How Apple’s iPhone lost its lustre

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How Apple’s iPhone lost its lustre

Despite the criticism of economists such as JK Galbraith, planned obsolescence worked for the makers of many products, especially oligopolies whose buyers had few alternatives. But it had a downside: customers got disillusioned with the shoddiness of products that degraded rapidly. Detroit was overtaken by Japanese companies making superior vehicles.

Apple is not guilty of plotting obsolescence. Steve Jobs, its founder, admired Sony for its meticulous design and high quality. He was devoted to, even obsessed with, making exceptional products and selling them at high prices. It was genuine — he loved beautiful things — and it had the benefit of making Apple beloved and very profitable.

The iPhone had no sales problem because technology provided the obsolescence. The latter evolved so quickly that Jobs, and his successor, Tim Cook, could pop up every year or two to announce an even better model. Apple could even upgrade older devices with the latest software — an iPhone 5s from 2013 runs on the iOS12 operating system — without stifling demand.

It suffered no penalty for being virtuous, but it is suffering now. Many people took up Apple’s offer of cheaper battery replacement for iPhones last year, and the latest cameras and chips in iPhone Xs are not alluring enough to prompt the leap. The iPhone’s average selling price rose by 28 per cent to $US793 ($994.50) between 2017 and last year. Older models are good enough.

Apple’s revenue warning last week was prompted by iPhone owners upgrading their devices once every three years, rather than two, with an even sharper change in China. Apple tries to “design and build durable products that last as long as possible”, Lisa Jackson, head of environment policy, declared in September and its customers are behaving accordingly.

What is to be done? Apple cannot convert to planned obsolescence in the traditional sense by making iPhones flimsier: that would diminish its brand. It has increased its trade-in efforts, with Ms Jackson promising that older iPhones will be refurbished or recycled so its environmentally conscious users need not feel guilty, but that is unlikely to revive the old cycle.

This makes Apple more like Sonos, the streaming audio speaker company, which has a similarly devoted group of fans, although it is much smaller. Sonos speakers are well built, expensive, and last a long time — 94 per cent of the 21m Sonos products registered since 2005 are still in use. Rather than the upgrade cycle, it relies on enthusiasts adding more speakers.

That has iron logic: if you cannot depend on simply upgrading the core product, you have to sell others as well. Sonos keeps expanding “the Sonos system” and Apple’s wearables business, including Apple Watch, now has annual sales of $US10 billion. When Apple launches augmented reality glasses, as it seems to be planning, it will diversify further.

But the iPhone setback, along with Samsung’s profit warning this week, marks the passing of a golden age for smartphones, when the speed of innovation and obsolescence made Apple one of the world’s biggest companies. The action is now in artificial intelligence and streamed services such as games and entertainment.

The iPhone remains an enviable franchise for Apple but, as Ms Mitchell would put it, the paradise of its first decade has been paved. john.gapper@ft.com

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