ColdFusion - Why Are Apple's Sales Slowing?

Starting point is 00:00:00 You are watching Cold Fusion TV. Hi, welcome to another Cold Fusion video. So last week, I took to Twitter to ask people what they wanted to see in terms of shorter format videos. One of the topics that came up was Apple's first sales declined since 2003. So why are Apple's sales falling? In this video, we'll find out. Last month, Apple reported its first year-over-year drop in iPhone sales in its history. Apple Inc. has posted its first ever decline in iPhone sales and first revenue drop in more than a decade,

Starting point is 00:00:42 as the company credited with inventing the smartphone struggles with an increasingly saturated market. A 16% drop when compared to the first quarter of 2015 and a 32% drop when compared to the last quarter of 2015. Here's a chart breakdown of Apple's total revenue structure. iPhones are so crucial to Apple's business that this drop cost. them 13% of their entire revenue. Despite all of this, Apple still managed to sell 51 million phones this quarter, second only to Samsung's 81 million. Before we get into the reasons for the decline, I wanted to get a feel of what people thought about Apple currently, so I went out and asked a few of my friends. The average answer went something like this. Apple just isn't

Starting point is 00:01:27 innovating like they used to, and Tim Cook just isn't the same breed as Steve Jobs. I totally agree with all of this and I would add that the smartphone competition from Android is stronger than it's ever been so for Apple to sit still is a little risky at the moment. It doesn't look like there is anything that would drive significant growth for Apple from here as they've been behaving. Now you know if they came out with a breakthrough product or price then you might see a change particularly if it's different than the the other smartphone makers in this market. But absent that that kind of innovation in price or features, I think we're in a much more gradual and uncertain

Starting point is 00:02:10 market. That being said, one of my friends did say something very interesting. This friend told me that he thought Apple wasn't stupid enough to let the world just pass them by, and that they were secretly sinking millions of dollars of R&D to surprise us all with a revolutionary product in the next two to five years. And as it turns out, he's not alone in those views. Doesn't seem like it's going to come in iPads, which are in a serious decline. It doesn't seem like it's going to come in Macs, which also declined. So if you want the kind of growth that Apple investors are used to, they're going to need something else. We've been talking about a TV for years.

Starting point is 00:02:43 That seems like it was kicked to the back burner. Possibly a car. There was another really interesting moment on the earnings call where one of the analysts asked about virtual reality. And Tim Cook, of course, isn't going to reveal anything. But he kind of hinted that, yeah, this is pretty important. So maybe VR is where they're going to go. and maybe they will use a chunk of that money to push ahead of their competitors. As interesting as this theory may be, it still doesn't help the fact that Apple's sales have fallen.

Starting point is 00:03:10 So why is this happening? The major reasons are as follows. Number one. Underlying global deflation. I'll try my best to explain this one. Deflation is an economic term that basically means the reduction of money supply usually resulting in falling prices. Deflation is natural and isn't in ham. but according to some economists like Peter Schiff's Jim Rickards, David Stockman

Starting point is 00:03:36 and Mike Maloney who I recently just had a chat with by the way. According to these economists central banks have tried to fight deflation since the 2008 crash by providing trillions of dollars worth of cheap low-interest credit. Instead of this credit going to productive use it's actually been allocated wrongly or put towards bad investments that don't help the real economy. This causes market distortions that are only just now starting to reverse and economies are just left with too much private, household and corporate debt. The end of a worldwide era in which central banks printed money, injected liquidity, supported

Starting point is 00:04:16 markets, manipulated and intruded in the pricing of financial assets like never before. And what it did was create a massive credit expansion in the world that's stopping. We We had 40 trillion of debt in the world in 1995. We have 225 trillion today. Everywhere is at peak debt. Since there's so much debt saturation, it all has to start being paid off. Because of this, there's less spending overall in the economy, and a deflationary cycle begins. So what is this deflationary cycle? There's less spending throughout the economy, which means job cuts. The people who lose their jobs are going to spend less, and this eventually means less profits for the companies that rely on consumer spending, which means even more job cuts,

Starting point is 00:05:05 and it continues. This is a macroeconomic force and affects all companies, not just Apple. Just take a look at Intel laying off 12,000 jobs and other companies like HP, IBM and Macy's. This is all out of Apple's control, but is probably the biggest reason for the decrease in sales, in my opinion. The second reason for the fall of Apple's sales is market saturation of the smartphone segment. In Western markets, about 60 to 80% of those who want a smartphone have one. And even China, a once large engine of iPhone growth is seeing market saturation and slowdown. Overall, it's already at a point where a one or two year old smartphone is good enough for someone who just wants to shoot some casual pictures, use social media, text and chat.

Starting point is 00:05:54 The only real places remaining for smartphone market growth are the emerging markets, but this is where Android is king at the moment. Google is working hard to provide capable smartphones at an affordable price with efforts like Android 1. Yes, there is the cheaper $400 iPhone SE but this is still expensive compared to some Android equivalent. In addition to this, the $400 iPhone SE isn't as it seems. This leads on to the third reason. The third reason is a higher exchange rate of the US dollar versus all major currencies. For example here in Australia, just a few years years ago, the US dollar and the Australian dollar are about the same, but now the US dollar

Starting point is 00:06:36 is 1.36 times more expensive. A higher US dollar makes everything that's exported from the United States more expensive and less attractive to overseas buyers. Again, this is another external force for Apple. So iPhones are going to be more expensive everywhere except for the United States. So that's it. Those are my three top exact reasons why Apple sales are slowing. I guess you could call it for if you add that lack of innovation. So to recap, the main reasons are a lack of innovation, macroeconomic conditions, market saturation, and a high exchange rate. All in all, it's certainly not the end of the world for Apple. After all, they still make more money selling physical products than any company on earth. This may just be a temporary blip for Apple, and the iPhone 7 may have

Starting point is 00:07:28 impressive sales again. But the global economic headwinds are going to be strong for Apple. and all companies for that matter. What do you guys think? Do you think Apple's reign is over? Or do you think they still have a lot of life left in them? Let me know in the comment section below. I also just want to thank everyone that's supporting me on Patreon. If you want to help support, I'll leave a link in the description.

Starting point is 00:07:49 No pressure if you don't want to, you don't have to. All right, thanks guys, give a thumbs up if you like this video, and subscribe if you're new to this channel. I'll see you again soon for the next video. Cheers, guys, have a good one. Thank you.

ColdFusion - Why Are Apple's Sales Slowing?

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