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Apple Hurt iPhone Sales In China By Failing On iPhone 7 Design

iPhone sales have been on a downward trajectory for a few quarters now. When releasing its Q2 financial report Apple glossed over the news that this is now a two year losing streak on iPhone sales in Q2.

Tim Cook did respond to questions about the iPhone's "disappointing" performance in a candid manner - blaming customers waiting for the iPhone 8 for slower than hoped for sales.

The thing is, Cook was only half right and he placed the blame incorrectly too. iPhone sales are only really down in China - and Apple's decision to go with a weak iPhone 7 upgrade is the real reason why.

China is a special case market. People who buy iPhones do so not because of any inherent preference for the iPhone, rather it's a visible statement of wealth. Chinese customers with cash look to flaunt it through the things they own which are beyond the reach of 99% of their countrymen. 

Imagine a whole class of people with the mindset of Harry Enfield's Loadsamoney character.

So when the iPhone 6 arrived, with its new design and obviously new and desirable looks, there was a mad rush to get hold of one in China. You'll remember stories of Chinese buyers queuing outside Apple Stores in the West, in order to buy and then sell on iPhone 6 handsets to grey importers to resell in China.

When the iPhone 6S arrived sales cooled a little. Yes, it was still an iPhone, but nobody could tell if it was new or not, and if it wasn't obviously new it wasn't as desirable. When the iPhone 7 arrived sporting basically the same design as the 6 it was inevitable that sales would continue to slide.

Fortunately for Apple the ongoing migration from Android to iPhone in mature markets like the US, Japan and the UK have masked these falls for the most part.

So what Tim Cook should have said was that a poor decision made in the planning of the iPhone 7 means Apple left a lot of sales on the table in China. If Apple were just releasing an iPhone 7S in September then the outlook would continue to be poor. 

Apple almost certainly won't just launch the 7S  though, there's strong evidence that it will release a significantly redesigned handset as well as, or instead of the iPhone 7S. 

When it does that will signal a massive and aggressive increase in demand from Chinese buyers, pushing sales to a new all-time high. In effect iPhone sales will be limited only by the number of device Apple can manufacture. 

The trend may be down, but there's an almighty turnaround coming, further proving that the smartphone market is heading towards, not away from, Apple.