It seems to me that this should be big news for the Chinese. The Wall Street Journal is reporting that Apple is sharply reducing its order for iPhones:
BEIJING— Apple Inc. is scaling back orders for its iPhones, sending ripples throughout the multibillion-dollar industry that supplies and builds the company’s phones.
A Chinese provincial capital promised Foxconn Technology Group—which assembles iPhones—more than $12 million in subsidies to minimize layoffs at its operations there, according to a government document. The subsidies came after Foxconn began dismissing some workers there earlier than usual for the Chinese Lunar New Year break, according to people familiar with the manufacturer.
Component suppliers that rode the iPhone’s boom are now bracing for lower sales. Apple has cut its order forecasts to iPhone suppliers in the past several months, according to three people familiar with the company’s supply chain.
Foxconn, technically a Taiwan company, is a major employer in China. Not the largest but a major one nonetheless. This passage:
A Chinese provincial capital promised Foxconn Technology Group—which assembles iPhones—more than $12 million in subsidies to minimize layoffs at its operations there, according to a government document.
is somewhat troubling. By my reading that subsidy is coasting right on the edge of being, in WTO terms, an “actionable subsidy”. If I were the U. S. government, I’d file a complaint with the WTO.
Recently, China has become the largest market for iPhones and the U. S. second. The economic downturn in China and, especially the recent stock market crash, is clearly affecting iPhone sales there, concerns about the future are probably depressing sales here, and Europe has been in recession for some time which I suspect are pushing sales down there.
Faraway economic woes affect your economy. That’s how globalization works. Mercantilist policies like those followed by China that injure their trading partners can come back to haunt them. It’s possible they’ll take the hint but I doubt it.
There also seems to be a movement developing to resist constantly upgrading all one’s tech with every new release. More people seem to be waiting until necessity intervenes before upgrading.
It was a huge deal going from a flip phone to a “smart” phone, but the year-to-year changes don’t seem that important now. My current phone is over two and a half years old, and unless it stops working I don’t feel the need to change. My wife’s much newer Samsung has some cool additional features, but aside from a noticeably larger screen, it really doesn’t do more than mine.
Some of this change in attitude is driven by economic necessity, of course, but as people realize they don’t need regular upgrades the idea will spread. This will be especially true if the idea takes off with people in their early twenties, as I expect it will. Unlike Janet Yellen, I don’t think all the “retirees” in the 20-24 age group are doing so because they’re getting rich exploiting brown people – they’re dropping out of the workforce because they can’t get _IN_ the workforce, and will eventually change their consumption habits accordingly.
Note that the phenomenon described above, if it occurs*, will have other implications too. When people DO replace their gear, they might consider buying something below the top of the line models. After all, some of the cheapies are probably as good as an iPhone was a few years ago.
Not at all incidentally, we got a notice a couple of weeks back that ATT wireless is changing their plans for upgrades. Basically, they’re cutting their subsidies for fancy phones, which they’ve used to get people to sign two year contracts. Fewer subsidies mean fewer sales of the top of the line models.
* I’ve seen an article or two recently about this phenomenon, but I didn’t pay close attention to them. How widespread is the phenomenon? No idea. But it mirrors things I’ve been hearing irl.
More evidence for the post-Keynesian theory that producers vary their output before varying price, hence most markets are not flexible but sticky.