The stakes for iPhone 7 have never been higher

Tim cook apple ceo blueStephen Lam/ Getty ImagesApple CEO Tim Cook.

Apple is expected to announce the iPhone 7 on September 7 — and the stakes have never been higher.

After years of staggering growth, the Cupertino company’s smartphone business is in decline, ramping up the pressure on Apple to make sure the new iPhone delivers.

And from what we’ve heard of the new handset from rumours, that’s by no means guaranteed.

According to data from research firm IDC, sales of the iPhone dropped by 7.7% in the second quarter of the 2016 calendar year compared to a year previously — the Cupertino technology giant’s third consecutive quarter of year-on-year decline in sales.

Apple shipped 44.4 million phones in Q2 2016, compared to 48.1 million in Q2 2015.

There’s always a decline in sales in the run-up to the launch of a new iPhone. But this decline is notable for two reasons: First, it’s a decline year-on-year, rather than just from quarter to quarter. In real terms, people are buying less iPhones than they used to.

And secondly, its market share is also dropping — in Q2 2016, it captured just 12.9% of the global smartphone market, down from a healthier 14.6% a year prior.

The lion’s share of Apple’s revenue comes from iPhones; the health of the business is intimately linked to the health of its smartphone business.

In April this year, the company announced on its quarterly earnings call that the decline in iPhone sales had caused the company’s first year-on-year decline in quarterly revenues since way back in 2003.

As such, investors are nervously watching to see if the iPhone 7 will help Apple return to growth.

So what’s behind this drop-off?

IDC says that globally, smartphone sales increased 4.3% year-on-year last quarter. (344.4 million, up from 330.3 million.) But sales in mature markets like the US and Europe are slowing. It is emerging markets that are driving the industry’s growth now, and Apple’s expensive handsets are poorly positioned to capitalise on this trend.

In fact, in some of these markets, Apple is performing appallingly. According to IDC data, the Chinese smartphone market grew by 4.6% — but Apple shrank 31.7% year-on-year (8.6 million sales in Q2 2016, down from 12.6 million).

This decline means there is increased pressure on Apple for the launch of the iPhone 7. But it’s questionable as to whether the new smartphone will generate the hype previous years have managed. It is expected to be largely similar to the current iPhone 6s, with few cosmetic changes and one of the key features being a new camera.

This lack of redesign — out of keeping with Apple’s usual practice of revamping its flagship smartphone every two years — is ahead of a more radical overhaul planned for the device in 2017, for the tenth anniversary of the launch of the iPhone.

So if customers decide to wait another year for the iPhone 8, then Apple’s growth nightmare might not end any time soon.


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