Over the last several weeks, analysts and research firms have been evaluating how Apple Inc. (NASDAQ:AAPL) has hit the rock bottom with the lukewarm response of its latest flagship iPhone X. Even though the world was intrigued by the design and technology of Apple’s top-of-the-line handset, its sales remain sluggish. The mighty iPhone X failed to lure the masses because of its hefty price tag. Consequently, it is estimated to have a direct impact on the Apple’s overall sales performance in 2018.
As new information comes to light, the demand for iPhone X is waning, as buyers seem reluctant to opt for older iPhone devices. It is estimated that Apple sold 45 million iPhones in the first quarter of 2018, ended on March 31. That’s a straight drop of about 11.3% from the same quarter year-ago. But what is more interesting is the drop in sales of iPhone X.
By checks from sources in the supply chain, Mehdi Hossein, the analyst from Susquehanna Financial Group, said that Apple might have sold only 8 million of iPhone X in the first quarter 2018, which is also the fiscal Q2 2018 for Apple. This is a straight 73% drop in the sales of iPhone X as compared to the previous quarter. Apple reportedly sold 29 million units of iPhone X in Q4 2017, or call it fiscal Q1 2018. While Apple is a month away from the official announcement of Q1 2018 results, the estimation by analysts portrays a worrisome scenario for Apple.
Old Models Account 50% of iPhone Sales in Q1 2018
It is also highlighted that shoppers are preferring the older model of iPhones, and just aren’t going for the latest and greatest. Mehdi also adds that Apple shipped about 15 million units of iPhone 8 and iPhone 8 Plus, currently priced at $699 and $799, respectively. The cheaper alternatives iPhone 6S ($449), 6S Plus ($549), iPhone 7 ($549), 7 Plus ($669) and iPhone SE ($349) accounted the lion’s share of the quarterly iPhone sales with 22 million devices.
iPhone buyers are preferring bargains to the latest iPhone model. Out of the total iPhone Apple is estimated sold in Q1 2018, nearly half of them were older iPhone models. There is no denying that iPhone demand has been diminishing for the last few years, but it is the estimated sales figure of iPhone X which has disappointed the most.
Despite the new design and top-notch innovation, iPhone X’s $999 price put it out of range of most customers. The iPhone X was labelled as ‘the world best selling smartphone‘ in Q4 2017 though, its sales failed to meet the Wall Street expectations. Canalys, an analyst firm, claimed that Apple sold about 29 million iPhone X units out of 77.3 million units of iPhone in Q4 2017.
Sales of iPhone: Disappointingly Deteriorating
Between fiscal 2015 and fiscal 2017, the yearly sales of iPhone either declined or stagnated. The latest flagship being the key contributor, Apple sold record 77.32 million units of iPhone in fiscal Q1 2018, ended December 30, 2017. Despite the company recorded a drop of 1% in the sales of iPhone from the year-ago quarter. In fiscal Q1 2017, Apple sold 78.29 million units of iPhone.
It was the very first time in fiscal 2016, when Apple witnessed a notable 8.36% decline in the overall iPhone sales, while in fiscal 2017, Apple recorded marginal growth of 2.3%. It is also estimated that in fiscal 2018, Apple would record a negligible growth of 0.25% in its iPhone sales.
Mehdi Hossein is not the only analyst predicting a disappointing Q1 quarter for Apple. Other analysts have also downgraded their previous sales estimate of iPhones for Q1 2018, albeit expecting 50-54 million units of iPhone sales.
The newer iPhones have a higher profit margin than the less expensive older models. Buyers opting for older iPhones are contributing a little less to Apple’s bottom line. But the revenues will have to surge eventually, because – you guessed it – they are buying an “iPhone”, no matter old or new. Based on the guidance provided by Apple, in fiscal Q2 2018, the company should surpass its revenue of the last year quarter. Apple told its investors that they could expect revenues between $60 billion to $62 billion in fiscal Q2 2018.
Apple will get the benefit of the wide uptick from the customers who have a high ‘intent to upgrade‘ from their older devices. Furthermore, even after the throttling controversy, if buyers are still going for the older devices, it is meant to help Apple in the long run.
As a long-term strategy, Apple has started preparing itself for the next fiscal year; The company is expected to launch the iPhone X in a new colour, may cut prices of the upcoming iPhone models and launch the much awaited 6.5″ iPhone X at the beginning of fiscal 2019.
Apple is deliberate to become the world’s first company to reach a $1 trillion market value, before Amazon. But to achieve the feat, Tim Cook needs to place all his bets at the right time and right place.