In 2007, Steve Jobs stepped out on stage at Macworld. He pulled the first ever iPhone out of his pocket and people cheered in amazement as if Jobs was a time traveller. Apple revolutionized the personal computer and the mobile phone. For a long time, Apple was the best, by far, it may still be. However, a decade after the unveiling of the iPhone, the market is starting to change. Competitors such as Samsung, Google and Huawei have started crawling back the gap. Other competitors such as Xiaomi and OPPO which didn’t have a share of the market a decade ago are starting to make their presence known. Meanwhile, Apple is fighting with giants such as HP, Lenovo and Dell in the personal computer market. In a world where it’s getting harder to distinguish devices based on technological ability and performance, Apple seems to be losing ground. Their recent underwhelming sales of the iPhone may also indicate that. Apples share price fell about 35% since its historic high in August 2018 compared to January 2019. Some of this can be put down to a number of factors outside the company’s control. The market, in general, has fallen over this time. The Dow Jones, which uses 30 select market leaders to quantify the movement of the market, has fallen about 10% in this period. Paired with a rare revenue warning about the sales of iPhones in China, the drop in share price becomes a little clearer. Apple blames this on slow iPhone sales in China, whose economy has had an underwhelming trade report for December 2018. But Apple also added that the trade conflict between the USA and China is further impacting the economic environment. Retailers in China have slashed iPhone prices, some by $118 as a retaliation to the revenue warning. As a result, Apple has reportedly cut iPhone production by 10% for the first quarter of 2019. So the question remains, is there more to the story? How much of this was due to Apple losing ground on its competitors, having lost second place of smartphone suppliers by unit sales to Huawei in early 2019. Could the company be losing the “Halo-effect”, where a loyal customer base is willing to pay a premium as they have done in the past for Apple products? Chinas economic growth rate, which has seen huge growth in recent years is beginning to slow down. In fact, in 2018 the growth rate hit a 3-decade low. This inevitably has an impact on consumer spending. Beijing is trying to increase that growth again by making credit cheaper to encourage sales of consumer goods. As mentioned this is what Apple has said has caused its iPhone sales to slump. However, it’s a bit of a stretch to blame all their issues on China’s economy. Apple isn’t only facing sales issues but the company has issues with its suppliers too. Apple is in the middle of an ugly lawsuit against Qualcomm, its main modem chip supplier for the last decade. Due to the lawsuit, Qualcomm has refused to sell Apple its chips. Apple has been forced to switch to the slower Intel modem chips instead for its most recent iPhones in 2018 and until the issue is resolved, Intel chips may be used for the foreseeable future. The smartphone market in the US has recently reached a possible saturation point, meaning that there are no more new customers available. A research paper from Pew Research Center in late 2018 showed that over the last 2 years the percentage of US adults who owned smartphones remained unchanged at 77%. Regular non-smart cell phones have also plateaued, unchanged since 2016 at 95%. This means that new smartphone sales rely heavily on replacing old phones. In 2011, the percentage of US adults with smartphones was 35%. Apple relied on the growth of the smartphone market which has more than doubled over the last decade. This may not be the be all and end all for iPhone sales, there are massive markets in the developing world with low smartphone penetration. However, these consumers generally cannot afford the expensive iPhones, so it will probably be a while until Apple gets access to these new customers. Despite the rapid growth in these markets expected in the next decade, consumers from emerging markets will likely adopt cheaper alternatives. It isn’t just Apple facing these issues. The global smartphone market has turned from explosive growth half a decade ago, to a contraction. According to Bloomberg, over the last two years, global smartphone sales have decreased by -0.2% and -0.3%, respectively. This is a stark contrast to 2013, which experienced 40% growth. But the numbers have been slowing down over this period, so it’s not something surprising. Why are global sales slowing? Well, it’s probably a combination of the lack of big breakthroughs that make consumers willing to trade in their old phone and the lack of new customers due to market saturation. The bottom line is that people aren’t buying. The introduction of 5G internet for smartphones may cause an increase in sales, however, the first versions of this technology are only expected in the second half of 2019. Perhaps Apple notices its decline as a global smartphone supplier. That would be a reason why the company has moved to expand its services. Or perhaps it’s just good business sense. iTunes will this year allow streaming on Samsung TVs and other competitor devices will support Airplay. Until recently, the streaming features were restricted to Apple TV. Tim Cook, Apples CEO, has stated that the company will be launching new services this year. This will most likely include a streaming service, much like Netflix, based off Apple TV’s massive library. Apple has also collaborated with Amazon to allow Alexa to control Apple Music. Allowing their products to be used across devices has historically been successful for Apple. Much of iTunes market penetration was due to the fact that it was available on both Mac and Windows, helping the app become the top digital music store in the world. Apple has more than enough products to keep its business going. The Apple Watch is the leader of the wearables market, fluctuating in market share between 20 to 50 percent. Apple computers are still doing fine in a tough market, posting relatively normal sales over the last 6 years. But historically more than half of Apple revenue is brought in by the iPhone, in 2018 this was closer to 50% where it had been as high as 66% in 2015. But with over 1 billion devices worldwide, that leaves Apple in a great position to capitalise on its services sector. In summary, Apple is facing tough competition in the smartphone market. A market which has possibly reached saturation for the US and many other first world regions. Many competitors provide cheaper alternatives that are not noticeably inferior to iPhones. Apple has curbed falling sales over the years by increasing the price of its phones with minimal technological advancements. External factors such as slow economic growth in China and the China/US trade wars have not helped the company. Apple needs to act and innovate to avoid the same fate that Nokia had a decade ago. Tim Cook believes that Apple's foundations and ecosystem are resilient enough to withstand this type of downturn. In an interview with CNBC, he said that Apples earning power is probably underappreciated and that the company has a history of innovation. He’s probably right, Apple didn’t become the world’s first trillion-dollar company by accident, although it was short lived. And Apple has proven time and again to be a market leader and innovator. This is the company that brought the Mac, iPod, iPhone, iPad and revolutionised how we use and see our devices. Even if you prefer their competitor’s devices, their presence is undeniable. So, if anyone can turn this around, its Apple.