1 Simple Way Apple Might Respond to Slowing iPhone Sales
Apple's (NASDAQ: AAPL) current iPhone product cycle has been disappointing to both the company and its shareholders. The company slashed its financial outlook in early January as iPhone sales fell significantly short of expectations, and the financial outlook for the current quarter indicates that iPhone sales weakness will continue to weigh on financial results.
The drop in the iPhone business is being partially offset by strength elsewhere, but Apple is still going to want to take steps to ensure the iPhones it launches this year sell better than the ones introduced last fall.
Of course, the company is expected to offer meaningful technology changes, such as a faster A-series chip, better cameras, and even enhanced support for device-to-device wireless charging. However, according to Mac Otakara, which often accurately reports information about upcoming Apple products, the company will be making a more subtle improvement to its iPhone offering this year: the addition of an 18-watt power adapter inside the box, as opposed to the weaker 5-watt adapter it has historically included.
Here's why this move, while no game-changer, makes sense in the context of Apple's current business situation.
Offering customers more value
Apple's goal is to offer consumers more value for their money. Increasing the attractiveness of its solutions has the potential to lead to increased sales.
Today, Apple sells the 5-watt power adapter for $19 on its website, and some consumers think of that $19 as being included in the purchase price of their iPhones. An 18-watt adapter, which will allow iPhones and other Apple devices to charge more quickly, sells for $29 on the website. Including the 18-watt adapter in the box, rather than forcing customers to buy it separately, is a small gesture that Apple can use to try to improve the value proposition of its latest iPhones.
Apple may have previously thought it could generate significant incremental revenue by selling customers on the optional 18-watt adapter, or that including it in the box wouldn't meaningfully improve iPhone sales. These days, though, Apple faces fierce competition in more premium portions of the smartphone market. One potentially disturbing data point: According to Counterpoint Research, Apple saw its share of the $500-to-$800 smartphone market in China plunge from 81.2% to 54.6% last year.
There's still AirPower
When Apple launches its next set of iPhones, it's likely that the 7-series devices will be discontinued. If so, every one of Apple's iPhones would have support for wireless charging without the need for a separate case.
Moreover, The Wall Street Journal (subscription required) recently reported that Apple has finally overcome the technical challenges that were plaguing its AirPower wireless charging mat and has started mass-producing it. It shouldn't be long before AirPower is available for purchase, and probably for a hefty sum.
What that means is that although Apple may be removing customers' need to purchase high-powered chargers by including them in the box, Apple will still have a charging-related accessory that it should be able to sell separately.
I think we'll see Apple increasingly take steps to try to enhance the out-of-the-box value propositions of its iPhones. In addition to feature improvements, we could see an 18-watt power adapter in the box, as well as, perhaps, a greater amount of free iCloud storage space for buyers of the latest iPhones. These ideas, combined with product improvements, could help Apple's iPhone business find a bottom.
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Ashraf Eassa has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.