Analyst: iPhone performance is strong, but faces ‘headwinds in a maturing smartphone market’

Its latest financial results show, yet again, that Apple is the most successful smartphone company in the world, but there are “headwinds” in the maturing smartphone market that are finally impacting Apple, according to Ian Fogg, head of Mobile Analysis, IHS Technology.

Significantly, Apple raised the average selling price (ASP) of the iPhone to $691 while also increasing iPhone unit shipment volumes year-on-year. Only the strongest companies can raise ASP and shipment volumes at the same time, Fogg says. 

“These high average selling prices and excellent margins provide Apple with strategic flexibility in how it chooses to operate its business in 2016,” he adds.

Apple has repeatedly demonstrated an ability to buck wider economic conditions and persuade consumers to spend more on their smartphone. China has had a widely reported economic faltering in the last year, but, despite that, Apple has pushed up sales in China by 14%, just as the iPhone prospered in Europe and North America during the economic troubles of 2008-2010. 

“The question is, if China’s economy had not slowed, how many more iPhones could Apple have sold?” says Fogg. “Compared to the competition, Apple’s iPhone performance is still very strong, but there are headwinds in the maturing smartphone market that are finally impacting Apple.”

Overall, the smartphone market is slowing. Apple has resisted these wider market trends, but their competition is as much their own products from years ago as it is Samsung, Huawei or Xiaomi. Fog says Apple’s hardest competitor is itself because it must persuade existing iPhone owners to upgrade and buy the current model. 

"Apple knows it needs to diversify from its dependence on the iPhone. Early signs are the new product lines — Apple Pay, the new app-enabled Apple TV and Apple Watch —  are growing well, but not yet fast enough to off-set the headwinds affecting the iPad and iPhone,” Fogg says. “Apple must leverage its vast iPhone installed base to cross-sell these devices to iPhone owners now, while the iPhone is selling well, to set up its business for the long term.”