Apple's trillion-dollar market value may be its last

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Image source: Visual China

While we still maintain our enthusiasm for the mobile phone market amid the rapid development and sharp marketing strategies of Huawei, Xiaomi and OPPO, the cold winter of the global mobile phone market is quietly approaching.

Data from market research firm Strategy Analytics recently showed that in the third quarter of this year, global smartphone sales fell 8% year-on-year to 360 million units, marking the fourth consecutive quarter of decline in global smartphone sales.

A third-party consulting firm attributes the smartphone industry's woes to a sharp reduction in wireless carrier subsidies, longer replacement cycles for users, inventory backlogs in many regions and a lack of exciting hardware design innovations.

Compared with Chinese companies that are used to dancing in the red ocean, Apple seems to be losing confidence in the quagmire of the "midlife crisis". Although Apple's third-quarter financial report set new records in both profit and revenue, the sales data of the three major electronic devices, led by the iPhone, were disappointing. Not only was the global sales of the iPhone surpassed by Huawei, but the stock price also ushered in a sharp drop, repeatedly breaking through the 1 trillion market value.

In addition to the sluggish terminal market, Apple's new product launch at the end of last month can be said to be the least noticeable Apple launch in history. The forgotten MacBook Air, Mac mini, and iPad Pro products, in addition to the IT-based performance upgrades such as screen, chip, and hard disk capacity, the only impressive thing is the price increase.

Many people once believed that without Steve Jobs, Apple would no longer be the Apple that led the global consumer market. However, as the sales and market value of Apple products continue to soar in the post-Steve Jobs era, this worry and nostalgia for Steve Jobs are slowly being diluted.

After iPhone 6, it is hard to find another Apple product with revolutionary design language and functional innovation, which is faithfully continuing the genes left by Jobs.

Apple is still Steve Jobs' Apple, but its ability to innovate the entire industry stopped on October 5, 2011. The price increase can be said to be the most thorough overdraft of "Steve Jobs". After the carnival of trillion-dollar market value, Apple's turning point has arrived.

Smartphones enter the "arc top cycle"

The situation in which smartphone market shipments have declined year-on-year for four consecutive quarters is not a rare phenomenon. This downward trend began as early as last year.

IDC's global quarterly mobile phone tracking data shows that global smartphone shipments fell by 0.5% in 2017, the first year-on-year decline since the launch of smartphones. Among them, shipments in the Chinese market fell by nearly 5% in 2017, which was an important factor leading to the decline in global sales. EMEA (Europe, Middle East and Africa) also fell by 3.5%, while the US market was relatively stable.

After a continuous decline in the first three quarters and a large drop in the third quarter, the total sales volume of the smartphone market this year will only continue to decline compared with 2017. In addition to well-known factors such as the high penetration rate of the smartphone market, the weakness of operator channels, high inventory in mobile phone sales channels, and the prolonged replacement cycle, the ITization of the highly mature industry chain is also related.

The PC and home appliance industries, which have entered the ITization of the industrial chain, clearly show us the cruelty and boredom of the red ocean melee in this arc top cycle. The PC and home appliance industries, which were once very popular, have become highly mature and transparent after their market penetration rates approached saturation and overcapacity.

Based on price and market positioning, everyone makes homogeneous choices among a limited number of suppliers of core components such as chips and storage, uses materials from the same suppliers, uses the same foundries, and even has hardware integration solutions provided by professional third parties. Downstream terminal brand manufacturers are reduced to the role of assemblers and assemblers.

It has become difficult to establish substantial differentiation between products of different brands. The performance of core components determines the selling point of the product. This has led to terminal equipment brands becoming more and more fickle and the life cycle of a single product has been greatly compressed.

On the other hand, resorting to emotional factors such as brand marketing and appearance design has great uncertainty. In the short (product life cycle), flat (channel flatness), and fast (market changes) industrial environment, a large number of small and medium-sized enterprises gradually lose their R&D and design capabilities in the meager profits, and eventually become assembly manufacturers and are quickly eliminated. The market will move towards rapid concentration at the top cycle.

Another major feature of the industry arc top cycle is that the Chinese market begins to determine the global market structure. At the same time, in the short-term and fast red ocean competition environment, China's leading companies have demonstrated their ease in competitiveness.

