Apple iPhone sales set to pass 1bn mark

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The iPhone SE

Apple is on the verge of selling its billionth iPhone, a rare achievement for any consumer electronics company and one that highlights the maturation of the smartphone market

The milestone is likely to come, according to Wall Street analysts, as Apple reports its third-quarter earnings on Tuesday, when a three-month total of 40m iPhones is expected to have been sold. That would take its overall tally of iPhone sales by the end of June to 987m. 

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With analysts expecting at least another 40m units to be sold in the present quarter, or 13m a month in aggregate, the billionth iPhone could be sold as soon as this week, if it has not happened already. 

“A billion is the new million,” said Benedict Evans, partner at venture firm Andreessen Horowitz, in a nod to the handful of internet services, including Facebook and WhatsApp Messenger, that can claim a 10-figure audience. Half of the iPhone’s total has been sold in the past two years. 

To put the figure in context, Mr Evans said Apple had sold a total of 397m iPods when it stopped reporting sales in 2014, while the iPhone is close to the 1.1bn-unit output of the entire Japanese digital camera industry from 1999 to 2015. He added that the cumulative number of PCs sold since 1981 was likely to pass 5bn this year, while Nokia at its peak in 2010 sold 453m mobile phones in a single year. 

“Microsoft wanted to put a computer on every desk,” Mr Evans said. “The vision of the smartphone is now a computer in every pocket. We are now at the scale of everyone on earth.” 

Earlier this year, Apple revealed that 1bn of its devices were in active use today, including iPads, Macs, TV boxes and Watches, as it tried to turn Wall Street’s attention from the fluctuations of hardware sales and towards the more predictable flow of revenues from services, such as the App Store and Apple Music. 

However, the landmark comes at a time when momentum is flagging for the nine-year-old smartphone. Analysts expect iPhone unit sales to be about 15 to 18 per cent lower than the same time last year. Apple is grappling with what chief executive Tim Cook has called “strong macroeconomic headwinds”, which is causing some customers to hold on to older devices for longer, as well as low-cost competition in Asia and a resurgent Samsung, whose Galaxy S7 is outselling the iPhone 6S in the US. 

iPhone

“It’s pretty clear the replacement cycle for the iPhone has lengthened,” Mr Evans said. The latest results will be the first since March’s launch of the iPhone SE, a smaller and lower-cost handset than the flagship 6S. The SE has seen stronger than expected sales, with many Apple stores selling out for weeks on end. 

Analysts at Morgan Stanley said in a note to clients last week that they expected this quarter’s decline in iPhone sales to “mark the trough”, after Apple in April posted its first drop in overall revenues in more than a decade. With expectations relatively low for the launch of the next iPhone in September, which leaks show is likely to look very similar to the current generation, Wall Street is expecting growth in the low single digits, if at all, over the coming quarters. 

“Investors will increasingly look forward to the 2017 iPhone cycle,” Morgan Stanley wrote. “We see several potentially revolutionary features, especially in display and battery life, that Apple could launch in just over a year from now.” 

In the meantime, the sudden reversal in Apple’s fortunes has caused even Wall Street bulls to show signs of fatigue. When analysts at Barclays cut their estimates and target price earlier this month, they noted: “This is the third successive pre-earnings cut, which is becoming tedious.” 

Apple depends on the iPhone for more than two-thirds of its revenues, a dominance which has not been eroded despite several new product launches over the past two years. Analysts at UBS said: “Other than solid Services growth and maybe some improvement in China, there probably won’t be many positives in the quarter.”

Last week, researchers at IDC said Apple Watch sales fell by more than half in the past three months, as customers held out for a new model. 

Carolina Milanesi, analyst at Creative Strategies, said: “To repeat the success of the smartphone market is going to be pretty impossible for any category. Is Apple disappointed the Watch didn’t take off more? Probably. But I still think it has potential.”

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