Apart from losing around $75 billion in value and officially admitting that it missed earnings estimates in China, the tech giant has faced criticism from consumers and techies alike for failing to innovate at a faster pace.
"Perhaps in part because there are no easy fixes, Apple failed to acknowledge the possibility that current iPhone prices are simply too high," says Toni Sacconaghi, an analyst at Bernstein Research. "The other real issue that Apple's press release did not mention explicitly is that the high-end smartphone market is increasingly mature (having declined for three straight years) and the overall market contracted for the first time in 2018."
Thus, the economic slowdown in China isn't the only factor to blame for Apple's grievances. In fact, a major issue is premium iPhone prices that are simply unable to gain traction in markets that already have a plethora of low-cost smartphones with similar functionality, usually manufactured by Android competitors. One such market is India.
"The bulk of the iPhone user base may not be ready to shell out $1,200+ for base iPhone models which used to cost $699 just a few years ago," said Neil Shah of Counterpoint Research. "Not all of the hundreds of millions of Apple iPhone user base are affluent."
Tim Cook said that even in developed markets, "iPhone upgrades also were not as strong as we thought they would be," implying that consumers would prefer to use their old iPhones instead of springing thousands for a new phone with limited enhancements. This further reflects that Apple is not innovating enough, and that people are investing in its products as opposed to its brand. A mere four years ago, this was not the case; whether due to irresistible upgrades or cultish brand loyalty, consumers would be ready to buy their next iPhone after 24 months according to BayStreet Research.
While China is an integral market in Apple's long-term play, it needs to regain market share in emerging economies such as India before it becomes priced out. The brand may need to consider entering with a low price point in such markets, or run different marketing campaigns targeted to various segments of the population and tout the software benefits of owning an iPhone, including features such as Apple Pay or Apple Music.
The downward trend for iPhone sales has caused many to question Cook's leadership and management as well. "It's possible conditions in China changed quickly, but the broader trends in smartphone activity are not new. Why didn't Cook make any of these admissions before now?" said analyst Shira Ovide.
That said, Apple still has 73% of the premium segment of smartphones in China, which could grow. Still, simply focusing on the Chinese market is not enough to sustain the giant over the long term.