In the PC era, Lenovo became the global leader in PC business by acquiring IBM, Germany's Medion AG, Japan's NEC PC business, and Fujitsu's PC business. As a core market accounting for nearly one-third of the global market share, the fluctuations in the Chinese market always affect the global PC market.

This phenomenon is even more obvious in the field of home appliances. After experiencing a period of rapid growth, foreign brands such as Japanese and Korean brands that were once popular in the Chinese market began to fail as soon as they switched to the red ocean model. Last year, China's home appliances accounted for 56.2% of the global market share. A number of domestic brands including TCL, Skyworth, Midea, Haier, Gree, etc. not only dominated the Chinese market, but also achieved remarkable results in global market expansion.

The performance of the mobile phone market for four consecutive quarters has begun to fully show the characteristics of the arc top cycle. The scale of China's mobile phone market is close to one-third of the total global mobile phone market. The dependence of major global mobile phone brands on the Chinese market is deepening, and the performance of the Chinese market also determines the performance of the global mobile phone market.

Although Samsung still holds the top spot in the global mobile phone market share, its market share in China has collapsed to less than 1%, which has directly led to its weak growth, with a year-on-year decline of 13% in the third quarter of this year. Under the dual pressure of declining sales and weak product innovation, professional managers of Apple are playing the role of a good guy in front of the capital market by deeply overdrawing the Apple brand.

Behind Apple's heyday, there is a startling decline. If Apple still fails to come up with decent technological innovations and product function designs that lead the consumer market in subsequent new products, it may exhaust the patience of its loyal consumers over the years.

5G is not a life-saving straw

Ryan Reith, vice president of IDC's All Mobile Phones Tracking Report project, is optimistic about 5G. He believes that the full deployment of 5G networks will be a major driving force for the smartphone market.

In my opinion, the opposite may be true, and the deployment of 5G will completely kick off the decline of the smartphone market.

The industry is looking forward to 5G, because several core technologies of 5G are the necessary foundation to support the scenario-based development of science and technology. In the future, wireless networks will deploy more than 10 times the number of existing wireless nodes. In the coverage area of ​​macro stations, the ratio of active users to sites may reach 1:1, that is, users and service nodes correspond one to one. Ultra-dense heterogeneous networks 5G networks will support more than 1,000 times the growth of traffic in the future.

It is foreseeable that services such as audio, video, and images for large-scale users will see a sharp increase. 5G technology will evolve into a content distribution network, adding intelligent virtual networks to traditional networks to carry massive amounts of new transmission content. D2D and M2M technologies will also see large-scale development after the popularization of 5G networks. Short-distance data direct transmission technology and intelligent communication and interaction between machines will give machine terminals themselves more "intelligence."

When 5G reaches the popularity of 4G networks today, the number of interconnected terminals around the world will exceed 50 billion, truly realizing the Internet of Everything. Cloud computing has entered the mobile end in the 5G era. Mobile smart terminals in mobile networks will connect to remote service providers in an on-demand, easily scalable manner to obtain the required resources.

With the support of the new generation of communication networks based on 5G, after smartphones, multi-form smart terminals will fully penetrate into all personal independent life scenarios. The smart home scene ecosystem created by Amazon Alexa voice system and echo smart speakers has gradually become clear, and many Internet giants and car companies are working hard to promote the autonomous driving and smart car ecosystem. And major developed economies have planned smart cities.

Smartphones will not only face the diversion of multi-format and multi-entry smart terminals in the future, but the uniqueness of mobile phone functions will also be broken. In terms of the layout of future multi-polar terminals, Apple has not yet delivered a satisfactory answer. As the world's most valuable technology company, Apple's investment in R&D in 2017 was lower than that of traditional technology giants such as Google, Microsoft, and Intel.

Amazon, which ranks second in market value, became the company with the highest R&D investment last year, with an investment of US$22.6 billion, exceeding the second-ranked Alphabet by a full US$6 billion and doubling the amount in 2016.

