Apple's Strategies for Addressing Weak iPhone 16 Demand

Current sales performance of iPhone 16

Despite reporting record overall sales, iPhone 16 demand appears weak, particularly in Greater China, where sales declined by 7%. Apple is addressing this with competitive pricing and trade-in offers, aiming to enhance value retention and stimulate consumer interest.

"Apple Inc. (NASDAQ:AAPL), whose iPhones currently hold the Top 4 (and 5 of the Top 10) best-selling smartphone models by sales, recently reported an all-time revenue record in sales in its most recent financial results." --- (AAPL, press release, 2024/05/08)

"They still start at just $7.99 for iPhone 16 and $8.99 for iPhone 16 Plus With exceptional durability, longevity and software updates, iPhone holds its value longer than other smartphones, which means it's even easier to benefit from excellent iPhone trade in offers from Apple and our partners, including up to $800 off in the U." --- (AAPL, event transcript, 2024/09/09)

"Apple Inc. | Q3 2024 Form 10-Q | 13 Segment Operating Performance The following table shows net sales by reportable segment for the three- and nine-month periods ended June 29, 2024 and July 1, 2023 (dollars in millions): Three Months Ended Nine Months Ended June 29, 2024 July 1, 2023 Change June 29, 2024 July 1, 2023 Change Net sales by reportable segment: Americas $ 37,678 $ 35,383 6 % $ 125,381 $ 122,445 2 % Europe 21,884 20,205 8 % 76,404 71,831 6 % Greater China 14,728 15,758 (7) % 51,919 57,475 (10) % Japan 5,097 4,821 6 % 19,126 18,752 2 % Rest of Asia Pacific 6,390 5,630 13 % 23,275 23,284 — % Total net sales $ 85,777 $ 81,797 5 % $ 296,105 $ 293,787 1 %" --- (AAPL, sec filing, 2024/Q3)

"Customers in more than 58 countries and regions, including Australia, Canada, China, France, Germany, India, Japan, Malaysia, Mexico, South Korea, Türkiye, the UAE, the U.K., and the U.S., will be able to pre-order iPhone 16 and iPhone 16 Plus beginning at 5 a.m. PDT this Friday, September 13, with availability beginning Friday, September 20." --- (AAPL, press release, 2024/09/09)

"We're also taking a big leap forward with audio performance. IPhone 16 Pro brings new hardware, software, and intelligence innovations previously unseen on smartphones." --- (AAPL, product launch event, 2024/09/09)

Customer feedback and marketing strategies

Apple is focusing on customer feedback by enhancing financing options and marketing strategies to boost iPhone 16 demand. They are implementing installment plans and trade-in programs to improve affordability, particularly in emerging markets, while also expanding retail strategies to drive momentum.

"And, you know, given you're struggling to reduce your net -- your -- reach your net neutral cash position and your margins are sort of near highs, do you see ways to deploy capital more to spur replacement demand in your installed base either with greater device financing, more investment in marketing, more promotions." --- (AAPL, earning call, 2024/Q2)

"We've introduced several financing solutions from installment plans to trading programs that reduce the affordability threshold and therefore, customers tend to buy -- want to buy at the top of the range that is very valuable for us in developed markets, but particularly in emerging markets where the affordability issues are more pronounced." --- (AAPL, earning call, 2024/Q2)

"How much of the momentum you're seeing would you associate with your sort of retail strategy in that market, retail expansion relative to maybe some of the supply change or the sort of manufacturing changes or strategy you've undergone or taken in that market itself." --- (AAPL, earning call, 2024/Q2)

Pricing adjustments and competitive positioning

Apple's response to weak iPhone 16 demand includes strategic pricing adjustments, particularly in Mainland China, where sales have shown acceleration. Additionally, improved gross margins from cost savings suggest a focus on competitive positioning despite currency challenges.

"So I'll steer clear of that. From what we saw was an acceleration from Q1, and it was driven by iPhone and iPhone in Mainland China before we adjust for this $5 billion impact that we talked about earlier did grow." --- (AAPL, earning call, 2024/Q2)

"Year-over-year Products gross margin percentage increased during the first six months of 2024 due primarily to cost savings, partially offset by the weakness in foreign currencies relative to the U.S. dollar." --- (AAPL, sec filing, 2024/Q2)

Supply chain strategies for iPhone 16

Apple's supply chain strategies for the iPhone 16 focus on enhancing semiconductor capacity and sustainability. TSMC's increased utilization of advanced technologies supports production, while Apple's commitment to carbon neutrality by 2030 aligns its supply chain with environmental goals, ensuring a robust and responsible approach to manufacturing.

