Business

Apple is facing several big iPhone 7 problems

Apple needs to drag iPhone revenue back from the decline it is in and kick it into growth territory. But this could be a lot easier said than done.

Written by Adrian Kingsley-Hughes, Senior Contributing Editor Nov. 3, 2016 at 9:17 a.m. PT

You could rename Apple "The iPhone Company" because the company's fortunes are tied to the success of this product.

Problem is, the iPhone isn't selling as well as it once was, and the iPhone 7 might not be able to drag the company back into revenue growth.

And it's not just the iPhone that has slipped into negative territory. The only part of Apple's business that's currently experiencing revenue growth is its services business.

Apple year-over-year revenue
Business Insider

But let's get back to the fuel that powers Apple, the iPhone.

The first problem is China. Currently interest in the iPhone 7 is waning in China, with users who were "very likely" or 'somewhat likely" to buy an iPhone falling.

This is a big deal given that China is a market that Apple is relying on to push the iPhone into revenue growth.

Then there are the iPhone 7 Plus shortages. When asked during the most recent earnings call whether Apple expected to reach supply/demand balance by the end of the quarter with regards to the iPhone 7 and iPhone 7 Plus, CEO Tim Cook had this to say:

"It's hard to say. I believe that on iPhone 7 we will. On iPhone 7 Plus, I'm not sure. I wouldn't say yes at this point, because the underlying demand looks extremely strong on both products, but particularly on the iPhone 7 Plus versus our forecast going into the product launch."

This is quite a critical issue because limited supply of Plus handsets puts a downward pressure on the average selling price, and, in turn, the revenue that Apple pulls in from the iPhone.

It could also push people to buy something like a Galaxy S7 Edge or a Pixel XL.

And it can have a long-term effect -- sell someone a cheaper iPhone now because you don't have the more expensive one in stock, and you might not get a chance to sell them another iPhone for several years.

Finally, the iPhone 7 has its fair share of problems, from a camera lens that's easily scratched to a camera problem affecting the 7 Plus. Previously there were issues with a hissing sound coming out of the iPhone 7, and an issue where it wouldn't come out of Airplane Mode.

Ongoing reports of problems not only dampen enthusiasm for the iPhone 7, but also get people looking elsewhere for new phones (or sticking with that they have).