As the world's first technology company to launch an intelligent voice system and has an absolute advantage in intelligent hardware and supply chain management, Apple has been left far behind by the Alexa intelligent voice system and echo smart speaker combination launched by e-commerce company Amazon in the competition for the smart home entrance. Google Assistant, which came later, also surpassed Apple HomeKit in a short period of time, forming a trend of competing with Amazon.

In the field of smart car systems, Apple also got up early but arrived late. Its CarPlay, which was launched in the same year as Google's Android Auto, was sought after by car companies and had a good initial coverage rate.

However, just like Siri on mobile phones, the usability and practicality of the CarPlay in-vehicle system did not meet the expectations of the consumer market. Its performance was mediocre in the later period, and it was robbed of all the limelight by the latecomer Amazon Alexa. In terms of autonomous driving systems, Apple has experienced a period of vacillation between building cars and systems. The newly exposed system testing function is evaluated by the industry as Google's technology three years ago. Apple's ability in autonomous driving has even fallen behind Baidu.

Without Jobs, Apple has continued to reap the dividends of the ecosystem and product planning left by Jobs, but its mediocrity in exploring new areas and innovating product technology has exceeded people's expectations.

The "fate of mediocrity" under a trillion-dollar market value

In 1977, Jobs and Wozniak saw the opportunity of personal computers changing the world and founded Apple. Jobs's vision, obsession and product talent helped Apple establish its own track. When the famous Macintosh was unveiled in a very Jobsian way, announcing the arrival of the Apple era, Jobs was also kicked out by John Sculley, the CEO of PepsiCo, who he personally invited, and the joint board of directors because of his obsession and willfulness.

This "sinner" of Apple, whom Jobs never forgave in his life, attacked from all sides, focused on making money, and built a huge product line. While pushing Apple's market value from hundreds of millions of dollars to tens of billions of dollars, he also brought Apple to the brink of bankruptcy. Apple has lost the label of innovation left by Jobs.

At the end of 1996, when Apple acquired NEXT for $400 million, announcing the return of Jobs, after a decade of dormancy in the film and entertainment industry, a more mature Jobs, who understood marketing better and public psychology better, returned as a king. Jobs not only re-established Apple's innovative spirit and the ultimate product culture, but most importantly, he established a religious appeal for Apple in the global consumer market. In the year he died of cancer, he helped Apple become one of the IT companies with the highest market value in the world.

As Jobs' designated successor, Cook is a loyal executor of Jobs' strategy, with excellent supply chain management and cost control capabilities. On the product roadmap planned by Jobs, he maximized the consumer culture influence and market appeal that Jobs created for Apple, and through constant compromise, he created an Apple that is the most profitable and has the highest market value.

When Apple created high profits by raising prices on the basis of a sharp decline in sales, and launched a $100 billion stock return plan at the peak of its market value with $285 billion in cash reserves, but its R&D investment was nearly twice that of Amazon, the second largest technology company by market value, Apple's growth crisis has been fully exposed.

The mobile phone industry is full of examples of rise and fall, from Ericsson, Motorola to Nokia. When a giant becomes obsessed with existing achievements and loses the motivation to innovate and change, and misses out on technological revolutions and key market opportunities, it often collapses much faster than the market position it has built through hard work.

The technology industry is an industry that produces many innovators and adventurers. Behind every technology giant stands a "paranoid" at the helm. From the old generation of Bill Gates and Steve Jobs to the middle generation of Bezos and Musk, and the new generation of Zuckerberg, the "paranoids" are strong, arbitrary, keen sense of smell, selfless dedication and adventurous spirit, which are the krypton elements that enable technology companies to maintain their innovative vitality and key market competitiveness during the geometric growth of their size.

After two "post-Jobs eras", Apple has achieved growth in size. Without Jobs, Apple has been heading towards a deep crisis in its brief glory. We cannot ask for more from Tim Cook. As a firm executor of Jobs's route, he is the last gift Jobs left to Apple.

The huge Apple is becoming smoother, even filling the bite mark in its logo. In the process of constantly compromising with the consumer market and capital market, the religious appeal that Jobs established in the consumer market through extreme innovation is rapidly fading. The collapse of Apple's faith may be one or two generations away, or it may happen in an accidental crisis.

Apple, with its trillion-dollar market value, is Steve Jobs' last spiritual totem.