Hitting for the cycle: why Apple should move its product launches

Apple’s earnings for their last financial quarter came out on Tuesday. I reviewed them here (and talked about the iPad specifically here) but wanted to address something more long term in my column on Tech.pinions this week. The issue I’d like to talk about is the cyclical nature of Apple’s operating and financial performance and the massive focus on the fourth quarter of the calendar year (Apple’s first quarter) as the driver of the year. (Note: throughout this piece I’m going to refer to calendar quarters rather than Apple’s fiscal quarters, as I find this requires much less mental gymnastics for readers).

Apple’s results are heavily affected by the sales of its hardware products, which in turn have a huge spike in the fourth and to a lesser extent third quarter of each calendar year – as shown in this chart of  historical revenues.

Apple revenues by quarter

As you can see, ever since about 2003, the fourth quarter has been significantly bigger than any other quarter. The second biggest quarter however, has varied between the third (for much of the 2000s) and the first (for the last three years). The second quarter (which Apple reported this week) is now regularly the smallest. In the past, the spike in the fourth quarter was always driven by “holiday sales” – i.e. Christmas in much of the world and to a lesser extent the Thanksgiving holiday and associated “Black Friday” sales day in the US. This is true for all consumer electronics companies and Apple is no exception.

However, what’s changed in the last few years is Apple’s timing for its major product launches for the iPhone and iPad. The chart below shows how the dates have moved steadily to the right on the calendar, with the iPhone starting in June and July and shifting to October and then September, and the iPad starting in March and April and shifting to November.

Apple product launch datesAlthough product launches for the iPhone are technically in the third quarter, they’re so close to the fourth quarter the vast majority of early sales are pushed into that quarter. It means the fourth quarter becomes even bigger than it already is.

So why is that a problem? Well, there are several issues with it.

Firstly, it exacerbates the problem of supply constraints. Because Apple insists on absolute secrecy, and because it now announces new devices just 10-20 days before they launch, it has to ramp up manufacturing extremely quickly and it can’t meet demand. In late 2012, it was unable to meet demand for the iPhone and iPad until the first quarter of the following year. In 2013, it took almost the whole quarter to get demand and supply in balance. This means Apple is leaving money on the table for much of these quarters and, in some cases, customers may go elsewhere if they’re unable to buy the product they want, especially in the holiday season.

Secondly, it creates this huge spike in fourth quarter sales, followed by a steady drop in sales for the rest of the year. There is what I call a trained Osborne effect here, as Apple has trained devotees of its products to expect a fall launch and then an annual revision. If you care at all about having the latest and greatest device, you won’t buy an iPhone or iPad in the second quarter because you know a new one is just around the corner. That’s why sales don’t just fall from the fourth quarter to the first, but also fall from the first to the second. Apple is unwittingly creating an Osborne effect without even announcing anything, just because the pattern has become so clear. Apple therefore doesn’t just create a huge spike in the fourth quarter, it actually depresses sales in the rest of the year.

What Apple should do – stagger launches

There are short term and long term solutions to this problem. Start with the short term, some of which Apple is already doing:

  • Create a product that appeals to those who don’t care about having the latest and greatest device, and sell it in the lull quarters. Apple has done this with the iPhone 5C, which was heavily marketed at least in Europe and North America in Q2, and which likely drove high sales, driving down ASPs in the process. The 5C was launched at the same time as the 5S, but its most useful effect has been to fill some of the gap in 5S sales later in the year. For this reason, it might well make sense for Apple to keep the 5C concept around.
  • Continue to hold launches late in the quarter. Every iPhone launch but one (the 3G) has taken place in the last two weeks of a quarter (originally the second, and now the third). This spreads the spike effect a little by putting the massive launch weekend in the previous quarter. If Apple was holding iPhone launch events two weeks later, the third quarter would likely be the smallest by far, so this helps to mitigate that effect. But it isn’t yet doing this for the iPad, and it might make sense to do so.

However, the longer term solution is to move at least some product launches to other quarters, preferably in the first half of the year. This would create two annual spikes – one around the holiday season and one around the product launch. By staggering iPhone and iPad launches so they no longer spike around the same time of year, Apple could spread the effects even further throughout the calendar.

But all that is far easier said than done. Apple has moved product windows twice — once when the iPhone 4s arrived later than expected in 2011, and once when it accelerated the iPad development cycle to release the iPad 4 just eight months after the iPad 3. Those are the only two ways to move the product launch windows: produce one faster than the usual twelve month cycle, or leave a longer pause between launches. Neither is easy to do. Pre-empting or delaying the iPhone launch cycle, so tied to two year handset upgrade programs in many markets, would cause significant disruption and break the cycle for many users, possibly damaging sales. It’s arguably easier for Apple to disrupt the iPad launch schedule, since that’s less tied to a particular upgrade cycle, and it has done it once before. It’s also a category that evolves less dramatically from one iteration to the next and which has just seen big upgrades in both sizes. However, the new device upgrade plans available from US carriers and some others around the world may allow Apple more latitude than it has had in the past because customers are less tied to a two year cycle.

Another possibility is Apple staggers the launches for different versions of a product, e.g. launching several iPhones at different times during the year. The iPhone 5S might get an update on schedule in September of this year, perhaps with one larger screen size, while a device with an even larger screen or even the 5C successor might come in the spring. The iPad Air and iPad mini launches could also be split throughout the year, with one coming in the spring and one in the fall. Moving an iPhone launch to the spring would also upset Samsung’s rhythm, which currently pitches its flagship Galaxy S launches as far away in the calendar as possible, with the smaller Note launch much closer to the launch of new iPhones.

