The autumn is normally a good season for smartphone sales. All the major suppliers have announced their new models, and consumers are keen to try them out. And, of course, many are bought as presents. But Q4 2022 was yet another disappointing quarter. As Strategy Analytics (SA) report:
“Global smartphone shipments fell -19% versus Q4 2021 to 296m in Q4 2022. This is the sixth consecutive quarter of annual decline.”
At first, the decline could be put down to Covid impacts. And then, of course, Russia’s invasion added to the problems. But as SA add:
“Unfavorable economic conditions continued to weaken consumers’ demand for smartphones and other non-essential products.“
Retail investors ignored the analysis and rushed to buy Apple stock again, and the rest of the NASDAQ.
But it really isn’t clear that we are going to see a repeat of the “meme stock bubble” – when retail investors bought anything that had fallen in price, on the basis it was bound to recover. As the Financial Times commented:
“At Apple, revenue growth, after adjusting for foreign-currency headwinds, grew just 3% from a year ago, an unexpectedly sharp slowdown only partly attributable to supply chain problems with the iPhone. The company expects growth in the current quarter to be similarly meagre. The CFO was careful to point out that expenses came in below the company’s targets.”
A major part of the problem is that investors know that Fed Chairman Jay Powell is desperate to reduce rates, and get the asset bubbles moving again:
- As we saw again last week, the market initially fell as the Fed Minutes were published
- But then Powell stood up in the press conference and was as dovish as could be
Some analysts suggest he would like to be remembered by history as being another Paul Volcker – doing the “right thing, even though it was painful”.
But actions speak louder than words. Powell earned the major part of his estimated $50m wealth when working on Wall Street. And his actions since taking over at the Fed, suggest that he doesn’t want to let his old friends down.
We would actually be more optimistic than Apple about the outlook for Q1 smartphone sales. But as the chart shows, the smartphone market clearly peaked back in 2017 at 1.5bn sales. And it’s hard to see anything that will suddenly cause it to see a major recovery.
Former Apple CEO Steve Jobs was a genius, who invented both the Mac and the iPhone. And in the early 2010s, consumers were desperate to buy the latest smartphone. Combining a camera with email and internet access on demand was a very powerful new offering. But there is nothing similar on the horizon in terms of “must-have” new features.
Operators and smartphone vendors get excited about 5G, but nobody has yet made any money from it in the 5 years since it launched. And in tech, 5 years is an eternity. Similarly, it’s hard to get too excited about the benefits of foldables.
We rather suspect that in reality, as Apple’s CFO conceded, the smartphone industry has become mature. As with the other FAANGs (Facebook, Amazon, Apple, Netflix and Google), it was a fun ride while it lasted. But all good things come to an end.
The smartphone market has now been in decline for 5 years. And whilst the Fed would clearly love to get stocks racing to the moon again, history suggests that Apple’s CFO is likely to be right when talking about the importance of cost control for the future.