By Chand Bellur
July 22, 2020 at 5:45 p.m. PT
- Apple’s iPhone sales for Q2 2020 are 23% lower than the same quarter in 2019.
- 26% of 2020 iPhone SE customers were former Android smartphone owners.
- Samsung only experienced a 10% drop in sales compared to the same quarter last year.
Android Users Switch to Low-Cost iPhone SE
2020 has been a rough year for consumers and producers alike. With consumer confidence at recession levels, few people are buying new smartphones.
Apple made a fortunate decision to update its low-cost iPhone SE. The well-equipped smartphone only costs $399. Although it’s missing some of the bells and whistles of a more expensive iPhone, such as Face ID and multiple camera lenses, it’s an ideal smartphone for those who aren’t constantly taking selfies.
Consumers took note, and the 2020 iPhone SE has proven to be successful. Analytics firm Counterpoint Research found that the iPhone SE ended up selling well, despite economic conditions. They also discovered that 26% of iPhone SE owners abandoned their Android devices for Apple.
These platform defectors are most likely casual smartphone users. Android has a small, die-hard cult of fanatics; however, many consumers simply want a free smartphone. The Android ecosystem is one of the few offering free smartphones in exchange for signing on to multi-year cellular data contracts.
Infrequent iPhone Upgraders Embrace iPhone SE
Apple’s new iPhone SE also appeals to casual customers. Counterpoint Research found that over 30% of iPhone SE customers upgraded from an iPhone 6S or older device. The iPhone 6S is the oldest device that can still run iOS 13; however, performance leaves much to be desired.
The notion that iPhone SE customers won’t upgrade to the iPhone 12 is likely valid. These customers, however, are more budget-conscious and aren’t concerned about adopting 5G technology. iPhone 12 sales may fare well, as 5G networking and improved camera technology are sure to please younger consumers who use smartphones as their primary devices.
iPhone SE Can’t Get Apple Out of Sales Slump
Regardless of the iPhone SE’s relative success, its chief competitor, Samsung, experienced less than half of Apple’s sales decline. With Samsung’s sales down only 10% compared to last year, it appears that their loyal customers aren’t switching to the iPhone SE. It’s likely that Samsung did not manufacture defecting Android users’ previous devices.
Services, Manipulating Profits and Stock Buybacks Keep Apple on Top
Apple’s growth in services offsets declines in iPhone sales to some extent. Over the past few years, Apple launched a few well-received subscription services. Apple Arcade, Apple Music and Apple TV+ have done relatively well; however, Apple News+ hasn’t converted many consumers.
Despite economic conditions, Apple will persevere due to creative accounting techniques. Like many multinational corporations, Apple diverts profits to tax shelters. This money is hidden, but can be repatriated to boost profitability, at the cost of taxation. It’s unlikely Apple will ever have a bad quarter, as they can always adjust profitability to please investors.
Stock buybacks are another technique that Apple and other large corporations use to retain share value. The recent decrease in the corporate tax rate enables Apple to repatriate offshore funds at a lower cost. This money typically finances repurchasing shares instead of investing in the company and hiring more employees.
Apple is due to release its Q3 earnings report on July 30. Apple will likely report that growth in service revenues more than make up for declining iPhone sales. With so much cash offshore, Apple can shape its own reality.