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People look at iPhones at an Apple Store during a Black Friday sales event in New York on Nov. 23, 2018.

ANDREW KELLY/Reuters

Apple Inc. spent much of 2018 sidestepping the struggles that plagued its big-tech brethren.

Unlike social-media companies such as Facebook Inc., it hasn’t been accused of allowing malevolent actors to subvert elections or spread hate. And it didn’t watch thousands of employees walk out worldwide over accusations that management allowed a toxic culture to persist, as with Alphabet Inc.'s Google.

November, however, has put a chill on Apple’s hardware-driven strategy. Despite revealing a suite of faster, bigger, shinier iPhone models in September, Apple’s shares have fallen more than 20 per cent since reporting results at the start of this month. After disclosing nearly flat iPhone sales growth that day, Apple said it would no longer publicize quarterly unit sales – arguing that the figures didn’t accurately represent its business strength.

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And in recent days, more reports of slowing iPhone demand emerged as suppliers such as Foxconn Technology Group and Qorvo Inc. planned major cost cuts and trimmed profit guidance, Apple is said to be cutting production for its lower-tier iPhone XR by as much as a third.

The iPhone is still the most profitable handheld device ever made, and accounted for nearly three-fifths of Apple’s US$63-billion in revenue last year. But it may be at a crossroads. The North American smartphone market is saturated, so Apple has taken to aggressively raising prices for each successive iPhone launch. This has ensured its continuing role as a revenue driver, but has begun exhausting even die-hard Apple disciples.

Shoppers browse Apple iPhones during a Black Friday sale at a Target store in Newport, Ky., on Nov. 23, 2018.

John Minchillo/The Associated Press

The iPhone XR, XS and XS Max models announced in September, largely variations on the 10th-anniversary model released last year, range in starting price from $1029 to $1519 in Canada without a contract.

Blake Northcott, a Hamilton author and writer who was considering upgrading her iPhone 5S to an iPhone XS this month, settled with a $629 iPhone 7. She couldn’t believe the $2,000 price tag on a 512-gigabyte XS Max. “Literally, my iMac computer cost less than the phone,” Ms. Northcott said. “I couldn’t justify that.”

Even just by adding a few features to the mid-range XS model – such as a 256-gigabyte hard drive and a two-year AppleCare+ warranty – the bill rises past $2000 after tax. In the midst of Black Friday deals this past week, that same phone on a two-year contract cost $499 before tax and warranty with Rogers. That’s down from $659; the monthly bill on that contract would cost at least $120. Meanwhile, with Black Friday specials, the lower-tier XR and last year’s X base models could be bought with the same plan at zero dollars upfront.

Similar $500-range pricing options were available on Friday for two-year XS plans via Bell (with a minimum $90-a-month bill) and Telus (with a minimum $115-a-month bill).

And with an increasing array of lower-cost alternatives with similar features, including older iPhones and models such as the Google Pixel 3 and Samsung Galaxy S9 (both available from Rogers for $0 down on some two-year plans on Black Friday), iPhone’s flagship XS model doesn’t hold the same appeal.

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“I feel like they have gone off the deep end in terms of overestimating demand for new phones, and probably more importantly overestimating the consumers’ ability to discern, or value, minor incremental changes or improvements from model to model,” said Kaan Yigit, president of Solutions Research Group Consultants Inc. “For about 10 to 15 per cent of the mobile-user population – let’s say technophiles – a premium device is important. But the mass market is 85 per cent of the market, looking to pay $0 or a small amount for an upgrade."

Apple did not respond to requests for comment.

In recent months, long-time Apple analysts have been flagging the iPhone’s struggles to gain market share. According to market-research firm Strategy Analytics, iPhone’s accounted for 13 per cent of the global smartphone market last quarter, and has hovered in that range since at least 2014. Huawei, meanwhile, surpassed Apple this year, with 14.4 per cent of the market. The research firm has also found a broader trend among smartphones: Worldwide, all smartphone shipments fell 8 per cent year-over-year.

Ken Hyers, a director with Strategy Analytics who studies mobile devices, said in an interview that he sees two reasons for the smartphone slowdown. True innovation has slowed significantly, he says: Phone hardware is getting sleeker, but the evolution of their functions has stagnated, leaving consumers more hesitant to upgrade every two years, as they did historically. Meanwhile, prices keep getting higher and higher. Especially for iPhones.

“There’s not a lot of change in either the appearance or basic functionality,” Mr. Hyers said. “From a consumer perspective, a lot are saying, ‘Gee, the phone I have in my pocket is quite good.’”

This is especially true in North America, where smartphones are effectively ubiquitous, and two-year replacement cycles have crept closer to three years, dragging down unit-driven sales growth for all handset makers. And while there are major opportunities to win smartphone share in the developing world, Mr. Hyers says that lower-cost manufacturers such as Motorola, Huawei and Xiaomi are winning the market there.

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Apple shares began the latest tumble this past week when Goldman Sachs analyst Rod Hall lowered his target price for the NASDAQ-listed stock to US$182 – his third target cut this month – expecting it to fall further over the next year from its close Monday of nearly $186. Mr. Hall flagged demand in emerging markets and “the balance of price and features in the iPhone XR” as investors’ biggest potential concerns.

Some observers remain unflinchingly bullish on Apple. Tom Forte, a senior research analyst with D.A. Davidson Companies, raised his target price to US$290 from US$265 at the start of November, and has kept it there since. He told The Globe and Mail, however, that he believes the XR, “while incredibly well received, is still not priced low enough for the company to maximize its dollar share in emerging markets.”

But Mr. Forte said he believed the Apple selloff was in part a product of a retreat from large tech companies in general, as well as the escalating trade war between the United States and China, where a large number of Apple products and components are made. “I think Apple, the stock, is incredibly attractive here,” he said. “Supply chain rumblings are not a perfect predictor of demand, in softness and in strength. …. I think that, oftentimes, since Apple was the first trillion-market-cap stock, it’s blamed for things that it really shouldn’t be blamed for.”

People shop at an Apple Store in lower Manhattan on Nov. 20, 2018.

Spencer Platt

Gene Munster of Loup Ventures also believes Apple’s share pullback is at least half driven by the broader market doldrums – as well as the woes faced by the tech sector, only to be further stimulated by the company dropping its unit-sale numbers and reported supply chain woes. “It’s understandable that investors would lower Apple’s multiple based on that,” he said by phone. “But I think it’s misleading.”

In the midst of stagnant unit-sale growth, analysts such as Mr. Munster have flagged Apple’s iPhone pricing strategy as a way to keep growing its handset business, by offering a suite of options to different markets, with the highest-end models’ prices creeping higher each product cycle, revenue can continue growing. The strategy is working: Global iPhone revenue grew 29 per cent last quarter, to US$37-billion, with 46,889,000 units sold – itself a rise of only 0.5 per cent.

So thanks to the pricing strategy, Mr. Munster believes the iPhone business line is healthy: “I think they’ve done a great job of finding the sweet spot. … People paying more for Apple products is a theme you’re going to hear more about.” And as for the supplier issues, he believes the company has gotten into a habit of asking its partner manufacturers to overproduce smartphone components – because that avoids the problem of not having enough supplies to build phones to meet demand, should it rise.

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