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Is Apple Really Struggling, Or Is It Just Market Fiction?

10/05/2016 12:27 | Updated 10 May 2016

Apple has been having a turbulent couple of weeks since its announcement that iPhone sales are slowing. In particular, share prices have taken a clear hit as investors worry that its flagship phone contributes too great a percentage of its revenue and that Apple doesn't have another smash-hit up its sleeve which could compensate for any iPhone-related declines.

CEO Tim Cook has been typically bullish in response, insisting that new models in development have features that "people won't be able to live without", thereby bringing new customers into the fold as well as convincing existing users to upgrade. He's also adamant that devices such as the Apple Watch will eventually be hailed as a success.

All this begs the question as to whether the market is being too critical of Apple, and whether Tim Cook is right to label the response to these latest results a "huge overreaction". After all, Apple is still extremely profitable. The iPhone 6 did convince lots of users to upgrade. And, as our data makes clear, the iPhone is still the mobile brand that people are most likely to want.

Worldwide, our figures show that almost 3 in 10 internet users would consider purchasing an iPhone, putting it almost 5 points ahead of second-placed Samsung. What's more, current iPhone owners are more than twice as likely to say they want to upgrade to another iPhone as they are to want to switch to Samsung.

What's particularly revealing in all this is how purchase consideration differs by market. Broadly speaking, Samsung is the most desired brand in mature markets across North America and Europe. But look to fast-growth countries in regions like Asia Pacific, MENA and Latin America and it's the iPhone which jumps to pole position for this metric, and often by some distance.

To date, the barrier in these emerging markets has typically been the price-point of the iPhone; it might have been the handset that people wanted the most, but this was something of an aspiration rather than a real possibility. For many, it was a largely unaffordable status symbol. That's surely one of the primary drivers behind the introduction of the iPhone SE: although hardly cheap, it does suggest the arrival of the same type of 2-tier pricing approach we've seen for the iPad and it does make the SE much more accessible than previous iPhone handsets. As a result, Apple now has an option which retains the status of the iPhone name but which boasts a price-point closer to the affordable handsets of newer names on the block like Xiaomi.

Certainly, the SE will appeal to price-conscious consumers in mature markets too, as well as those who thought the iPhone 6 was just that little bit too big, but it should surely be seen first and foremost as a phone designed to drive expansion in emerging markets. That's particularly important as smartphone ownership reaches saturation point in developed counties; with the overwhelming majority of the world's new smartphone users in the rest of this decade and beyond coming from emerging countries, Apple needed to become much more competitive on price to stave off domestic competition. So, in that respect, Apple has done exactly what it needed to do.

Arguably, accusations that the 6S models failed to convince enough existing users to upgrade are also a little unfair. Just as the 6 bought a huge sales boost, it's the 7 which should be the next model to carry this expectation, rather than the intermediate releases which have usually been designed to keep things ticking over instead of revolutionising the game.

What's more, there's plenty of potential upgraders that Apple can target with its next major handset. According to our data (collected before the SE became available), about 45% of current iPhone owners have one of the various 6 models, whereas around 33% have a 5 and almost 20% have a 4. It's among these 5 and 4 owners that Apple can expect to see serious enthusiasm for upgrades.

Of course, if they weren't tempted by any of the 6 models then the 7 needs to deliver compelling new features which, as Tim Cook said, people feel they simply can't live without. Even so, recent history will be encouraging for Apple here: the 6 was well received by Apple fans despite the fact that it wasn't as distinctive or as ground-breaking as it could have been. Now, it's this exact same group which needs to be impressed by the 7. So, if it's the type of stellar handset that the company is promising, it can rightly expect to see huge numbers of upgraders. And even if it's not, many loyal Apple owners are likely to part with their cash anyway.

With all of this in play, the current criticisms of Apple do seem to be overblown. The iPhone might not be quite the cash-cow it once was, but it's far from being an issue for real concern.

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