Apple CEO Tim Cook.
A few days ago, Apple sold its one-billionth iPhone. Apple CEO Tim Cook announced the milestone on Wednesday.
"We never set out to make the most, but we've always set out to make the best products that make a difference," Apple CEO Tim Cook said in a statement. "Thank you to everyone at Apple for helping change the world every day."
One billion phones is, no doubt, an impressive number, but does it really mean anything? The iPhone helped define the modern smartphone market, but some have questioned its ability to compete with new, high-quality Android flagship models.
When it first arrived in the market, the iPhone met a mixed reception. Some lauded the touch screen design, while others scoffed at its high price tag. In fact, then-Microsoft CEO Steve Ballmer actually laughed at the iPhone back in 2007.
However, little did Ballmer know that Apple's revenue from the iPhone alone would eventually eclipse Microsoft's entire revenue, and that trend would continue. In 2015, Cook said that, during a certain quarter, Apple was selling 34,000 iPhones an hour, 24 hours a day. At one point, Apple's total revenue was more than double that of Microsoft's and more than Google's as well.
Still, that's the past. In early 2016, Apple announced its first decline in iPhone sales. In Apple's recently announced Q3 earnings, Apple reported its second straight quarter of declining iPhone sales, selling only 40.39 million iPhones, a 21% drop from the same quarter a year prior. At that time, the iPhone generated $24 billion by itself. Microsoft's total revenue, as reported by its 2016 Q3 earnings, was $20.5 billion.
Those numbers are still pretty high, but they represent a massive decline in Apple's major sales driver. In that sense, the billionth iPhone doesn't mean much.
"It's always great PR for vendors to hit milestones," said Forrester vice president and principal analyst J. P. Gownder. "Unfortunately for Apple, the company hit the billionth iPhone mark in an environment of year-over-year declines. Why? Because the iPhone has saturated a number of markets, leaving Apple with a big gap: The company needs to find the "next big thing" to drive growth, since many of its major products (including iPhone and iPad) are seeing declining sales."
The first few years of the iPhone were marked by excitement. Long lines wrapped around Apple's retail spaces in malls around the country, and certain models routinely selling out within the first week. However, an upgrade cycle marked by simple iterations and waning innovation has made new iPhone models feel stale.
The iPhone laid the foundation for the current smartphone market, but Apple's innovation hasn't kept pace with its biggest rivals. While Apple did make an AI pivot at the latest WWDC, only time will tell if its efforts were enough.
With that being said, the iPhone is still one of the most popular smartphones on the planet, and a status symbol for many users. Apple has finally begin targeting emerging markets with the iPhone SE, and one billion iPhones sold means that there will be demand for iOS apps for quite some time.
"A billion iPhones ensures the vitality of the developer ecosystem for a long time to come," Gownder said. "iOS is a de facto go-to for most developers, alongside the even larger Android ecosystem, and iOS enjoys many high-income users."
Additionally, the iPhone is still massively popular with businesses, and likely gained some more fans with Apple's renewed stance on security. So, the question then becomes when the lack of innovation around things like AI will matter to the enterprise, and if that will force a further drop in iPhone sales.