Companies that make components and assemble iPhones have begun to say that Apple has asked them to make fewer units than were planned months ago. Bloomberg reports that Murata says Apple will drop the expected production of the new iPhone 14. The issue is bad for revenue at these companies and just as bad for Apple.
The iPhone has been Apple’s flagship product since 2007. By some estimates, Apple has sold three billion iPhones. This has made Apple one of the world’s corporate juggernauts. Last year, Apple’s revenue was $395 billion and net income was $98 billion. Apple has the largest market cap of any American-based company, weighing in at $2.3 trillion. The Apple brand is the most valuable globally, at $355 billion.
One of the primary worries about the Apple business model is that each version of the iPhone has to be a great enough improvement from its predecessor to keep customers upgrading. Apple releases a new version of the iPhone every year, usually in September. This cadence forces Apple to add and promote new features, even if they are only a modest improvement from the previous version.
The addiction to upgrades extends to the largest wireless companies, AT&T, Verizon and T-Mobile. The “improved” iPhone allows them to sell their customers a new model yearly. While this helps them keep and grow their revenue, the risks are the same as Apple’s. At some point, the upgrades will not be good enough to excite hundreds of millions of potential buyers. The ripple effect is put at risk.
The iPhone 14 has a longer battery life than the iPhone 13. It also has an emergency SOS system that can be activated if owners are in trouble. This operates via satellite. The iPhone 14 has a new, faster chip. It also has a better system for low-light photos. It comes in two versions, the iPhone 14 and iPhone 14 Pro. One version of the Pro, called the Pro Max, carries a price as high as $1,599.
The typical iPhone buyer cannot tell if a new chip is faster. The iPhone 13 chip was already blazingly fast. How many people care about low-light picture quality? How many will be in enough danger to use the SOS system? The answer to these questions is very few.
The iPhone 14 may have hit an upgrade wall. The drop in production hints at that. Consumers may have begun to ask themselves if their earlier version of the iPhone is good enough to keep another year.
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