iPhone new machines are not selling enough why apple wants to launch a hardware subscription service?

Financial Associated Press (Shanghai, editor Ma Lan) news, in the fourth quarter of 2021, Apple's revenue and net profit hit a single quarter record high, and the supply of new iPhones exceeded demand. But the latest news is that in the case of new machines still not enough to sell, there are reports that Apple is considering launching a hardware subscription service.

The so-called subscription is a combination of installment payment and trade-in, when the user will no longer own the device, but only the right to use. What does this seemingly promotional mean for Apple?

In the fourth quarter of last year, Apple's hardware business: the iPhone achieved revenue of $71.63 billion, an increase of 9% year-on-year; Mac products achieved revenue of $10.85 billion, an increase of 25% year-on-year; iPad achieved revenue of $7.25 billion, down 14% year-on-year. In addition to the iPad, sales of other devices have made great progress.

Only from the financial report, Apple's layout seems to be redundant, iPhone, Mac is not worried about selling, why add another subscription service on the basis of the original installment payment.

But in fact, Apple's performance for the whole year of 2021 benefited from the release of the iPhone 12 and subsequent iPhone 13. As the flag model that opened the "super cycle", the iPhone 12 opened Apple's 5G era, and the product cycle will continue until 2022 according to industry estimates. On the other hand, the gradual return of consumers to the market after the vaccine has also led to a wave of consumption boom.

But the super cycle is not every year, and what Apple needs to do more is to build a moat in the weak cycle of the years.

A big fan of older models

Apple's phones have always been known for the stability, battery capacity, and design of their systems, which have helped it become the only company that can compete with Android phones, but have also hindered its development from another perspective.

Especially in the stage of rapid technological development. The development of a new technology cannot be achieved overnight, and the release of new machines is a mandatory requirement of Apple's annual conference, so in the past few years, Apple's new machines have become interchangeable and non-replaceable for many people.

In fact, since the release of the iPhone 6, the models behind Apple have no way to achieve breakthroughs in key technologies, there is not much freshness, only the big screen remains. As a result, many people choose to continue to be true to the iPhone 6.

Not only Apple, but almost all smartphones have ushered in a decline in sales in recent years. Apple sales have even fallen by 20%, or even 30%, in some quarters. Until the birth of the iPhone 12, it woke up the needs of some people to replace the new, so that Apple will not always fall face down.

Apple now intends to launch a "subscription" program, some of which can be used as a motivation to stimulate users to change new ones.

Just imagine, add a little money every month (or maybe even no money), but you can update it every year when Apple is out of a new machine, this kind of activity that does not change white, don't you have a heart?

As long as the user changes the new machine, the sales volume of the new machine rises, and the subscription fee brought by the new machine may also rise; at the same time, the old machine that is replaced can continue to circulate through Apple.

This is the three eagles with one stone.

The second-hand market has more potential than new machines

According to the International Data Corporation (IDC), used smartphone shipments will reach 351.6 million units in 2024, with a compound annual growth rate of 11.2% from 2019 to 2024.

According to the data of the second-hand platform SellCell, 9 of the 10 most popular old-for-new mobile phones in 2021 are Apple's iPhones, of which the iPhone 11, iPhone XR, and iPhone 12 Pro Max are in the top three.

If Samsung is the boss of the new smart phone market, then Apple must be the deserved overlord of the second-hand phone.

But Apple itself has not made much achievements in the second-hand mobile phone market, the only second-hand attempt on the mobile phone in the Chinese market, or the official sales of the iPhone 6, there is no other similar activity after the rapid out-of-stock.

Although China is apple's most important market at present, Apple is reluctant to do official sales on The Official Website in China.

One of the reasons is that the sales of official turnover machines are strong, which can easily affect the sales of new machines. Another reason is that it is always hesitant to recycle old phones, because downstream manufacturers such as Foxconn have the ability to dispose of recycled used iPhones at a lower cost, and it is not so attractive to do refurbishment machines only from the cost point of view.

The second-hand market is fundamentally a price battleground. Apple's official depreciation pricing logic is calculated according to the price of dismantled parts, which is about 60% lower than the whole machine recycling. Although Apple has stepped up the recycling of second-hand mobile phones in recent years, it is still impossible to compare with China's second-hand platforms, and most of the users' second-hand mobile phones are still recycled on the e-commerce platform.

With a subscription plan, that would change completely. Apple does not need to compete with the platform for the second mobile phone in the hands of consumers, because when the replacement cycle comes, the second mobile phone will automatically flow back to Apple from the hands of consumers, and Apple not only does not need to re-bid to buy the second mobile phone, but even earns a new price difference.

In this way, not only has the sales of new machines not been affected, Apple can continue to provide customers with different models to sink the market, and all that is needed is the maintenance cost when the equipment is recycled.

Spend money every month, but the phone doesn't belong to me

Another point of Apple's subscription plan lies in the psychology of consumers.

Once the user chooses to participate in the subscription, he begins to accumulate his own sunk costs, and the more he holds the phone for one month, the higher he invests in the Apple phone.

After reaching a point in time, users will find that the cost of changing their mobile phones will become very high: not only will they give up all the subscription fees in the past, but also pay a new payment for the purchase of mobile phones.

Long-term subscriptions will also strengthen customers' stickiness to Apple devices and services, in other words, help them develop inertia that only uses Apple hardware, and when they want to change again, there is a painful adjustment period.

I would like to ask, which is more attractive among mobile phones that have developed the habit of use or mobile phones that need to spend money and adapt to the system again?

As long as Apple can continue to maintain its own technical echelon is not lagging behind, then this subscription service is equivalent to buying Apple an insurance, making it difficult for users to leave Apple's big army.

An added benefit is that because ownership no longer belongs to the consumer, when a device fails, the consumer may only be able to return the device to Apple or an authorized dealer for repairs, rather than finding a fly shop to solve it. Another seemingly small amount of income went into Apple's pocket.

In terms of internal support for subscription hardware, Apple has long been prepared. Among the many programs it has partnered with U.S. telecom operators is a monthly payment to unlock the use of the device. Now it's just about leaving dealers behind and putting the contract directly between consumers and Apple.

In this way, Apple's subscription hardware is not superfluous, but more than one.

According to Apple itself, the plan could start next year, and the details are still being discussed. At present, quite a few people believe that as long as the price is reasonable, they probably will not oppose this service.