Whether the iPhone X is a major win for Apple or a tremendous flop is one of the most hotly-debated questions in the technology industry right now. The general consensus that’s been reached is that iPhone X volume isn’t what was expected pre-launch, but things aren’t all bad, because Apple makes so much profit on the iPhone X that the company is still swimming in money.
But that hasn’t stopped some people from feeling like they have to defend the iPhone X as the greatest thing to ever come out o Cupertino, period. Today’s case in point: An article from AppleInsider, pinned to some new smartphone sales data from GfK, which proclaims that “Apple’s iPhone X delivered a KO punch to cheap Androids: Q1 smartphone demand slumped globally but ASP grew by 21%.”
The premise is that despite a global slowdown in smartphone sales, Average Selling Price (ASP) for all smartphones is up significantly year-on-year, and the iPhone X is solely to thank:
New data from GfK shows that global demand for smartphones declined by 2 percent year over year in the March quarter while Average Selling Prices grew by 21 percent, totally contradicting the media narrative that customers were looking to save money and would shy away from Apple’s premium-priced iPhone 8 and iPhone X…..Significant growth in phone ASP has only been associated with Apple. Other phone makers, using Android or any other minority mobile platform, have been locked in a race to the bottom, with ASPs for Android phones incrementally falling over the last decade from a high of around $450 to current ASPs around $200.
Unfortunately, that assumption isn’t supported by the data. Smartphone ASPs were already rising at a “record pace” last year, before the iPhone X was even released, according to GfK’s own data. While it’s true that Apple’s ASP remains much higher than the rest of the industry, analysts broadly expect Apple’s ASP to only marginally increase this quarter compared to previous quarters. If the iPhone X was really dragging up the rest of the industry’s average selling price on its own, Apple’s own ASP would skyrocket.
Instead, it might be the rest of Apple’s lineup doing the heavy lifting. Recent data from CIRP shows that the iPhone X only made up 16% of total iPhone sales last quarter. The iPhone 8 and iPhone 8 Plus accounted for 44%, and Apple’s older iPhone models, including the iPhone 7 and iPhone 6S, sold strongly. Those devices are much cheaper than the iPhone X, but still expensive enough that consumers switching from $200 Android phones to $500 2017 iPhones would push up global ASPs significantly.
But really, the decline in smartphone volume and rise in global ASPs can be attributed to something much simpler. Speaking about the decline in smartphone volumes in the last quarter of 2017 Anshul Gupta, Research Director at Gartner, gave two reasons. “First, upgrades from feature phones to smartphones have slowed down due to a lack of quality “ultra-low-cost” smartphones and users preferring to buy quality feature phones,” he said. “Second, replacement smartphone users are choosing quality models and keeping them longer, lengthening the replacement cycle of smartphones.”
GfK’s own report suggests that the shift to more premium models and longer replacement cycles isn’t restricted to Apple. In China, for example, the report says “revenue grew by 14 percent to USD 41.1 billion, with both domestic and international brands persuading the Chinese to migrate to more premium devices.” That doesn’t sound like it’s Apple alone.
While it’s clear that the iPhone X isn’t a flop and Apple still dominates all other firms when it comes to average selling price and profitability, this trend isn’t being driven by the iPhone maker alone. Instead, markets have reached saturation for cheap Android devices; people are mostly done switching from featurephones to cheap smartphones, and are instead buying phones for longer durations, and buying much nicer devices. The age of the $200 Android phone is certainly coming to an end, but the iPhone X didn’t deliver any knockout punch.