Apple, Inc. (AAPL) is one of the world’s largest tech companies by market capitalization, and it continues to dominate in categories that it invented or popularized, such as the smartphone and tablet. While Apple Weaknesses appears to be at the top of its game, it still has significant flaws.
- Apple has grown to become a household name and one of the most valuable companies in the world.
- Despite its dominance in mobile devices and computing, the company faces some significant challenges.
- Among these flaws are its high-priced products, forays into more competitive markets, and incompatibility with other software.
The Limited Ecosystem
Many of Apple Weaknesses devoted customers regard the company’s tightly controlled software and services as a major strength, allowing Apple to control all aspects of the devices it manufactures. Overall, however, this adds to Apple’s development cycle by making software, security, and many other details an in-house responsibility. Furthermore, Apple is in the business of managing licensing agreements for its content sales, which include Apple TV, Apple Music, and the App Store.
From a management standpoint, this clouded the picture of what Apple should prioritize. Although hardware generates the most revenue, the closed nature of Apple’s ecosystem forces the company to be present in all other businesses as well. In contrast, Samsung can focus on iterating hardware and innovating the design of its devices by plugging into Android and the rest of Google Inc.’s (GOOG) ecosystem, rather than having to police third-party apps or roll out operating system updates.
Apple’s high product expectations for each new version or model may ultimately prove to be the company’s biggest weakness. Apple has created an incredible brand that is associated with products that work flawlessly and are designed in such a way that they feel both advanced and natural. Because of these high expectations, Apple cannot release experimental products or services into the market without jeopardizing its brand.
Because of this inability to Experiment,
This inability to experiment makes it more difficult for Apple to innovate at the same rate as Google in the services space or Samsung in the hardware space. As a result, Apple must rely on its leadership and employees to be so far ahead of the curve that even with a slower release schedule, Apple remains the market leader.
So far, Apple has been able to maintain its lead in most of its major product lines, but the size of its leadership has remained relatively stable. At the same time, other technology companies have caught on and are regularly releasing upgrades and new models. For example, Samsung’s Galaxy S mobile phone line now sees a new release every year or so.
Over-dependence on iPhone Revenue
In 2020, Apple’s revenue was $274 billion. However, half of that was due to iPhone sales. One of Apple’s major flaws is its over-reliance on iPhone sales. It’s difficult to say when the company generated $137 billion in revenue from iPhones, but the iPhone has specific sales cycles and revenue can be sporadic. If Apple is unable to sell as many phones in a given quarter or year for any reason (economic, political, social, etc.), it will most likely have a material impact on results.
The company has recognized this and is changing as a result. As I previously stated, Apple has grown into a juggernaut by introducing other products over time, particularly through its Services and Wearables, Home, and Accessories categories, which now account for 20% and 11% of total revenue in 2020, respectively. And both are still growing strongly, with Services increasing by 16% year on year (YoY) in 2020 and Wearables, Home, and Accessories increasing by 25% year on year (YoY).
Global Smartphone Market Share Is Declining
Apple’s global smartphone market share has remained relatively flat over the last three years, while other carriers have continued to gain share. China has the world’s largest smartphone market, and Apple has successfully competed with other carriers there. That has changed as the market has matured.
Apple’s revenue growth in China is slowing due to rivals such as Huawei, Xiaomi, OPPO, and Vivo, which can produce high-quality smartphones at lower prices than Apple. Furthermore, consumer preferences are changing, with many Chinese consumers preferring local brands to Apple. Whether or not this is a long-term trend depends on Apple’s China strategy going forward.
Few Successful Product Innovations Introduced
Over the Last Decade, Apple has long been regarded as one of the world’s most innovative technology companies, but is this still the case? No way, I don’t think so. Not when it comes to product innovation, at any rate. The company is well-known for releasing game-changing products such as the iPod, iPhone, and iPad. However, only two innovative products come to mind from the last decade: AirPods and the most recent M1 processor.
However, innovation is more than just new products. It can take many forms. Some may consider Apple’s ecosystem, services, or the recent App Tracking Transparency feature to be innovative. However, it is difficult to deny that Apple must do more to foster product innovation in order to remain successful, particularly as hardware products become more commoditized.
Other issues include Apple’s high-priced products and entering markets with higher competition. Although higher-priced Apple products have proven to be less of an issue in a booming economy, they may become an issue if the economy slows. Furthermore, it has relied on its brand image rather than spending heavily on advertising, which may change in the future.
As Apple grows in size and seeks new revenue streams, it will likely enter more competitive markets, such as Apple TV, where it will compete with players that focus solely on content, such as Netflix (NFLX). Furthermore, its entry into the payments market places it in competition with companies such as Chase (JPM) and PayPal (PYPL).
There are hundreds of tech companies that would love to have Apple’s flaws if they could also have its strengths. These include a sizable war chest, a strong brand, and much of the infrastructure left over from its string of hit products. However, Apple must maintain its high level of innovation. Apple’s competitors will continue to close the product gap and eliminate the premium that Apple charges for its products and service offerings.