A series of stories from Sloppy’s supply chain
How did these tremendous financial newspapers fall headlong into a story that was not that hard to understand? In part, it was because the various reporters working for them refused to admit that they know very little about Apple’s complex global supply chain, which they tried to decipher with the sophistication of an oscillating hammer.
Nikkei claimed to know the “channel verification” data that revealed “disappointing holiday season sales” for iPhone X in January, before revealing that the iPhone X was also the most popular smartphone in that quarter.
That was followed by a Tripp Mickle report for the Wall Street Journal that said Apple is “cutting back on planned production” of the iPhone X “in a sign of weaker-than-expected demand.”
These two newspapers have consistently issued incorrect reports of “weak” sales and alleged “order cuts” for some Apple’s previous iPhones, models that were incredibly successful, not only as independent products competing against cheaper rivals but for specific areas of demand.
last year, iPhone 7 was falsely slandered for alleged “slow sales”. Similarly, Nikkei claimed that Apple had decimated their orders, but achieved new growth and higher sales of an iPhone.
The same nonsense news cycle occurred for iPhone 6s. And before that, iPhone 5c was criticized as a failure, but it was a best-selling smartphone model outperforming other flagships and attracting a higher percentage of Android switchers.
The rumors of “order cuts” clearly do not translate into “slow sales” nor can they be interpreted as “slow demand,” or these channel verification reports would sometimes be correct instead of consistently incorrect.
The fantasy of $ 999 Hype
Writing for Bloomberg, Mark Gurman was so sure of the iPhone’s “lackluster” sales that he declared, “Apple Inc.’s earnings this week will confirm what most investors finally accepted: the iPhone X was not up to the standards. Expectations”.
But the “exaggeration” launched by Bloomberg and other financial documents – not just some casual Android bloggers – was not that the iPhone X took over the whole world as the best-selling iPhone, but that its “initial price of $ 999 was too much. For some consumers “, an idea that Gurman repeated ad nauseam since the product went on sale.
Its higher price was supposedly depressing demand and was declared as the reason for the bad news in the supply chain, including Samsung’s OLED business. Gurman specifically designed a story about the slower growth of the Display Panel segment at Samsung and directly linked the fact that Samsung supplied OLED panels to Apple for use on the iPhone X as evidence that Apple’s expensive new flagship did not It sold well.
To reach that conclusion, he had to avoid mentioning that Samsung himself said that both OLED and the conventional LED panel business had been affected by slow demand and challenging competition and that the company also noted that “the demand for flexible panels It remains strong at the highest levels. -end segment “where the iPhone X sits.
How a $ 999 phone turned experts into clowns
Many bloggers and analysts expressed self-confidence that Apple had set the iPhone X too high, despite the fact that Apple has a reliable historical record of incredibly good prices to maximize sales by volume at sustainable margins while providing extremely high customer satisfaction.
Other companies have achieved incredibly low prices that can not be maintained (such as cheap Google tablets) or products with high amounts without reaching significant sales volumes (Google Pixel and Microsoft Surface) or without achieving margins or satisfaction (Andy Rubin’s Essential) , but Apple has been unique in the development of products with premium prices that people want to buy, again and again.
This was the case with years of iPods, and again with the first iPhone, which was offered at a price that then Microsoft CEO Steve Ballmer laughed at, before the company tried to raise the price of Windows Phones to match it, without success.
Last year, a media narrative about the prospect of the next high-end iPhone costing $ 1000 did not take into account that high-end smartphones are priced at $ 1000 since before the original iPhone was launched. And Apple’s high-capacity iPhone 6 / 6s / 7 Plus models were already in the $ 950 area, which makes a $ 1000 price point just news.
Besides, although all of its new 2018 models began at higher price and capacity levels, Apple not only increased the prices of its iPhones. He also expanded his pricing down to offer the cheapest iPhone in history. Therefore, they were hungry, tech-hungry customers who raised Apple’s average selling price, not a dark and infamous plot to increase everyone’s costs, such as a moratorium on San Francisco housing supply…
Why can Apple only sell high-end mass market products?
Nobody has cried for Samsung’s $ 1000 phones. Before Apple introduced its largest iPhone 6 and 6 Plus format, Samsung was offering flagship models with a price higher than an iPhone. However, most of Samsung’s sales were very cheap models, so much so that their average selling price was still around $ 200 despite having products of $ 700 or more for sale.
Unlike Samsung and a variety of Chinese phone manufacturers with similar aspirations to enter the level of luxury smartphones, Apple’s ASP in all its iPhone sales has always been above the entry price of its latest iPhone, not focused on the middle of your most significant budget offerings.
In part, Apple attracts premium sales because it continues to identify the exciting new technology it can incorporate into its products. Inventions such as the design of the iPhone 4, Siri, Touch ID, 3D Touch, Live Photos, Portrait Photos, Face ID and Animoji have boosted the sales of new generations of iPhones. Apple’s iOS apps and services ecosystem, and its work wrapping envelopes in performance, photography, and security also drive premium sales of new iPhones.
