures rising.
As an example, in 2010 you could purchase a new iPhone 4 for $599. In 2017, you would pay $849 for the iPhone 8 and a whopping $1,149 for the iPhone X, its most expensive phone.
The increase in pricing kept Apple’s growth alive. For the same reason, its revenues have continued climbing higher and higher since 2011. There are also other reasons for the increase in the price tags of iPhones.
With the exception of a few years, the price for making an iPhone has been on the climb since 2007. The first iPhone cost Apple around $200 but the cost for the iPhone XS doubled that amount. There is no doubt that Apple has always had the highest price for phones but as you can now see, it had its reasons for doing so.
Apple had to offset the constant growth in costs. It was just a matter of time when Apple would have to cut back on its pricing.
Last September, Apple released the iPhone XR which is more affordable and less advanced than the iPhone X. It only costs $749 which is a 35% decrease in price compared to the iPhone X coming in at $1,145. In all reality, these two phones are almost identical.
This was just another Apple marketing ploy to offer a cheaper phone to get their sales figures back up on track.
Apple has now gone a step further this year by slashing the price of its new iPhone 11 which starts off at $699, a price not seen since 2017. It seems this is the last resort for Apple to ignite their weakening iPhone demands. To many, it seems like this could be the end of Apple’s lucrative iPhone business.
The bottom line, Apple is selling fewer iPhones and now earning less from them. Recent financial reports revealed that iPhone revenues are beginning to drop, significantly.
That is not good for a company whose lifeblood comes from these phones. Apple earned 10% less from its iPhones than last year at this time. That’s an incredible loss of approximately 20 billion dollars!
Many experts believe that half of Apple’s business is going south and the chances of turning back are slim to nil. Even though Apple admits to the decline of its iPhones and looking for new business avenues, things like this do not just happen overnight. In a nutshell, Apple’s money-making magic is spinning to a halt.
Right now, Apple is not in a good position so I would stay away from their stocks for right now. However, Apple has managed to get back on their feet more than once. Maybe they will reconsider it’s high-tech computers or follow some other path. Only time will tell.