The smartphone era is coming to an end

Yesterday, Apple announced that it will cut the estimates production of their brand new iPhone X in half. The Cupertino tech giant had thought to sell at least 40 miliion devices this year. But the demand for the iPhone X has been ‘somewhat’ slow, especially in one of Apples most important Asian market, China.

Does this mean that we have reached the end of our smartphone era already? Or is this just a minor bump in the road for our beloved portable computers?

As you probably know, I am not really a tech blogger, but product life cycles are something that absolutely fascinated me. So I thought I would share some of my thoughts. Oh yeah, these words were written on my iPhone X.

Product Innovation Cycles Slowed Down

Sure, we have learned to work and play more efficiently with our smartphones. We might even tend to neglect the fact that our phones are significantly faster and more stable than a few years ago, allowing us to use them in whole new ways than we did before. However, the smartphone concept itself has not changed significantly.

Product life cycles can be broken down into the following trend stages – that pretty much apply to any commercial product:

  1. It starts with the innovation of a new product that is brought to market,
  2. The first early movers try out the product,
  3. Ideally this leads to the creation of a hype phase,
  4. Followed by a long road to mass adoption,
  5. That hits a natural (market or technical) ceiling,
  6. And inevitably the decline of a product-usage – interest.

The smartphone has gone through nearly all of these steps. From the very first hype phase around the very first iPhone or the ‘best iPhone ever’ – for many the iPhone 3Gs – that brought the product to the masses, to the beautiful iPhone X that we have today. The tenth generation of Apples signature product.

Top line growth is slowing down innovation

However good or profitable the iPhone X has been for Apples top line growth, the interest and expected user adoption rates have been considerably lower than Apple and analysts had anticipated. My hypothesis is that Apple played it safe with its latest signature product and pushed the limits just a little too much. The market is saturated with far less costly alternatives, and Apple’s latest and greatest phone just didn’t really measure up to the competition. Don’t get me wrong, FaceID is grand and Animojis a ton of fun, but the iPhone X still just lacks real hardware innovation that people need to have.

Hence we will need to watch out that the interest in this product category does not start to decline steeply soon. The general public appears to be generally happy with what they can do with their current smartphones and are waiting for the next truly big innovation that they can spend their money on.

Short Release Cycles Kill Competitive Hardware Advantages

But in the hardware side, we see something very different. iPhones are by no means the fastest phones on the market. Its camera (one of its main features) has lost a bit of its shiny filter, with Samsung and Google outshining Apple on a number of fields. And there are a number of Android phones out there that are simply offer better hardware at a lower price point. At the end of the day its probably safe to say that product differentiation through hardware has become increasingly difficult if not sheer impossible.

Maybe Apple should switch up their production cycles to two years to allow their engineers to produce something spectacular and innovative once again

Creating a sustainable product advantage is a thing of the past in this market setup. Mass production of smartphones and the market dependency on only a handful of suppliers, makes it very difficult to differentiate your smartphone offer through hardware. With product refresh cycles of around 12 months, any product hardware innovations can be matched within a mere number of months.

Apple Must Create More Independence In Their Supply Chain

Apple is highly dependent on their main competitors for the production of the components that are needed to create their phones. Samsung in particular is one of the key suppliers for iPhone and iPad parts. If it weren’t for Samsung, the iPhone would not have a screen, nor a proper memory chip.

The dependency on suppliers such as Samsung is one, if not Apples biggest achillesheel. If Apple wants to gain a true competitive hardware advantage, they will need to invest heavily in their own production facilities and supply chain.

It is not that they cannot do so, Cook is by all means a master in production optimization, and they have the financial means to do so, but it is a question of whether they want to. By ‘merely’ being a marketing machine, the calculatable risk for Apple is fairly low. The product margins are easy to work with and the distribution network has matured. Both the own stores as well as the telecommunications companies do a great job at bringing the products to market efficiently.

But if Apple wants to prolong the smartphone era that made them to what they are today, they need to do more than bring out a new color line of their smartphones and take a huge leap forward in product innovation.

Is The Smartphone Era Really Over?

I just hope that Apple, Google and Samsung would focus more of their attention on the way phones are used. I feel that smartphones are seen as entertainment devices more than anything, instead of productivity machines. I love working on my phone, it is something personal, portable and it allows me to be flexible all day long. There are days in which I highly doubt whether I need a laptop or desktop pc at all. Sure a bit of screen real estate can be useful sometimes, but for 70–80% of that what I need to do, my smartphone will do just fine.

In order for the masses to stay interested in portable computers as such, we will need to start seeing some true innovation from the big three. Not just a better camera, or a faster processor that can deal with more ways to play angry bird. Virtual Reality and Artificial Intelligence are two technologies waiting to break out into the masses and the next portable computer needs to make a huge leap. Incremental changes are not gonna cut it anymore. If Apple wants to keep its name and reputation up as the most innovative company in the world, it will need to disrupt its own baby. It will need to make an end to smartphone era.

This post was originally posted January 30th 2018 on my personal website:

Dutch Digital Entrepreneur. Love to share thoughts on innovation and digitalization (ceo @gandt ventures) - writer @thestartup