The smartphone market in the US is saturated, and Apple seems to be moving toward services as it struggles to sell iPhone units.
According to research from Consumer Intelligence Research Partners, people are waiting longer to upgrade to the newest iPhone model. Nearly half of iPhone owners, for instance, are now waiting until their device is two years old or older to upgrade, whereas in 2013, only 34 per cent of iPhone owners would wait. This is clearly affecting Apple, as iPhone sales are falling, which caused the company's first quarterly revenue drop in 13 years.
On 26 July, Apple posted third quarter results, revealing that things have only gotten worse. All of the company's major hardware businesses posted declines for the 90-day period that ended in June. It posted an overall revenue of $42.4 billion, down 21 per cent compared with the same quarter last year. That's partially due to iPhones sales dipping 15 per cent from the year-ago quarter - and Mac, iPad, and Watch sales tanked, too.
But not everything was doom and gloom for Apple in the quarter. The company's services segment saw revenue growth, with a 19-per cent uptick to $6 billion. Ben Schachter, an analyst with Macquarie Securities, told The New York Times that he estimated nearly one-third of Apple’s quarterly profits came from services, which includes App Store purchases, Apple Music subscriptions, and the iCloud storage business.
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So, as people find it difficult to justify iPhone upgrades, Apple's services are for the first time taking the spotlight, and that might push the company to focus more on the segment altogether. Keep in mind Apple's weak results came at the end of its product cycle. It is expected to announce new iPhone models in September, so many customers are liking holding off until then.