28 October 2016
When iPhone 6 plus was launched in 2014, it fetched as much as HK$20,000 on the grey market. But all that is a distant memory now. Photo: HKEJ
When iPhone 6 plus was launched in 2014, it fetched as much as HK$20,000 on the grey market. But all that is a distant memory now. Photo: HKEJ

Why the iPhone dream run has ended

There is no better place to gauge the prospects of iPhone, whose maker warned this week of the smartphone’s first-ever sales decline, than in Sin Tat Plaza in Hong Kong’s Mong Kok district.

The building, the place to go for an array of new as well as used phones and also serves as a hub for parallel-goods traders, has been missing the usual buzz after the iPhone 6s launch last September.

Softer-than-anticipated demand for the new phones has led to some traders shutting shop. As of now, about 10 percent of the retail space in the marketplace remains vacant.

Gone are the golden days when people lined up and paid double for the latest iPhone.

Forget short-supply, 6s devices are now available aplenty everywhere, be it telecom operators, specialty shops such as Wilson or big electronics chains such as Fortress and Broadway.

Slowing sales in a key market is perhaps what prompted Apple CEO Tim Cook and CFO Luca Maestri to comment Tuesday about challenges surrounding the China economy.

The tech giant revealed that iPhone sales overall grew only 0.4 percent, the weakest pace since the smartphone’s launch in 2007, to 74.8 million units in the fourth quarter of 2015.

For the firm’s fiscal first quarter ended Dec. 26, Apple reported a profit of US$18.4 billion, up 2 percent on a top line of US$75.9 billion, slight below the market forecast of US$76.5 billion.

Worse still, it said it expects its first sales slide. Revenue for the current quarter was projected in the range of US$50-53 billion, down from the US$58 billion it posted in the same period last year.

This effectively means that the dream run on iPhone may have ended, at least for now.

Coming back to Hong Kong, although it is a tiny city with a population of just around seven million, it has been a robust trading port for Apple products.

Apart from a being a fashionable international city (with an average handset replacement cycle of 18 months), the territory’s close proximity to China, the biggest market for Apple, has made Hong Kong a key beachhead for Apple.

Apple started direct China sales in 2012 when it launched iPhone 5s. The gadget was an instant hit with China’s affluent, although some mainlanders still preferred to buy their phones in Hong Kong due to the shorter waiting time and cheaper price.

The latest iPhone 6 was listed as HK$5,588 (many outlets I know now offer a HK$500 discount) in Hong Kong for the 16GB version, about 12 percent lower when compared to its mainland listed price of 5,288 yuan (HK$6,345).

Despite the pricing advantage, many shops at Sin Tat Plaza failed to survive this winter as there were fewer mainland shoppers and traders, as well as reduced demand from locals.

Some of the waned enthusiasm could be due to the fact that the new phones featured only slight enhancements from the previous model.

Consumers want more substantive upgrades before shelling out big bucks for the phones, while an uncertain economic environment is also adding to the caution.

Traders at Sin Tat Plaza will readily testify to the changed iPhone market situation. And also that iWatch and iPad sales have not met expectations, adding to the retailers’ woes.

What the market is looking for now is a new “killer” product from Apple, not just incremental upgrades of existing gadgets.

Will the company rise to the occasion?

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EJ Insight writer

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