Gartner’s Analysis Provides Bleakest Outlook Yet on Apple’s Slagging iPhone Sales

iPhone XS Max on Apple Store Table Credit: ezphoto / Shutterstock
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It’s not big news that Apple’s iPhone has been suffering declining sales over the past few months, and although the trio of 2018 iPhone X-series models are still going strong, numerous analysts have estimated that Apple’s growth in the smartphone market is rapidly declining. While Apple no longer divulges the specific number of iPhone units sold — only its overall revenue — that hasn’t stopped industry heavyweights from weighing in with their own estimates.

The latest voice to join the chorus is Gartner, which has released the bleakest estimate thus far, suggesting that Apple actually only sold 64.5 million units in the 2018 holiday quarter. If true, this would represent a double-digit decline for Apple — almost 12 percent year over year — and the largest decline in growth by far among the top five smartphone vendors. This would also leave Apple with a 15.8 percent share of the smartphone market, down from the 17.9 percent share that it enjoyed in the 2017 holiday quarter.

Of course, Gartner’s analysis is only an estimate, although it’s the lowest one we’ve seen yet; others have guessed at sales of between 65.9 and 68.4 million units, but even at the highest end of that range, it’s a clear drop from the 73 million iPhones that Apple itself reported shipping in the previous year’s quarter, when the company was still disclosing unit sales.

As Gartner concedes, however, the smartphone market has been slowing overall, with almost every vendor experiencing a noticeable decline in sales. Samsung suffered a 4.3 percent drop, while most other companies saw closer to 6 percent. The only exception — and it was a big one — was Huawei, which actually saw a massive 27 percent growth, from 43.9 million units sold in the 2017 quarter to 60.4 million units in its 2018 quarter.

In fact, according to Gartner’s numbers, it was only Huawei’s sales that contributed to an overall positive growth for the smartphone industry. Take Huawei’s numbers out of the equation, and sales in the overall smartphone industry would have actually shrank by 4.3 percent.

Again, however, this all assumes that Gartner’s estimates of iPhone sales are accurate. With three current iPhone models, four older iPhone models, and multiple capacities of each being sold, it’s impossible to directly convert Apple’s overall iPhone revenue back into unit sales with any degree of accuracy. However, with Apple admitting itself that its iPhone revenue has dropped by 15 percent since last year, the numbers may not be all that far off.

Combining its most recent estimate with the numbers provided by Apple for the rest of 2018, Gartner estimates that iPhone sales only dropped 2.7 percent in 2018 as a whole, to around 209 million units. The report notes that demand for the iPhone weakened in most regions, with the exception of North America and “mature Asia/Pacific.” Not surprisingly, the report also backs up every other recent report that suggests that Apple’s sales suffered most in Greater China, losing significant market share to competitors such as Huawei, which continued to grab market share in the mid-tier as buyers seemed to shy away from the more expensive premium smartphone models — not just iPhones, but also Samsung’s higher-end models.

In mature markets, demand for smartphones largely relies on the appeal of flagship smartphones from the top three brands — Samsung, Apple and Huawei — and two of them recorded declines in 2018.

Anshul Gupta, senior research director at Gartner

This would also seem to line up with recent reports that Apple is selling more iPhone XR units than the two iPhone XS models combined, and is still helping Apple gain “switchers” from Android, however it seems that the iPhone XR still faces an uphill struggle against “mid-tier” competition from Android handset makers such as Huawei. Meanwhile, Apple’s flagship XS models may not offer enough appeal to justify their higher asking prices, and it seems that Apple is not alone in this area either.

Apple also faces the challenge of a season of significant change in its 2018 iPhone lineup. While Apple continued to offer its familiar iPhone form factor in new 2017 models with the iPhone 8 and iPhone 8 Plus, the switch to an entire “X-series” lineup in 2018 left many loyal iPhone owners choosing to stick with their trusty home-button-equipped iPhones rather than wading into the new and unfamiliar waters of Face ID and entirely gesture-based controls. Although Apple still sells the older iPhone models for those uncomfortable with leaving the home button behind, these come in at significantly lower prices than the newest iPhones, and it’s unclear whether analysts are accurately taking into account sales of older iPhone models when putting together their unit sales estimates.

Regardless of the specific numbers, however, it seems clear that Apple knows that the smartphone boom is over, and has in fact been planning for it for a long time. Not only has the company been pushing for a shift to generating more revenue from services over the past few years, but has been spending its enormous pile of cash on developing transformative technologies such as self-driving cars, augmented reality headsets, new health initiatives, and likely several other projects that have yet to be discovered.

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