iPhone sales slump as Apple continues to churn out smartphone patents

By Steve Brachmann
August 1, 2016

iPhone familyOn July 26th, American high tech developer Apple Inc. (NASDAQ:AAPL) released its earnings report for the third quarter of its 2016 fiscal year. Despite posting quarterly revenues of $42.4 billion, well short of the $49.6 billion Apple took in 2015’s third quarter, the company still beat financial analyst expectations of $42.2 billion in revenue.

A rise in revenues in Apple’s Services division helped the company beat financial forecasts. 2016’s third quarter saw nearly $6 billion in Services revenue after posting $5 billion in the third quarter of 2015. The nine months ending with June 25th saw $18 billion in Services revenues compared to $14.8 billion in revenues for the same nine-month period last year. These revenues include App Store and AppleCare sales along with $548 million received by Apple in the first quarter related to a patent infringement suit filed against Samsung Electronics (KRX:005930).

The third quarter continued Apple’s declining iPhone sales, eating into the company’s most profitable sector. iPhone revenues dropped from $31.3 billion in 2015’s third quarter down to $24 billion in the most recent quarter, a loss of 23 percent. That drop in revenues follows a sharp reduction in unit sales for the iPhone, down to 40.3 million units sold in the recent quarter from 47.5 million units sold in 2015’s third quarter. Apple lays much of the blame for this sales downturn on the acceleration of iPhone upgrades during 2015 as well as challenging market conditions around the world. The day after Apple’s most recent quarterly earnings were posted, the company announced that it had passed the milestone of one billion iPhones sold.

New sales could be spurred on by the upcoming release of the iPhone 7, the newest model of the smartphone which reports indicate will be released in September. Media speculation on new features offered by the phone is running high, much like it does every iPhone release cycle. Information and iPhone 7 pictures leaked to the Internet indicate that three iPhone 7 models will be released. A model marked as iPhone 7 Pro appears to have a dual lens rear camera and offers the Smart Connector technology used by iPads to connect to peripheral equipment. Other reports indicate that the iPhone 7 will be waterproof and will have wireless charging capabilities but will not have a headphone jack.

[Patent-Business]

Apple 2016 smartphoneApple earned the 12th-most patents during 2015 from the U.S. Patent and Trademark Office by taking in 1,937 U.S. patents that year, a reduction of 3.3 percent from the company’s 2014 patent totals. This year, Apple earned 29 U.S. smartphone patents according to the patent portfolio analysis tools available through Innography. As the text cluster here shows (see right), these patents primarily relate to user interfaces and portable displays.

locked deviceiPhone 7 owners might find it easier to access applications without going through the steps of unlocking the phone thanks to the innovation reflected within U.S. Patent No. 9372978, titled Device, Method, and Graphical User Interface for Accessing an Application in a Locked Device. It protects a portable multifunction device with a touch-sensitive display and a memory containing program instructions which can detect a gesture that starts a restricted session for a camera application while maintaining the device in a passcode-protected state; a second gesture brings up a passcode entry interface allowing users to unlock the device. Users with this device will be able to snap photos or record video without going through all of the unlocking steps. The patent notes that many device users only have a brief window of time for capturing such content.

transit informationMethods of crowdsourcing traffic information to determine an estimated time of arrival (ETA) for a vehicle at a destination should be available to Apple device owners to judge by U.S. Patent No. 9285231, entitled Providing Transit Information. It discloses a method which involves detecting that a wireless signal source is moving along a transit route which is significant to a device user. The system determines ETA based on the current location of the user device as well as the current time. This system would help iPhone users using public transit systems, including subways, buses or high-speed trains, to find an accurate ETA to their upcoming destination.

automated assistantThe voice-controlled intelligent assistant Siri is a popular feature to iPhone users and that service looks to be getting an upgrade with the technology found within U.S. Patent No. 9318108, which is titled Intelligent Automated Assistant. It claims an automated assistant operating on a computing device including a language interpreter component to derive user intent from a user input and a services orchestration component for calling a service to perform an identified task. The system uses natural language processing to set reminders, get directions, obtain weather forecasts, book taxis and search for restaurants based on user input. The innovation addresses the difficulty of navigating the increasing functionality of portable electronic devices; it’s also more capable of determining which contact is being requested by a person who uses a pronoun in the request, such as “Send him a text message.”

video conferencingThe improved use of mobile phone screen space for video conferencing applications is reflected within U.S. Patent No. 9237305, entitled Overlay for a Video Conferencing Application. It claims a non-transitory machine-readable medium storing a video conferencing application for execution by a first device and application instructions for presenting video in a first display area captured by the first device prior to initiating a video conference, presenting a set of contacts for video conferencing in a partially transparent second display area superimposed on a portion of the first display and initiating a video conference upon selection of a contact. This new configuration makes better use of screen space to display videos in a video conference while presenting contacts. Additional claims in the patent seem to indicate that the video conference application could work between desktop and mobile platforms.

Despite the recent R&D related to smartphones, industry analysts expect that decline to continue. Some have noted that smartphones have come close to achieving market saturation. 65 percent of North American consumers own a smartphone so the fact that new smartphone sales are dropping isn’t much of a surprise. Apple is also facing tough competition in global smartphone leaders like Samsung and China-based Huawei Technologies (SHE:002502), both of which have increased smartphone sales in recent quarters. A five-year survey conducted by investment banking firm Maxim Group indicates that Apple’s iPhones could be about to undergo a “significant upgrade cycle” which could encourage consumers to pick up a new iPhone with a great deal of new features. Until that occurs, it wouldn’t be a shock to see Apple iPhone sales continue to slip into the future, sucking away sales and revenues from the most profitable division of America’s premier high-end smartphone developer.

The Author

Steve Brachmann

Steve Brachmann is a freelance journalist located in Buffalo, New York. He has worked professionally as a freelancer for more than a decade. He writes about technology and innovation. His work has been published by The Buffalo News, The Hamburg Sun, USAToday.com, Chron.com, Motley Fool and OpenLettersMonthly.com. Steve also provides website copy and documents for various business clients and is available for research projects and freelance work.

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