However, it is not just the features and specifications that drive sales of premium or Samsung phones, and Chinese manufacturers will also experience high ASPs instead of just sending money at an average sales price of $ 200 or less.
A big part of Apple’s charm in high-end products is the way they make people feel. Apple is astute in marketing and product development that offers products that allow people to use them and feel satisfied with their purchase. Apple combines the charm of fashion with luxury and style with design cues that make its products easy to use and safe.
Unlike computers with Android and Windows, most users do not have to feel that they need help to perform basic tasks. As anyone who has ever worked in sales knows, it is preferable to sell them to buyers because they will be happier to get the best product, and they are more likely to come back for that satisfying experience.
Apple’s Tim Cook revealed that the company seeks (apparently) to achieve prices that are affordable. Apple is relentless in negotiating the costs of the components and reducing those costs to achieve profitability, even at low rates. But the company is also willing to incorporate high-end elements that offer a superior experience.
While tech bloggers have fallen in love with cheapness, the experience of saving money is often a more significant problem for most significant users than merely spending more money in the first place. That is why many people voluntarily pay more money for well-known brands, higher quality clothing, and premium food.
When Apple moved to Touch ID, state-of-the-art fingerprint sensors were too expensive to be considered for inclusion in highly competitive smartphones. The same happened in high-end optics, memory and CPU and high-performance GPU. Apple continued adding higher quality components and transferring the cost to customers, who benefited from a better product.
Experts, analysts and tech bloggers have complained for a long time that Apple’s prices were too high to be competitive with the $ 300 androids, and have lavished praise on the cheap devices of the company.
The halo of $ 999 X
The iPhone X was the pinnacle of Apple’s efforts to build a high-end luxury smartphone with innovative features and intelligent design. The fact that Apple also released an updated pair of models of iPhone 8, which shared many of its advances, including the same processor and similar features of the camera, indicates that Apple did not have the illusion that everyone rushed to buy your iPhone X more expensive. Starting at $ 999.
In fact, Apple knew that one of its most prominent regulars, government, and corporate companies, would hesitate to launch an entirely new phone with ultra-premium prices that required training and adaptation. iPhone 8 was not a protection against the failure of the iPhone X, but a pragmatic and conservative alternative that Apple needed to offer to be taken seriously in the business world (where Android and Google are not).
However, by launching new exclusive features for iPhone X, from its Face ID and Portrait Selfies to its rounded corners and curved OLED display panel, Apple created an ambitious product that not only sought to justify its superior price level but also it emitted a halo over the entire Apple brand.
iPhone X also introduced a roadmap of the future for iOS devices that indicates that Apple has ambitious plans for its hardware, even if its other more affordable iPhones 2018 still looked entirely conventional: a kick in the face for all the pessimists that Apple suffered from an affliction of innovation deficit.
Shut up and take my money!
At the same time, the price of $ 999 for the iPhone X is not as impressive, unacceptably high as many bloggers, experts and analysts seem to think. From the first iPhone, the actual cost of owning a smartphone with the data service has been reflected mainly in the rates of the data providers. If your phone bill is more than $ 40, holding an iPhone X for two years is the cheapest part of that experience.
As with car sales, a lease or financing contract makes a high-cost item accessible to people who do not have savings allocated for an expensive purchase. A smartphone is one of the things we interact with almost every day. Spending a few extra cents per day at the most enjoyable end of a smartphone experience is not an insurmountable financial problem for many people.
Instead, it is an expense that is incurred voluntarily not only by the latest technology but also by having a valuable device that feels luxurious to use. For Apple to maintain that lucrative business, it needs to maintain a high quality of experience for iOS, iCloud and related services. That is much easier than the prospect against other phone manufacturers, who are struggling to obtain volume sales at the lower end where the product offers little differentiation.
Apple does not have to keep increasing the price of new iPhones to keep its business going. By building a solid base of luxury buyers, Apple only needs to expand its aspirational products through new markets that are ready to be updated. Apple has been upgrading PC users to higher-priced Mac computers, selling iPods to MP3 users and selling iPhones to essential phone buyers for years, so this is in line with what it has been doing successfully.
Competition from Apple, the companies that manufactured both Windows PCs and Android phones, have been locked in a battle of commodities for a low market share in those same decades. Wanting to change to the Apple model is obvious, but not so easy to achieve, as Google and Microsoft have shown in the last years of trying.
Huawei, Lenovo, Samsung, LG, and Sony would also like Apple’s high-end sales, but none have done exceptionally well in achieving this in the PC and mobile devices categories. Interestingly, all the advice and opinions of bloggers and experts who currently adduce Apple that their prices are too high have never been turned around and even noticed that other manufacturers are also trying to sell their products at similar rates (and merely fail in it).
This indicates that his “concerns” about the iPhone X of $ 999 were completely false. It also makes clear that Bloomberg, the Wall Street Journal, and Nikkei have an incredibly poor idea of what customers want, what buyers consider “innovative,” what they choose to pay and the value of aspiration that consumers see in Apple. What a gift I do not look for his rivals.
That is their job as journalists, and they are failing in that. If you do not know what you are talking about, you should not confidently publish your misconceptions as facts.