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Jeff Kagan: How Apple Painted Themselves Into an iPhone Corner

Why is Apple iPhone growth slowing? Why their solution to this problem may be uncomfortable for investors.
Equities columnist Jeff Kagan is a telecom, technology and wireless analyst and consultant. He covers 5G, AI, IoT, the metaverse, autonomous driving, healthcare, telehealth, pay TV and more. Follow him at and on Twitter @jeffkagan and LinkedIn.
Equities columnist Jeff Kagan is a telecom, technology and wireless analyst and consultant. He covers 5G, AI, IoT, the metaverse, autonomous driving, healthcare, telehealth, pay TV and more. Follow him at and on Twitter @jeffkagan and LinkedIn.

Some of you may have noticed, there seems to be been growing anxiety around Apple AAPL of late. Let’s peel the layers of the onion back and see if we can get a clear look at what is happening with Apple, the iPhone and the threat and opportunities of the changing smartphone industry.

Apple has been bathing in the glory of their iPhone revolution over the last decade. However, now that their iPhone sales are slowing, they have chosen to change the way they report and the way we watch and measure their success going forward.

Apple says they will no longer disclose iPhone unit sales data. That’s right. What does that mean? The iPhone is the largest part of Apple. Trying to stay on the winning side of the change wave, they want to focus on where their growth is, and that no longer seems to be with the iPhone.

Instead, they want us to focus on their services business. This is a major shift in the way the marketplace watches, evaluates and compares Apple performance.

Apple Wants Us to Watch Their Services Growth

Apple services have grown 24 percent over the last year. It is now worth $37 billion. As good as that sounds, that is still a small part of the company. It will likely continue to grow, but it only represents roughly 14 percent of their total $265 billion in revenue during 2018.

This is the problem with success. When you show rapid growth, the marketplace has a hard time understanding that cannot continue forever. So, it’s important to move into other areas to continue to show growth.

I have predicted iPhone growth would slow down for many years. They tried, but when everyone has an iPhone or Android and when there are only incremental improvements with each new year that passes, they simply can’t continue to ride the same horse, year after year after year.

Apple Marketing Mistake Lead to iPhone Growth Slowdown

However, Apple has increasingly painted themselves into a corner with their decisions over the last several years. Apple has created much of the iPhone slowdown themselves, by ignoring what the customer likes and wants and heading in new directions.

Let me give you a few examples of how Apple created their own iPhone growth problem.

First, the iPhone was very popular when it was small enough to hold and operate in one hand. That meant the screen was smaller. Given the choice, some users want a bigger screen while others want the ease of use with a smaller screen.

The main problem was Apple chose to tell users what they wanted. They didn’t focus on what the user wanted.

Apple iPhone Mistake Number One

The move to the larger device and away from the smaller, one-hand device was a key Apple mistake. Apple thinks they can tell the marketplace what they want, rather than listening to the marketplace and giving users what they want.

This may have worked in the early years after the iPhone rolled out, but after a decade, users know what they want. Apple can continue to innovate, but they should not force otherwise happy users to change the way they communicate if they don’t want to change.

New iPhones have plenty of new features and technology, but not the kind of technology that interests all users. Sure, there are plenty who love this new technology, so Apple should offer it to them.

However, many others are not interested and would rather have a newer iPhone, with faster technology, that still works the way they are used or still has the smaller size. By choosing to ignore user desires, Apple threw gasoline on a smaller fire. Now it’s a big problem.

Making iPhone Larger and Heavier Is Key Mistake

This is where Apple misses the mark. Users who love innovation and who are willing to learn new ways of operating the iPhone, are happy. However, other users who don’t want to learn new ways to use the device are out in the cold.

Especially, when it means the device is larger and heavier. Many users compared the new iPhone XS and their earlier version. While many users love the new technology and new ways to use the iPhone, none of them like the larger size and heavier footprint of the new device.

Given the choice, some customers would choose the larger and heavier device and others would prefer the smaller size and weight. In fact, many say they prefer the smaller, original size device.

Apple ignored what many customers wanted and continued to force the issue with the change in design. What they should have done was offer a variety of devices, small, mid and large. And give the user the ability to choose the new iOS or the older iOS.

Apple Will Continue to Grow, but Will Pay This Price

Apple is a great company with great products. I think they will continue to grow, but in new ways. Any way you slice it, the smartphone marketplace with the iPhone and Android is more than a decade old already. This kind of change was going to happen at some point. It’s too bad Apple accelerated this problem with their past marketing mistakes.

I like how they care and how they make it easy to get service by simply walking into any one of their stores. They are a huge company, but they seem to care. They have improved the retail experience and the smartphone experience. So, thank Apple for that change.

However, they should listen to their customers and give users what they want rather than forcing new designs and sizes on the marketplace. We are no longer in the early days of the iPhone and Android revolution. Customers today have opinions. Ignoring those desires threatens your growth potential.

Jeff Kagan is an columnist. Kagan is a Wireless Analyst, Telecom Analyst, Industry Analyst, speaker and consultant. He follows wireless, wire line, telecom, Internet, cable TV, IPTV, Cloud, Mobile Pay, FinTech and communications technology. Email him at [email protected]. His web site is Follow him on Twitter @jeffkagan.

If you don't feel that U.S. culture (and much of the world in different ways) is in turmoil, you are not paying attention.
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