Apple iPhone 7 and iPhone 7 Plus are now official, and for Cupertino these phones come at a time when their star product is on the wane. Apple’s Q3 results saw a drop in iPhone sales (down to 40.3 million compared to 51 million sold in Q2) and for the first time in 13 years, the company’s revenue dipped.
For Apple, the challenge has been in getting people to upgrade from their older iPhones to the 6s series, which was the latest until recently. Even Apple CEO Tim Cook admitted in his comments the upgrade cycle for 6s was not as strong as the one they had seen when iPhone 6 launched. iPhone 6 had represented a significant upgrade for the company, with Apple introducing the bigger 4.7-inch and 5.5-inch screens over its 4-inch displays.
In his Q3 call, Cook said: “Maybe that was a predictable thing, although we didn’t predict it in the beginning. It took us a little time to realise that.” For Apple, both Q2 and Q3 in 2016 have seen iPhone sales decline on an yearly basis, and this is another first.
So naturally there’s a lot riding with the iPhone 7. Interestingly, Apple won’t be revealing the weekend sales numbers for its new iPhones, also a first. Most Apple iPhone launches have been followed by reports of a ‘blockbuster’ weekend and ‘record pre-orders.’ So it is strange Apple is ending this tradition with the iPhone 7, iPhone 7 Plus, which it calls as ‘the most innovative iPhones till date’.
With the iPhone 7, iPhone 7 Plus, the big changes are the water-resistance, new cameras, and yes the end of the headphone jack. Overall, the design hasn’t changed at all, unless you count the antenna bands are now on top, and the glossy black finish version (prone to scratches, according to the company).
The smaller iPhone 7 finally gets OIS on its camera, as well as a bigger aperture at f/1.8, a much needed upgrade for the camera. Whether it will be enough to get someone to ditch their iPhone 6s is unclear, since the camera on the older phone is still one of the best in the market.
But the iPhone 7 Plus camera is what has most people interested thanks to the dual-rear camera set-up. Apple’s implementation will be different from other players with a telephoto and wide-angle lens in the set-up, and 2X optical zoom and 10X digital zoom. The iPhone 7 Plus is set up as a direct challenge for entry-level DSLR’s, and even gets a professional Portrait mode to help create a shallow depth of field. But Apple is adding this feature as a later software update, which is totally out of character for the company.
Interestingly, reports from analysts have pegged the iPhone 8 as the next big one to watch out for; KGI Securities’ Ming Chi-Kuo has hinted how this one could have a bigger OLED display, a new all glass body, and other innovative features which could boost sales. Of course, that launch is still a while away.
As we have noted earlier, for Apple, the October-December quarter (Q1 for the company) is the crucial one, as it determines how the new product has done. In Q3 2016, Apple reduced channel inventory by $3.6 billion, which was more than the expected reduction of $2 billion. Also the iPhone is struggling to do well in China, and reports indicated, buzz on the iPhone 7 has been muted in the country. China with its huge population and better Internet infrastructure is a crucial market for the company, but in Q3 sales were down 29 per cent sequentially in the region. And growth in upcoming markets like India, etc is not strong enough to make up for this fall.
The overall problem is the iPhone 7, iPhone 7 Plus are being perceived as incremental upgrades from the previous version. The stock has also fallen since the phones were launched, which is not a first after a launch, but still conveys the sentiment that the new phones are not viewed as revolutionary. More importantly the launch also comes at a time when the smartphone market is itself seeing negative growth in some parts of the world, with users holding on to their devices for longer.
For Apple, iPhone 7 and iPhone 7 Plus need to convince users, especially those on the 6, 6s devices that they should upgrade. But it won’t be surprising if that doesn’t happen this year on a large scale, and people decide to hold out for the iPhone 8.