In China, the billionaire CEO of LeEco (previously called LeTV) Jia Yueting made headlines over the weekend when he called Apple “outdated” and openly questioned the rationale behind the launch of the iPhone SE.
“For example, a month ago Apple launched the iPhone SE. From an industry insider’s perspective, this is a product with a very low level of technology…We think this is something they just shouldn’t have done,” he was quoted as saying by CNBC.
LeEco, a company originally branded as the ‘Netflix of China’, is directly competing with Apple with a wide variety of products like smartphones, phablets and television (it even boasts of a LeSEE supercar dubbed the ‘Tesla killer’).
Jia’s argument goes as such: Apple’s single-app platform was fantastic five years ago, but now LeEco is an ‘Internet-first’ company with a more dynamic environment because software and hardware are secondary to the ecosystem.
“One of the most important reasons [for slowing sales] is that Apple’s innovation has become extremely slow,” Jia said.
It’s a great argument — the self-sustained ecosystem model is being borne out in the communication sector by WeChat and, to a lesser extent, Facebook — and logically it makes perfect sense.
But unfortunately for Jia, the facts do not back him up.
Chinese consumers love Apple, and the release of the iPhone SE (its cheapest ever model) is setting up to be one of the best decisions the company has made in a while.
In a separate report by CNBC, Apple estimated the iPhone SE had exceeded a pre-order number of 3.4 million phones.
Chuck Jones, a contributor at Forbes, has been tracking the lead-times (the amount of time for a manufacturing process to be completed) for the iPhone SE and has seen, in both the US and China, the time has consistently gotten longer since the launch on March 30, implying demand has surpassed inventory and beat Apple’s projections for initial sales.
But more telling is the reaction from local hardware supply chain manufacturers, which told Digitimes they were scaling down the production for Chinese brands like Huawei and Xiaomi, because the iPhoneSE had squeezed the market share.
“The launch of relatively low-priced iPhone SE in China has squeezed market share from local brands, including Huawei, Xiaomi Technology, Vivo and Oppo, affecting the earning performance of these brands, said the sources,” the article reads.
It seems that by lowering the cost of the phone — combined with Apple’s reputation for opulence in China — has pulled some of the “cheap Android” market towards Apple, a market that has been the foundation for the success of companies like Xiaomi.
Our new favourite punching bag
Apple is rowing upstream against a media narrative of a company struggling to stay up with the current pace of innovation. Once the golden boy of the tech world, it is now the ‘easy target’. Let’s take Apple’s apparent white elephant, the Apple Watch, as an example.
As of now, because nobody seems to ‘need’ the Apple Watch, it has been deemed a flop. Although just today, the Wall Street Journal pointed out Apple Watch sales in year one exceeded year one iPhone sales in 2007. Actually, with an estimated 12 million year one sales, it may have doubled the 2007 iPhone sales — and generated US$6 billion in revenue by doing so.
And as can be expected the year after a company launches a brand new product, Apple does not appear to have anything major on the 2016 calendar besides the annual product updates. This led to an article in Quartz by Mike Murphy that received much attention (at least on the ‘Tech Internet’) framing Apple as a boring has-been.
Also read: The most important Apple announcement ever
And so the narrative has been written. Apple is boring. Dull. Stuck in a model built for 2012. Not 2016, 2017, 2018.
But boring can be good.
Maybe, in 2016, we have become accustomed to immediate gratification, require constant sexy updates and miss subtle shifts because they lack fireworks.
A cynic sees the iPhone SE (and iPad Air 2) as a simple price change. Huawei and Xiaomi see it as an existential threat. Who’s opinion is more valuable?
The biggest news, seriously: iPad Air 2 is now $100 less. And Apple Watch is $50 less.
— Paul Thurrott (@thurrott) March 21, 2016
Apple has deliberately damaged its ‘prestige score’ to reach a slightly less affluent consumer base. The company saw what everyone else saw the cost of the Apple brand was becoming devalued, and companies could offer ‘good enough’ for hundreds of dollars cheaper.
That, to me, seems like a forward-looking move and if early sales predictions are an indicator, it seems to have worked.
The recent censorship of iTunes Movies and iBooks in China is certainly a worry, but honestly, if there ever was an antiquated Apple service, those would be at the top of the list.
The point of the story is, just because a billionaire makes a point, this does not make it true. If Apple has “fallen behind”, as Jia claims, it just fell behind into a hell of a cash cow.