“5G is a once-in-a-decade kind of opportunity,” Tim Cook told the media during the Q&A portion of Apple’s Q3 earnings call. “And we could not be more excited to hit the market exactly when we did.”
The truth of the matter is its timing was a mixed bag. Apple was, by some accounts, late to 5G. By the time the company finally announced that it was adding the technology across its lineup of iPhone 12 variants, much of its competition had already beat the company to the punch. Of course, that’s not a huge surprise. Apple’s strategy is rarely a rush to be first.
5G networks are only really starting to come into their own now. Even today, there are still wide swaths of users who will have to default to an LTE connection the majority of the time they use their handsets. The arrival of 5G on the iPhone was really as much about future-proofing this year’s models as anything. Consumers are holding onto phones longer, and in the three or four years before it’s time for another upgrade, the 5G maps will look very different.
Clearly, the new iPhone didn’t hit the market exactly when Apple had hoped; the pandemic saw to that. Manufacturing bottlenecks in Asia delayed the iPhone 12’s launch by a month. That’s going to have an impact on the bottom line of your quarterly earnings. The company saw a 20% drop for the quarter, year-over-year. That’s hugely significant, causing the company’s stock to drop more than 4% in extended trading.
Apple’s diverse portfolio helped curb some of those revenue slides. While the pandemic has generally had a profound impact on consumer spending on “non-essentials,” changing where and how we work has helped bolster Mac and iPad sales, which were up 28 and 46% respectively, year-over-year. It wasn’t enough to completely stop the iPhone stumble, but it certainly brings the importance of a diverse hardware portfolio into sharp relief.
China was a big issue for the company this time around — and the lack of a new, 5G-enabled iPhone was a big contributor. In greater China (including Taiwan and Hong Kong), the company saw a 28% drop in sales. There are a number of reasons to be hopeful about iPhone sales in Q4, however.
As I noted this morning, smartphone shipments were down almost across the board in China for Q3, per new figures from Canalys. Much of that can be chalked up to Huawei’s ongoing issues with the U.S. government. Long the dominant manufacturer in mainland China, the company has been hamstrung by, among other things, a ban on access to Android and other U.S.-made technologies. Apple’s numbers remained relatively steady compared to the competition and Huawei’s issues could present a big hole in the market. With 5G on its side, this next quarter could prove a banner year for the company.