Date
17 September 2019
Apple must make a quick decision on the modem chip supplier for its latest iPhone models in order to catch up with the market's frenzied preparations for the advent of 5G technology. Photo: Bloomberg
Apple must make a quick decision on the modem chip supplier for its latest iPhone models in order to catch up with the market's frenzied preparations for the advent of 5G technology. Photo: Bloomberg

Apple must ride 5G wave to revive its iPhone fortunes

Apple is under severe pressure amid the weak sales performance of its latest iPhone series, particularly in the Greater China market, and this has led the company to issue a profit warning to investors.

In order to stimulate iPhone sales before the Lunar New Year, some retail channels have slashed the prices on several iPhone models, but Apple is sticking to its pricing in order to maintain the image of its products.

Several Chinese electronics retailers, including Alibaba-backed Suning and JD.com, have cut iPhone prices this week, after Apple blamed poor smartphone sales in the country for its rare warning about slowing revenue.

The discounting, as steep as US$118 for the recently launched 64GB iPhone XR, is the latest sign that Apple’s weak holiday sales in China may have extended to the current quarter.

It is not normal for retailers to slash the prices of the current batch of iPhone models given the company’s premier position in the market. 

The price cuts show that Apple is trying to turn things around in a bid to stimulate the sluggish sales across the nation. But the move is limited to third-party retailers and does not include the company’s official channels. Still, that would not change the fact that Apple is clearing its stock.

In less than nine months, Apple will unveil its new iPhone series, and this will tell investors whether or not market sentiment has changed.

Several nations including China, the United States and South Korea will roll out their high-speed 5G mobile networks for commercial operation this year.

Smartphone makers such as Samsung Electronics, Huawei and Xiaomi all seek to latch on their products to the new technology as a killer application that would convince users to upgrade to their latest models.

Apple is no exception. The company is also planning to come out with an iPhone series that could support the new technology to maintain its leadership in the luxury category. Media reports suggest that Apple may launch its first 5G iPhone in 2020.

Testifying at a trial of Qualcomm’s case against Apple on Friday, Apple’s supply chain executive Tony Blevins said the smartphone maker has held talks with Samsung Electronics and MediaTek along with semiconductor giant Intel to supply 5G modem chips for its latest iPhones.

Modem chips are essential for iPhone to connect to the mobile network for internet access – from 2G and 3G to 4G and 5G.

Apple had relied on Qualcomm as its sole modem chip supplier between 2011 and 2016. Starting in 2016, however, the company split the business between Intel and Qualcomm.

In 2018, amid legal wrangles with Qualcomm, Apple turned to Intel for chip supplies for its iPhone XS, iPhone XS Max and iPhone XR.

The dispute between Apple and Qualcomm has been worsening. Just recently, Qualcomm was able to secure court approvals in China and Germany for a ban on the sale of some iPhone models in the two markets.

Given that Qualcomm is the market leader in 5G modem chips, the legal dispute is likely to make it more difficult for Apple to catch up with rivals in launching 5G-compatible products.

In fact, Qualcomm has already teamed up with several Android smartphone makers, including LG, HTC. Xiaomi, Vivo, Oppo and OnePlus.

These brands are expected to launch their first 5G products this year, and a key market will be China.

Apple, if it is unable to launch its own 5G models due to problems with chip supplies, will lose its status as a premier brand in the luxury segment.

During the court hearing, Blevins revealed that Apple is considering MediaTek and Samsung as key suppliers of the chips its needs for 5G connectivity. 

He did not say whether Apple has reached a decision on the 5G modem supplier or whether it would release a 5G iPhone this year.

But from the perspective of smartphone users, what is crucial for Apple is that it must launch a 5G product as soon as possible to maintain its market leadership.

Otherwise, it might be too late.

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CG

EJ Insight writer