NEW YORK — Behind Apple’s disconcerting news of weak iPhone sales lies a more sobering truth: The tech industry has hit Peak Smartphone, a tipping point when everyone who can afford one already owns one and no breakthroughs are compelling them to upgrade as often as they once did.
Some manufacturers have boosted prices to keep up profit. But Apple’s shortfall highlights the limits of that strategy. The company said demand for iPhones is waning and revenue for the last quarter of 2018 will fall well below projections, a decrease traced mainly to China.
Apple’s shares dropped 10 percent Thursday on the news — its worst loss since 2013. The company shed $74.6 billion in market value, amid a broader sell-off among technology companies , which suffered their worst loss in seven years.
Apple’s news is a “wakeup call for the industry,” said analyst Dan Ives of research firm Wedbush Securities.
And it’s not just Apple. Demand has been lackluster across the board, Ives said. Samsung, long the leading seller of smartphones, has been hit even harder, as its phone shipments dropped 8 percent during the 12 months ending in September.
“The smartphone industry is going through significant headwinds,” Ives said. “Smartphone makers used to be like teenagers, and the industry was on fire. Now it feels like they’re more like senior citizens in terms of maturity.”
Tech innovations in phones grew in leaps and bounds earlier in the 2010s, with improvements in screen size, screen resolution, battery life, cameras and processor speed every year.
But the industry is a victim of its own success. Innovation began to slow down around 2014, once Apple boosted the screen size with the iPhone 6 and 6 Plus models. While phones kept improving, new features tended to be incremental, such as a new flash technique to already excellent phone cameras. It’s the stuff consumers won’t typically notice — or want to shell out for.
“Since the iPhone 6 you’ve seen it has been tough to innovate to continue to raise the bar,” Ives said.
Apple customers now upgrade every 33 months on average, longer than the 24 or 25 months three years ago, he said.
Apple’s diminished growth projections, fueled by plummeting sales in China, have reinforced fears the world’s second-largest economy is losing steam. Its $1,000 iPhone is a tough sell to Chinese consumers unnerved by an economic slump and the trade war with the U.S. They also have a slew of cheaper smartphones from homegrown competitors such as Huawei, Xiaomi and Oppo to choose from.
The fact that even Apple’s iPhone juggernaut is suffering cements a larger trend for all major smartphone makers. After a steady rise for a decade, worldwide smartphone shipments fell 3 percent to 1.42 billion in 2018, the first annual drop, according to International Data Corp., which tracks such movements. IDC estimates that shipments will rebound 3 percent in 2019 to 1.46 billion, but that still falls short of 2017 levels.
It doesn’t help that top phones come with four-digit price tags — $1,100 for the iPhone XS Max and $1,000 for Samsung’a Galaxy Note 9. The top-end Max model sells for $1,450 in the U.S.