What can Apple do to arrest declining iPhone sales?

Apple’s share of the local smartphone market continues to slip, but what can Cupertino do with the next iPhone to change this?

Figures released recently by Kantar Worldpanel show that the Apple iPhone 6s is the single most popular handset on the local market, with a 10.8% share of all phones sold being that model. All is well and rosy for Apple, right?

Nope. Not even remotely so, because while it still has the most popular model, for the most part Apple has lost market share both in terms of pure operating systems share and in specific handsets. Australians still love their iPhones, but not as much as they used to, and they seem to be getting a slightly-faster-than-seven-year-itch towards Android in the meantime. To give that iPhone 6s figure some comparison, its immediate predecessor, the iPhone 6, commanded a 17% standalone share when it was at this stage of its lifecycle.

In short, Apple’s appeal is dropping for consumers as they increasingly opt for what are largely Samsung branded phones, and I’m certain Apple isn’t unaware of this.

There’s no doubt that there will always be a market for a premium smartphone experience with an Apple badge on it, but Apple positions the iPhone as both premium and popular. There’s never an iPhone release without Apple proudly proclaiming how many millions of phones it sold in the opening weekend, although it never breaks out local figures. The Kantar figures give us proper perspective on where the iPhone as a brand sits locally, and what that means for Apple’s ongoing fortunes in the very mature smartphone market.

The short and simple of it is that Apple’s dominance in smartphones is over, and the iPhone is becoming less popular, not more. That’s certainly not what Apple would want. While it’s not formally named as yet, the iPhone 7 is coming in a rough September/October timeframe to combat this year’s generally impressive crop of Android devices.

Apple will no doubt put out an enthusiastic release detailing global sales of the next iPhone, and quirks with Chinese IP lawsuits notwithstanding, it will probably have some solid numbers behind it from the iPhone faithful. But it appears unlikely that the numbers will match the heights the company used to command.

So what can Apple do to arrest this slide in interest? I think it’s time to innovate, and fast. Despite the rumours, I don't think dropping the headphone jack is the solution to make the iPhone 7 more desirable, but there's a few key smartphone aspects that Apple could address in the next revision.

Hardware is still the key

As Kantar released its figures, Apple was busy wooing developers by opening up the covers on iOS 10, the next generation of its mobile operating system. There’s a lot to like about what iOS 10 promises. I’m particularly excited by the simple but stupid possibility of finally being able to uninstall the damned weather and stocks apps, for one. Plenty of other features have appeal, even if many are rejigs of ideas already implemented in the rather more open Android universe. Apple’s control of its software and hardware ecosystems, along with a general level of polish does give it some scope to deliver features that might not be innovative, but could be better presented under iOS.

iOS 10 alone, however, cannot sell new iPhones. It can’t, because Apple has to ensure that at least last year’s iPhone 6s and iPhone 6s Plus run them acceptably well. Conspiracy types love to go nuts on the idea that new iOS releases are designed to make older models completely redundant, but that's usually more the case for the much older iPhone models than the immediate predecessors.

In truth, it’s hard to say quite how much is actually stretching the capabilities of older models and how much is code that’s more tightly optimised for newer hardware, but the reality in this case is that iOS 10 will have to run very well indeed on at least the iPhone 6s and 6s Plus. That’s the development framework that all but the very few developers within Apple’s inner circle -- which is to say, the ones likely to get up on stage at the iPhone 7 keynote -- will be working for and developing for.

Which means software alone won’t cut it to make the iPhone 7 truly stand out. So what can?

Better cameras

The battle for the "best" premium smartphone camera has been particularly heated this year, with LG, Samsung, Sony and Huawei all laying claim to being the prime option for premium smartphone buyers.

One thing that has been constant, however, is that when they present their cameras, they always compare against iPhones. That’s partly a question of market size, given the still-dominant iPhone position, but it’s also because they generally know they can out-shoot the relevant iPhone model, especially in low light.

This doesn’t mean that the iPhone has a terrible camera, but if you’re going to compete in the premium space, you need a premium offering. Apple could go in many different directions for a "better" iPhone camera, whether it chooses to ape the LG G5’s dual lens feature for widescreen photography, even larger pixel sites a la the HTC 10 or Samsung Galaxy S7, or even just a simple bump up the megapixel scale. Yes, pixel count isn’t the be-all and end-all of photography, but it’s another area where Apple’s camera technology has lagged the general market.

Better batteries

Ask any iPhone owner about their chief grumble with their phone, and they’ll invariably answer that the battery life sucks. It’s been the constant beating drum of iPhone dissatisfaction for years, and if you look at the battery life expectations of iPhone models, it’s not hard to see why. Here’s how the iPhone 6s, iPhone 6s Plus and iPhone SE, Apple’s most recent premium handsets compares in battery life using Geekbench’s battery test against a range of premium handset options:

You’ll notice that the sole "good" iPhone in that crop is the 6s Plus, and even then it’s beaten by more than four hours of tested battery life by Samsung’s Galaxy S7 Edge. Apple’s shown it can do innovative things with battery flexibility in the new MacBooks, and it’s well beyond time it worked similar magic on the iPhone platform, even if it means a slightly thicker iPhone. Having the world’s thinnest doesn’t help much if it conks out during the day, and Apple knows this. Do you think it would have released the iPhone 6s battery case if it didn’t?

Better displays

Apple coined "retina display" years ago to try to wow consumers, and for a very limited period of time the display on an iPhone was the best you could get. It’s been rapidly overtaken by its competitors, many of whom now sport 4K-capable displays. Yes, to an extent that’s a little silly on a screen that only measures in at five to six inches, but if you’re selling premium, it should be premium. Apple experienced something of a surge in local sales when it launched the larger screened iPhone 6 and 6 Plus models, because consumers were demanding larger screened devices, but it could only go down that path once, unless it plans to re-release the iPad Mini as a phone device.

What about a "budget" iPhone?

Apple’s never really released a true "budget" iPhone anywhere on the planet, although you could be forgiven for thinking it has. One common mistake here is to look at the price suggested at the US launches of each model, where new models are usually expressed as "costing" US$199 or thereabouts. It’s a misunderstanding to think that’s the outright price; instead it’s part of the handset repayment that in an Australian contract would be spread out over the life of the contract; in the US all or some of this price is paid upfront by the consumer.

The closest Apple’s come to "budget" iPhones has been with smaller, slower models such as the iPhone 5c or this year’s iPhone SE, which is fundamentally an iPhone 6s in a smaller dress. Apple tends to use words like "more affordable" when it comes to the iPhone SE. That’s no accident, because at a starting price of $679, it’s at optimistically best a high mid-range option, and that’s for a fixed 16GB model, which isn’t likely to satisfy many.

Still, that doesn’t make a "budget" iPhone a good option for two very simple reasons.

Firstly, the budget phone space is an absolute bloodbath of Android models, both those units designed from the get-go to be cheap and cheerful, and the cheerleader models of yesteryear that have been supplanted by newer, fresher models. Apple would have to compete with all of them in that space, with smaller margins due to the lower overall cost per unit.

Secondly, and more pertinently given Apple’s self-appointed premium positioning, is the fact that delivering a "budget" iPhone experience would essentially devalue the "iPhone" brand. Apple still wants the iPhone to be an aspirational device, despite the fact that with millions sold it is a mass market device, at least in the first world. If there’s a true "cheap" iPhone, why would you buy an expensive one?