Apple CEO Tim Cook: Customers Are Holding on to Older iPhones 'a Bit Longer' Than in the Past

Apple saw lower than expected iPhone sales during its first fiscal quarter of 2019 (aka the 2018 holiday quarter) and one explanation provided by Apple was lower quarterly ‌iPhone‌ upgrades. During today's earnings call, Apple CEO Tim Cook delved into the reasons why Apple is seeing fewer upgrades.

First and foremost, he named foreign exchange rates. The strength of the U.S. dollar has made the ‌iPhone‌ much more expensive in many parts of the world, which is why Apple today said that it plans to lower prices in some emerging markets. In Turkey, for example, the ‌iPhone‌ became so expensive due to exchange rates that revenue fell $700 million from the previous year.

Cook also said that ‌iPhone‌ subsidies are becoming increasingly less common, which is impacting upgrade rates. In Japan, for example, it used to be common to have subsidies for smartphones, but local regulations have eliminated many of those. According to Cook, less than half of iPhones sold in Japan were subsidized compared to 3/4ths a year ago. The total value of subsidies has declined as well.

Cook's third reason for fewer ‌iPhone‌ upgrades was the battery replacement program that Apple offered across 2018, allowing customers to swap out the battery in their iPhones for $29. Cook said that this made it inexpensive and efficient to replace ‌iPhone‌ batteries and hold on to older iPhones for a longer period of time.

According to Cook, while analysts suggested Apple shouldn't do it, the company "strongly believes it was the right thing to do for [its] customers."

To combat fewer upgrades, Cook pointed towards Apple's trade-in program, which drives down the price of new devices when trading in older devices, and he highlighted the monthly payment options that Apple recently started promoting on its trade-in page. This page provides details on the monthly price of the iPhone XR and iPhone XS when trading in an older device.

The lower than anticipated ‌iPhone‌ upgrades along poor sales in China ultimately led to a 15 percent decline in ‌iPhone‌ revenue year over year.

Cook says that while ‌iPhone‌ upgrades were lower than anticipated, the company's business grew in the rest of the world, setting new records in the U.S., Canada, Mexico, Germany, Italy, Spain, and Korea.

According to Cook, investors should be aware of three factors long term: a loyal and satisfied customer base, a large and growing active installed base, and Apple's deeply ingrained culture of innovation.

Top Rated Comments

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14 months ago
Yes, Tim. That is what they do when the cost of upgrading is so unrewarding!
Rating: 18 Votes
14 months ago
Thats what happens when you get caught slowing people's phones down and they realize that their phone is not slower because its older but because you quietly did so in purpose and a battery replacement would resolve the issue. How many people would have chosen to replace their batteries in the past had they known that their phones would function as fast as when they first started instead of spending hundreds on a new device. Apple kept this hidden long enough, reap what you sow and live with the consequences as it is only going to get worse. I am an apple fan boy and I don't plan on upgrading any time soon as I don't care for any of the new gimmicks. I might even consider Android if I have to even though I will hate it at first but enough is enough, that's the only way to let apple realize that consumers deserve better.
Rating: 17 Votes
14 months ago
release a SE replacement and i’ll upgrade...
Rating: 15 Votes
14 months ago
You mean we all aren't upgrading to a phone every year with the device cost inflating each time with relatively minor improvements????

Rating: 10 Votes
14 months ago
Love my iPhone 4s ( and iOS 9.3.5) - still works great! (original battery too)
Rating: 7 Votes
14 months ago
I never understood people who upgraded their phone every year. I've always been on a three year cycle myself.
Rating: 6 Votes
14 months ago
Smartphones have reached the same place that PCs did over a decade ago. Everyone now has one, and the generational upgrades are no longer significant enough to justify tossing your old device if it isn’t giving you trouble. It has little to do with pricing, IMO. If anything, Apple’s new pricing is for sustained profits to handle upgrades from committed customers. I’d be surprised if a new phone will move the needle. Folding screens might sound cool, but it adds complexity, and I’m pretty sure such tech won’t be solving the affordability issues people seem to have with existing flagships already.
Rating: 6 Votes
14 months ago
The world market is Apple's oyster - yet they continue to crawl towards the pearl. Too many people on don't own an iPhone or a MacBook.

Top of the line iPhone X series, built to order, costs $1672 for the XS, and $1779.84 for the XS Max, AppleCare+ after tax !

Top of the line iPhone 5S at the time, with AppleCare - $600. (What I paid - don't how know to calculate the release price.)

The 5S numbers might be off, but the picture is there to see - that is too much money to give-up!

Yes, the specs are also too high, not exactly the consumers' fault. The Android family has seen how much Apple can push the envelope and raised their specs and prices (while copying each other) to make these high prices the new norm! Another reason why the smartphone market on the whole is plateauing.

If Apple had also offered a version of the iPhone X in the case size of the iPhone 5S/SE, and priced it around $650 with max configuration, the market will show that enough people will buy it. Even if it lacks OLED screen, has a single camera and the capacity is maxed at 128GB.

The flagship should also cost around $1200 with max BTO. The iPhone 6S cost $1050 at the maximum level, with tax.

Wishful thinking, yes. Until then, even if takes 6 years, I will ride this phone to obsolescence.
Rating: 5 Votes
14 months ago
You don't say!

The industry just can't figure out why people don't buy phones every year. Hmmmmm I wonder?

Technology is rapidly advancing but in cell phones its plateaued. The processors are so fast you don't need to replace a phone every 6 months.
Rating: 4 Votes
14 months ago
Tim, the reason users are holding and not upgrading as often are the obscene expensive prices, even in the US, offering only minor improvements.

It is quite hilarious that Apple decides not to release unit numbers, but they release the number that is convenient to them (active devices...).
Rating: 4 Votes

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