"Over the past three months, we have observed strong AI and high-end smartphone related demand from our customers, as compared to three months ago, leading to increasing overall capacity utilization rate for our leading-edge 3-nanometer and 5-nanometer process technologies in the second half of 2024. Thus, we" --- (TSM, earning call, 2024/Q2)

"Today, Apple is carbon neutral for global corporate operations, and by 2030, plans to be carbon neutral across the entire manufacturing supply chain and life cycle of every product." --- (AAPL, press release, 2024/05/07)

"N2 will deliver full load performance and power benefit, with 10 to 15 speed improvement at the same power, or 25% to 30% power improvement at the same speed, and more than 15% chip density increase as compared with the N3E.N2 technology development is progressing well, with device performance and yield on track or ahead of plan." --- (TSM, earning call, 2024/Q2)

"First part, a lot of questions on the tight supply 5 and 3-nanometer? And so are your customers engaging with you early on the planning into 2025 capacities for a better upgrade cycle?And then for silicon content, recall a few years back when 5G just started to ramp are used to provide the silicon content expectations of 5G high-end and low-end smartphones, so I wonder at this point of time, if you have any estimates for AI for smartphone going to next two, three years?" --- (TSM, earning call, 2024/Q2)

Future outlook and strategic initiatives

Apple's future outlook includes enhancing product accessibility and a commitment to sustainability, both of which aim to improve user engagement and resonate with consumers. These strategic initiatives are part of a broader effort to address the challenges posed by weak iPhone 16 demand.

"And in honor of Global Accessibility Awareness Day, we introduced all new capabilities to give users more ways to take advantage of all our products can do." --- (AAPL, earning call, 2024/Q3)

"At Apple, we're dedicated to helping protect the planet for future generations." --- (AAPL, Twitter, 2024/04/22)

Impact of economic conditions on demand

Economic conditions, including inflation, geopolitical tensions, and consumer confidence, are significantly impacting demand for the iPhone 16. Retailers note that uncertainty around economic health and rising interest rates are causing consumer concerns, which directly affect discretionary spending on products like smartphones.

"Other Information ." We expect continued uncertainty in our business and the global economy due to inflationary trends, a challenging macro environment, geopolitical conditions, supply chain disruptions, volatility in employment trends and consumer confidence." --- (WMT, sec filing, 2025/Q1)

"and productivity. In addition, global economic and geopolitical conditions and additional or unforeseen circumstances, developments, or events may give rise to or amplify many of these risks." --- (AMZN, sec filing, 2024/Q1)

"While we cannot control or reliably predict general economic health or changes in competition, we believe that we have been successful historically in adapting our business to these changes, such as through adjustments to our pricing and merchandise mix, including increasing the penetration of our private-label items." --- (COST, sec filing, 2024/Q2)

"And even as inflation moderates and we see sequential improvement in discretionary category trends, higher interest rates, uncertainty around the future of the economy, continued social and political divisiveness and the upcoming election cycle have consumers concerned about what lies ahead." --- (TGT, earning call, 2025/Q1)

"We, along with other retail companies, are influenced by a number of factors including, but not limited to: catastrophic events, weather and other risks related to climate change, global health epidemics, competitive pressures, consumer disposable income, consumer debt levels and buying patterns, consumer credit availability, disruptions in supply chain and inventory management, cost and availability of goods, currency exchange rate fluctuations, customer preferences, deflation, inflation, fuel and energy prices, general economic conditions, insurance costs, interest rates, labor availability and costs, tax rates, the imposition of tariffs, cybersecurity attacks and unemployment." --- (WMT, sec filing, 2025/01/31)

Innovations and features driving customer interest

Apple is focusing on meaningful innovations, such as enhanced AirPods Pro features and advanced chip performance, to drive customer interest. Their commitment to accessibility and continuous technological advancements aims to enrich user experiences, addressing weak iPhone 16 demand by broadening appeal across product lines.

""These features on AirPods Pro will make an impact on so many people by driving more awareness around hearing health and empowering individuals with new customizable tools to help them stay connected."" --- (AAPL, press release, 2024/09/09)

"It's why we're going to keep investing in the meaningful innovation that enriches the lives of all of our customers." --- (AAPL, earning call, 2024/Q2)

"This is critical to give the chip the fastest, most efficient access to our generative models, as well as drive the performance of Apple Intelligence." --- (AAPL, product launch, 2024/09/09)

"We're continuously pushing the boundaries of technology, and these new features reflect our long-standing commitment to delivering the best possible experience to all of our users." "Each year, we break new ground when it comes to accessibility," said Sarah Herrlinger, Apple's senior director of Global Accessibility Policy and Initiatives." --- (AAPL, press release, 2024/05/15)

"You noted both mix and leverage. Any more color on the mix, if you could share if customers are at all starting to mix down across product lines or is this more a mix across product lines?" --- (AAPL, earning call, 2024/Q2)