Serious iPhone Problems Force Tim Cook Into Risky Decision

Ahead of tomorrow’s first quarter earnings from Apple, industry analysts are expecting iPhone sales to continue falling through the first half of 2019, but there is a chance of recovery in the second half of the year.

Noted analyst Ming-Chi Kuo picked out the falling sales in China during the back half of 2018, but Kuo some good news for Tim Cook and his team. iPhone shipments in the second quarter of 2019 are going to be in the region of 34 to 37 million. That would be a rise of thirty percent compared to 2019’s first quarter – a quarter that saw Apple issue a stark profit warning – but Kuo believes there will be an increase in the second half of the year that should bring annual sales back to a 2018 levels.

That would be an impressive turnaround, given that the Q2 estimates are equivalent to a fifteen percent fall compared to Q2 2019.

Apple will be pleased that it is expected to halt the slide in sales, but Kuo’s figures are overly generous when compared to other analysts. Given the lack of new features that are in the pipeline for the 2019 iPhones (the lack of 5G will be one noticeable omission), it’s hard to see where these extra sales are going to come from. Apple’s faithful will turn out once more, but if it couldn’t energise the general public with the iPhone XS and XS Plus, or tempt them with the continued price cuts on the iPhone XR, what will change in September 2019?

And that’s before you consider the impact that an ongoing trade war with China could to to Apple in one of the few potential high-growth markets that Apple covets.

Apple iPhones are seen on display at an Apple Store on January 7, 2019 in Beijing, China (Photo by Kevin Frayer/Getty Images)GETTY

Following a number of years of relatively flat sales, the iPhone sales curve has started the downwards trend that will be hard to break. It’s a curve familiar to historians of Nokia, Motorola, Palm, and other historical smartphone innovators that became the incumbent.


The question now is if Apple’s risky decision to look at revenue from its software and services to cover the expected shortfall from the loss of iPhone revenue over the next two to three years will succeed.


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