Chinese customers in an Apple store on January 3, 2019 in Beijing, one day after Apple predicted weak quarterly results, which it attributed primarily to slow sales in China.
Lintao Zhang | Getty Images
The latest Apple and Samsung earnings reports show the same thing: most people don't want to spend $ 1,000 on a new phone, no matter how good.
Apple is no longer breaking unit sales, but on Tuesday reported iPhone revenues of $ 25.99 billion in fiscal Q3 2019, missing Wall Street estimates of $ 26.31 billion, according to FactSet. That figure is down 12 percent from the same quarter last year.
Samsung reported its second-quarter earnings on Wednesday and specifically said it is seeing demand for its more affordable phones, including its A-devices, but the Galaxy S10 has not performed well.
"Samsung's smartphone shipments have increased QoQ driven by strong sales of the new Galaxy A Series, including the Galaxy A50 and A70," Samsung said. "However, flagship model sales have dropped QoQ due to weak sales movement of the Galaxy S10 and stagnant demand for premium products."
The new Samsung Galaxy S10
There are a few reasons why people don't buy those premium phones as they used to.
First, people hold phones longer. Toni Sacconaghi, a Bernstein analyst, said in February that iPhone owners updated about once in four years. Apple's Tim Cook said in January that "customers are backing their older iPhones a little bit longer than in the past." Cook also said macroeconomic factors are playing a role, especially in places like China.
There were also no compelling reasons for regular consumers to upgrade. Enthusiasts might want the latest and greatest phones every year, but most people care about camera quality and battery life.
Cameras are becoming a more difficult selling point, as phones launched over the past several years already have really good cameras.
Telephone manufacturers know this. Apple launched its iPhone XR last September, a phone that excels at both camera quality and battery life but that starts at $ 749. The expensive iPhone XS ($ 999) and XS Max ($ 1,099) have more colorful and lighter displays and even better cameras, but most consumers don't want to spend that much to get it. Meanwhile, Apple also still sells the iPhone 7 for $ 299.
Samsung's series phones attract the same audience that doesn't want to drop $ 999 In high-end Galaxy S10 + (which now sells for $ 799.) Google recently launched its Pixel III and Pixel III XL, which include excellent cameras at half the cost of the standard Pixel 3 ($ 799) and Pixel 3 XL ($ 899). ).
Apple and Samsung are catching some 22.
They are both building and selling really great phones that are such good people, or don't want to upgrade to a new model just a year or two later. Samsung's Galaxy 8 and 9 series are still "pretty good." And most people would argue the same for Apple iPhones returning to even the iPhone 6, as long as you replace the battery.
No signs of this trend cease – at least not until someone perfects foldable phones or adds "necessarily."
Samsung will announce its highly anticipated Galaxy Note 10 on August 7, which gives it the chance to get their best foot forward on Apple's new iPhones in September. The Galaxy Note has a dedicated rail base, but it is also typically a very expensive phone. That means its success will depend on whether people upgrade or not. It is one reason that Samsung has already switched on the phone with mandatory exchange offers.
Apple will face the same hurdles with its new iPhones expected this fall, but it has at least two rapidly growing revenue sources: its service companies and laptops, the latter of which now bring in more revenue than Apple's iPad or Mac companies.
Those trades were good enough in Apple's June quarter to ship the stock more than 3 percent on Wednesday morning after a gain – despite iPhone's unpleasant sales.