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Apple’s iPhone 11 probably won’t be revolutionary. But the company needs it to sell.
The company is expected to unveil its latest iPhone lineup at its headquarters in Cupertino later on Tuesday. The rub: None of these devices are expected to look radically different from those released last year, per my CNN Business colleague Samantha Kelly.
From Samantha: “At a time when some of its competitors are launching innovative but riskier concepts, such as Samsung’s foldable smartphone and its two 5G devices, Apple (AAPL) is expected to stay the course. That, too, may be risky. The iPhone business — still Apple (AAPL)’s single biggest moneymaker — has been lackluster at best of late.”
The backdrop: Apple’s core iPhone sales have declined for three consecutive quarters. For the three months ending in June, they dropped by nearly 12% compared to the previous year.
Despite this, shares have been resilient in 2019, rising more than 35%. But Apple’s stock price is still below its 2018 peak.
What’s happening: Demand is slowing as customers hold onto their smartphones for longer. Apple is also in a slump in China, once its most promising market. The bruising trade war between Washington and Beijing has been a big part of the problem.
The iPhone 11 lineup — which should include an iPhone 11 Pro and an iPhone 11 Pro Max — presents a crucial opportunity for Apple to reverse the trend. Roughly 60 million to 70 million consumers in China are due for an upgrade, Wedbush analyst Dan Ives points out.
Expect changes such as a faster processor and improved Face ID. But without any blockbuster design overhauls or flashy 5G phones, it may be difficult for Apple to grab customers’ attention. “Apple tends to perform well when it changes the design of the iPhone in a drastic way,” ABI Research analyst David McQueen told Samantha. “However, it cannot do this every year.”
Watch this space: Look for Apple also to use the massive event to highlight its growing services business. It needs Apple TV, the App Store and Apple Music to help cushion the drop-off in iPhone sales.
Calling more stimulus from Beijing
Another batch of weak data from China is a reminder that the country’s economy is not out of the woods just yet.
China’s producer price index — which measures the cost of goods sold to businesses, and is an important measure of corporate profitability — dropped 0.8% in August compared to one year ago, according to government statistics released Tuesday. That’s the index’s worst decline in three years.
Analysts said the drop points toward a broad slowdown in demand, according to my CNN Business colleague Laura He in Hong Kong. And it bolsters the expectation that China will ease monetary policy even more in the coming months.
“The authorities will not cease easing … until they see definitive signs that PPI rises are recovering,” Freya Beamish, chief Asia economist at Pantheon Macroeconomics, wrote in a note.
China also released data this week that showed a sharp decline in exports, while imports stayed weak.
The scene: The country’s central bank has already taken some steps to support its economy. This includes its announcement last week that it would reduce the amount of cash banks have to keep in reserve. The government still has plenty of tools available, and it’s expected to use them.
Jack Ma has retired from Alibaba
If I had a fortune of nearly $40 billion, I’m not sure I would wait until my mid-50s to retire. But I’m not Jack Ma. China’s most famous entrepreneur and the country’s richest man has been preparing to hand over the reins at Alibaba (BABA) for a year. He officially steps down as executive chairman on Tuesday, just as he turns 55.
After two decades building Alibaba into a $460 billion business, Ma is now pivoting full time to philanthropy, my CNN Business colleague Sherisse Pham in Hong Kong writes. A former English teacher, he’s expected to focus on education and gender equity.
Don’t expect Ma to be out of the picture entirely, Sherisse writes. He’s expected to continue to shape the company’s future through his lifetime membership with the Alibaba Partnership, a group of 36 people that can nominate a majority of the directors to the board. There’s also the matter of his 6.2% stake.
But by exiting the chairman role, Ma is leaving on a high — and at a time when China’s government is increasing restrictions on internet companies.
Apple’s iPhone 11 event kicks off at 1 pm ET. Consumers — and investors in the tech company — will definitely be tuning in.
- The NFIB’s US small business optimism index for August posted at 6 am ET.
- US job openings data for July arrives at 10 am ET.
Coming tomorrow: OPEC releases its monthly report, coming just after Saudi Arabia appointed a new oil minister.