In-Depth: Why did iPhone revenue tumble 15 percent?
In Apple’s first quarter earnings call, CEO Tim Cook had given two big reasons why iPhone sales dropped 15 percent year-over-year to $52 billion.
In developed markets, the onus was on carriers not offering subsidies as heavily as they used to. In Japan last year, three-quarters of iPhone purchases were subsidized. This year, less than half were discounted. Cook also pointed out that US carriers had carried fewer sales on the iPhone XR, iPhone XS and iPhone XS Max.
Tim Cook has previously stated that Apple’s iPhones were a great value at their intended price points — that goes from the successor of the “entry-level” iPhone 8 to the $1,099 iPhone. Apple has done its part to help sales along by extending its iPhone trade-in incentive program.
However, with a volatile global economic picture at the moment that has been especially impactful on emerging markets, he admitted that the company was looking at price adjustments.
Cook told Reuters in an interview:
When you look at foreign currencies and then particularly those markets that weakened over the last year those [iPhone price] increases were obviously more. And so as we’ve gotten into January and assessed the macroeconomic condition in some of those markets we’ve decided to go back to more commensurate with what our local prices were a year ago in hopes of helping the sales in those areas.
CFO Luca Maestri told investors in the earnings call that foreign exchange fluctuations accounted for a $1.3 billion decline in gross earnings. Still, with Chinese revenues down 27 percent, there’s plenty of work needed to be done to bring growth back into the picture.
The company expects these macroeconomic factors to persist through to the second quarter, contributing to its forecast of another annual decline in revenues for the second fiscal quarter: $61.1 billion last year versus between $55 and $59 billion for this year.