Apple admits smartphone slowdown as iPhone 15 launch nears

On the cusp of the iPhone 15 debut, Apple has finally admitted what has long been clear: The industry is facing a smartphone slowdown. Also: Another M3 Mac goes into testing, Apple seeks to downplay its Goldman Sachs rift, and Vision Pro developer labs get off to a sluggish start.

Last week in Power On: The iPhone 15 will have thinner bezels in another step toward Apple’s dream phone.

Less than six weeks before it unveils the iPhone 15, Apple Inc. has finally acknowledged a hard reality: The US smartphone market is mired in a slump.

After reporting sluggish iPhone sales on Thursday, sending Apple stock sliding, the company disclosed that “the smartphone market has been in a decline for the last couple of quarters in the United States.”

That presents a challenge for the next iPhone, which promises to be the biggest update to the device in three years. When Apple rolls out major phone overhauls — like it did with the iPhone 6 in 2014, iPhone X in 2017 and iPhone 12 in 2020 — the new features usually sell themselves. In those earlier examples, the company kicked off major upgrade cycles by offering bigger screens, revamped designs (with no home button in the case of the X model) and 5G connections.

Normally, the iPhone 15’s bells and whistles would be similarly enticing. The Pro model includes borders around the display that are one-third thinner, a titanium frame that feels lighter and more premium than the current stainless-steel design, big camera improvements, a USB-C charging port, and a much faster processor.

But the sales prospects of the new iPhone won’t hinge on features alone. Apple will have to work harder to coax shoppers into opening their wallets.

A key theme of its post-earnings conference call Thursday was the slowdown. Sales of the iPhone slid 2.4% to $39.7 billion last quarter, coming in just below Wall Street estimates. The device has had earlier blips — including a rough patch in China in early 2019, a Covid-related launch delay in 2020 and supply chain problems in 2022 — but the iPhone doesn’t usually suffer sales declines.

Apple blamed currency headwinds for hurting results, but also admitted that US shoppers aren’t spending on its products the way they used to. Sales in Apple’s home country paled in comparison with China, which Chief Executive Officer Tim Cook called out as a highlight of the quarter.

That said, Apple expects the iPhone performance to improve in the current period. That means it will be better than a 2.4% decline — perhaps it will even grow. But the company warned that overall revenue will probably stay in the same range as the past quarter, when it fell. In fact, Apple is poised to suffer its fourth straight quarterly sales decrease, something that hasn’t happened since 2001.

That’s a tough backdrop for the iPhone 15, which I’m told will go on sale around Sept. 22 — following an event planned for either Sept. 12 or Sept. 13. The timing means Apple will get about a week of iPhone 15 sales in its fiscal fourth quarter, which runs through September.

The real test for Apple will be the holiday quarter, its sales period extending from October through December. That’s invariably the company’s busiest time of year.

One thing going in Apple’s favor: This holiday season should have a favorable comparison with the same stretch of 2022. Last year, the iPhone 14 Pro and Pro Max ran into a pandemic-related production stoppage at Foxconn Technology Group plants in China. That dragged down the iPhone’s performance during the season.

So it shouldn’t be hard for the iPhone 15 to show healthy year-over-year growth (assuming it doesn’t run into its own production problems). If Apple can’t manage that, the smartphone slowdown could be even worse than feared.

Another M3 Mac goes into testing at Apple’s campus. The company continues to ramp up testing of Macs with the new M3 chip, which could debut as early as October. So far, I’ve reported on several next-generation machines in testing, including new iMacs, as well as entry-level and high-end MacBook Pros. Today, I can add another M3 Mac to the list: a model running a base M3 chip.

The Mac in testing includes eight CPU cores (made up of four efficiency cores and four performance cores), 10 graphics processor cores and 24 gigabytes of memory. This machine is running macOS Sonoma 14.1, the first point update to the upcoming new Mac software release. Given the M3 chip’s specifications in this particular Mac, I believe it probably represents a next-generation Mac mini.

The entry-level M3 core counts are the same as those in the M2, coming in at eight CPU and 10 graphics cores, but the M3 Pro comes in a bit stronger than its predecessor, reaching 12 CPU cores and 18 graphics cores. I estimate that a high-end M3 Max could reach 14 CPU cores and over 40 graphics cores.

The struggling Mac business could use a boost, but it will take time for these new machines to show up in Apple’s results. During the latest earnings call, the company said it anticipates that Mac revenue will decline by a double-digit percentage in the fourth quarter. Apple won’t be launching any new Macs until the first quarter of fiscal 2024 (which begins at the start of October), so existing Macs will have to drive sales for a while.

Apple seeks to downplay rift with Goldman Sachs. The last several months have been tumultuous for Apple’s relationship with Goldman Sachs Group Inc. The bank has said that its backing of the Apple Card is costing it hundreds of millions of dollars annually. And earlier this year, the pair drew criticism after users of their new savings account struggled to withdraw cash. Recently, there’s been speculation that Goldman is looking to offload the partnership onto American Express.

Fast forward to this past Wednesday, the day before Apple earnings, and the companies used a key milestone as an opportunity to say all is well with their partnership. The new savings account has reached $10 billion in deposits (no small feat). Apple’s top financial products executive said that the tech giant is “thrilled to see the excellent reception from customers both new and existing.” A Goldman representative, meanwhile, said that the bank is “pleased” with the success of the program.

Apple’s Vision Pro labs get off to a sluggish start. As I predicted, initial interest in creating apps for the Vision Pro headset is low. This shouldn’t be a big surprise. The device is extraordinarily pricey, will sell in low quantities (at least compared with other Apple products) and uses technology that will baffle many people. All that means it’s not worthwhile for most software makers to bet on the platform.

Aiming to spur interest in the Vision Pro, Apple launched developer labs this past week. The labs let software makers come into Apple offices to try out their code live on Vision Pro hardware (instead of a Mac-based simulator).

Developers who attended these sessions said that the rooms weren’t filled up, and they were surprised by how few people attended. The event consisted largely of Apple engineers assisting with code troubleshooting. Some developers who did want to go griped about the lack of sessions on the East Coast.

The Vision Pro units were seemingly the same as the ones used in demos at WWDC in June, and the software didn’t appear to include anything that hasn’t yet been shown. Even so, the labs were kept under tight wraps by Apple. Multiple developers said that the company emphasized keeping the proceedings secret from the press. Bloomberg