Technology giant Apple will face a drop in demand for its flagship product, the iPhone; however, a Washington Post report indicates that the Cupertino, California , firm has a plan B.
According to the medium, as customers expect more between updates and the market for smart phones are saturated. Apple can recharge by charging higher prices for each phone and getting more money from services such as streaming music, videos and data storage.
However, the publication says that most of the companies that supply the components of the iPhone do not have a random plan.
This means that what can be bad for the signing of the apple, can be terrible for suppliers, an example of the above is what happened on two continents in a matter of hours. The Japan Display company , which gets more than half of its income from its share in the iPhone, cut its forecasts.
For its part, Lumentum Hondings , one of the leading sensor manufacturers for facial recognition for the device, reduced its outlook for the second quarter. Recently. Hon Hai Precision Industri, the largest assembler, also reduced its estimates.
In turn, several analysts pointed out that suppliers depend more on volume than Apple. Faced with a mature smartphone market, Apple’s strategy has been to attract customers to pay more for phones with new features, such as facial recognition and more vibrant screens.
The Washington Post argues that the 3D detection components of companies like Lumentum are found in iPhones that often cost more than a thousand dollars.
Fewer people can pay so much for a new device, but when the sale occurs, suppliers get a single payment for their component, while Apple can earn hundreds of extra dollars for each gadget.
The company reported an almost zero increase in the number of iPhones sold, but revenues in its business increased 29 percent from the previous year.
This means that if demand for newer and more expensive iPhones decreases, Apple can cut component orders or delay shipments, leaving suppliers with more inventories; this makes it more likely that they will reduce prices when Apple returns to the negotiating table.
The company is increasingly promoting its base of 1.3 billion active devices, instead of the number of iPhones it sells per quarter; and the firm has been making changes to keep these existing customers happy while selling them more services.
With longer iPhones, users are more likely to subscribe to new services, which makes the devices more lucrative for Apple than just the initial cost. But these services are not sources of additional income for component suppliers.