SA analysts blame pricey iPhones for Apple’s revenue fall

SA analysts blame pricey iPhones for Apple’s revenue fall

By Admire Moyo, ITWeb’s news editor.Johannesburg, 03 May 2024

Apple has 19% of SA’s smartphone market, according to Statista.

While Apple iPhones remain popular in the South African market, their prices are too steep for many local consumers.

This is according to local analysts, commenting on Apple’s financial results for its fiscal 2024 second quarter ended 30 March.

The company posted quarterly revenue of $90.8 billion, down 4% year-over-year, and quarterly earnings per diluted share of $1.53.

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“Today Apple is reporting revenue of $90.8 billion for the March quarter, including an all-time revenue record in services,” says Tim Cook, Apple CEO.

“During the quarter, we were thrilled to launch Apple Vision Pro and to show the world the potential that spatial computing unlocks. We’re also looking forward to an exciting product announcement next week and an incredible Worldwide Developers Conference next month.”

“Thanks to high levels of customer satisfaction and loyalty, our active installed base of devices has reached a new all-time high across all products and all geographic segments, and our business performance drove a new EPS [earnings per share] record for the March quarter,” says Luca Maestri, Apple CFO.

“Given our confidence in Apple’s future and the value we see in our stock, our board has authorised an additional $110 billion for share repurchases. We are also raising our quarterly dividend for the twelfth year in a row.”

Apple’s board of directors declared a cash dividend of $0.25 per share of the company’s common stock, an increase of 4%.

Affordability challenge

According to data from Statista, as of April 2023, Samsung led the mobile device market in SA with a market share of around 48%. Apple ranked second with a share of around 19%, closely followed by Huawei in third.

Arnold Ponela, IDC senior research analyst for mobile technologies and image printing and document solutions for SA and Sub-Saharan Africa, comments that the iPhone enjoys significant popularity in SA, but affordability remains a challenge for many due to Apple’s focus on premium-priced devices.

In September last year, the American multinational tech company launched the long-awaited iPhone 15 and iPhone 15 Plus, starting at $799 (R15 200).

“This likely explains why refurbished iPhones are performing strongly in the market, with network operators also choosing to sell them. This trend highlights the demand for more affordable options in the market,” says Ponela.

He points out that the lack of entry-level devices affordable for most South Africans who desire the product but cannot afford the current line-up is a significant issue.

“The company’s current offerings primarily target the high-end and upper-middle-class consumers, leaving a large portion of the lower-middle-class segment unable to afford these products, especially given the challenging economic climate.”

Ofentse Dazela, director of pricing research at Africa Analysis, comments that the iPhone remains an aspirational brand in the local market, especially among young people with flourishing careers (LSM: 8-10).

“Considering the status position of this brand in our lives, many people in lower income groups (LSM: 5-7) will break the bank to own one, even if it is a good second-hand model,” Dazela says.

“The economic challenges afflicting the local market cannot be over-emphasised. We have witnessed Maslow’s hierarchy of needs theory kick into play as a result. Financially, the local working class is not doing well, as it is directly or indirectly impacted by growing geopolitical tensions and the long-lasting effects of the pandemic.”

He notes that those who own iPhone brands now hang on to those devices a little bit longer.

“Those who have lost their jobs or are not earning as much as they earned before are downscaling their lifestyles and are going for much cheaper brands, hence we observe a direct relationship between the declining sales of iPhone devices versus the growing increase of cheaper Chinese brands.

“Cost of living, exacerbated by high inflation, growing unemployment, and the weakening of the local currency has made life a lot more difficult in recent months,” Dazela notes.

Chinese threat

According to Ponela, in SA, Samsung stands out as Apple’s primary competitor, particularly in the premium segment.

However, he observes that the landscape is evolving, with Chinese vendors gradually gaining traction in the market.

“This growing presence poses a significant threat to Apple’s mid-range segment. Apple has traditionally relied on older models to cater to this segment, but this strategy faces challenges as consumers increasingly prioritise having the latest models,” he explains.

On Apple’s revenue decline, Ponela says the slowdown in demand during the initial months of the year dampened the momentum built up in the latter part of the year.

“Economic uncertainties and consumer hesitancy to spend due to macro-economic challenges further contributed to the subdued performance of the smartphone market.

“Apple must introduce a device that fills the gap in its line-up, targeting the lower end of the middle segment without compromising its premium market positioning. Despite the iPhone’s popularity among the middle class, its affordability remains a significant barrier, leading many to opt for cheaper alternatives,” he concludes.

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