A change of this magnitude would be difficult and perhaps even painful in the short term, as it might either delay sales or create a smaller upgrade cycle for one year. But at the moment, Apple is both leaving money on the table by under-supplying demand in the fourth quarter and creating a massive lull in sales in the spring and summer. Both could be solved by moving at least some product launches back to other times of the year, and ideally late in the first quarter. Both overall sales and the stock market would be well served by a move away from fall product launches.

Published by

Jan Dawson

Jan Dawson is Founder and Chief Analyst at Jackdaw Research, a technology research and consulting firm focused on consumer technology. During his sixteen years as a technology analyst, Jan has covered everything from DSL to LTE, and from policy and regulation to smartphones and tablets. As such, he brings a unique perspective to the consumer technology space, pulling together insights on communications and content services, device hardware and software, and online services to provide big-picture market analysis and strategic advice to his clients. Jan has worked with many of the world’s largest operators, device and infrastructure vendors, online service providers and others to shape their strategies and help them understand the market. Prior to founding Jackdaw, Jan worked at Ovum for a number of years, most recently as Chief Telecoms Analyst, responsible for Ovum’s telecoms research agenda globally.

70 thoughts on “Hitting for the cycle: why Apple should move its product launches”

  1. “However, the longer term solution is to move at least some product
    launches to other quarters, preferably in the first half of the year.”

    I feel like this article came from some alternate universe in which Apple did not just in the past couple years deliberately move all of their product launches into the fall quarter.

    A shorter version of this article: “ignoring the fact that Apple has deliberately set things up so that their product launches are all now clustered in the fall so as to maximize their Christmas sales at the expense of sales at all other times of year, I will attempt to portray the situation that they have deliberately chosen and established over the past couple of years as a bad thing.”

    I get that you think your financial wisdom is superior to the financial wisdom of the Apple execs who decided to make Apple’s annual schedule the way it is now. Since they didn’t hire you or ask you your opinion on the matter, however, this article seems like a complete waste of time.

    1. I thought that Apple had purposefully set up two product cycles. Fall for the phone, Spring for the tablet. I thought wrong.

      As Glaurung-Quena says in his comment, above, Apple just went to a lot of trouble to move all of the product launches to the Fall. The chances of them undoing that are virtually nil.

      1. Isn’t Apple exploring robotic manufacturing to some degree? Maybe that factors into this, perhaps Apple thinks they’ve got the supply issue solved.

        1. Yes. I have read the same thing. This is why I have heard that the new Mac Pro’s where slow to fill the channel as Apple was ramping up their robotic manufacturing operations. Also there is this story about Foxconn ramping up robots to make iPhones:


          So if anything I do think that the current issues with the supply chain filling the channel and leaving money on the table are going to be coming to an end. This is the only way I can see reaching their goals of having all their products refreshed at least once per year. To do that I can only see it happening with robots playing more of a key role. If Apple can pull that off it will be a huge game changer as they will be able to be able to change directions faster then any of their other competitors. When Apple changes directions on a dime and their competitors are stuck with lots of old and out of date inventory that they have to write off that will be a massive blow to them. More so that any legal action that can be taken in court.

          This is the true genius of why picking Tim Cook as CEO makes so much sense. Tech is so fast to change that you need someone who is the best at supply chain management and who can delegate the rest to the best team in the industry.

    2. Still, from a production point of view it is extremely unhelpful to have such a massive peak in demand and hence production. If Apple could launch their 6s and 6c in separate quarters then they might achieve better utilisation of all those expensive production line.

      Say, the 6s gets launched in June for the premium customers, while the 6c for the less spec-driven customer gets launched in September. That way they might be able to achieve some meaningful price discrimination, while improving utilisation of production line.

      He assumption that Apple has deliberately moved everything to Q4, does not really stand up to scrutiny. Let’s face it, launching the iPad Air and iPad mini deep into November is something you do because of production constraints, not something that inherently makes a lot of sense.

      1. “Say, the 6s gets launched in June… the 6c… gets launched in September”

        As I think about this and considering how much Cook likes show first time buyers and switchers stats, I wonder if just before Christmas is not the best time for those buyers, when they are most likely to plop down money to try something for the first time. If the 6s is 6 months before that and, say Samsung jumps on the opening I can imagine those potential Apple customers deciding to go for the newer, bright, and shiny. 3-6 months is a long time in cell phone consumer land.

        I agree with Jan in so much for the person already decided on iPhone, changing the launch will make little difference. But Holiday splurging is a time honoured tradition and high motivator to try something new.


  2. Good article in terms of laying out the complications due to the fall launches, however, there are at least a couple mitigating factors not mentioned which seem quite pertinent. 1) the consumer psychology – many may feel it’s OK to splurge for the holidays (or feel less guilty about acquiring the luxury product vs cheaper alternatives), and this combined with the hype / excitement generated by the once a year launch may induce more buyers. 2) the rapid growth in Apple’s sales in China and other Asian markets and continued outlook for same means the Sept/October launches are a bit less problematic as these markets’ holiday seasons are at least a month later, providing additional time for supply chain ramp up.
    Overall, there are many factors which Apple management must be intimately aware of, and I expect they ‘sweat the details’ to optimize the launch timing to the greatest extent possible among many conflicting considerations.

    1. My view is that the holiday quarter has always been huge, and would continue to be so without a late-year product launch. As such, Apple would see two separate spikes, more manageable from a supply perspective, instead of one huge one where it struggles to meet demand.

        1. Well, right now it’s exacerbated by the fact that it’s also their launch quarter for iPads, and the quarter immediately after launch for iPhones. If the two were split then it wouldn’t be as challenging.

          1. I get that. But, if I were selling hamburgers for a living and the majority of my customers bought them between the hours of 11am and 1pm, I would focus on meeting demand during those peak service hours. I might loose a few if I tell customers to show up sooner or stop by later.

          2. I get your point, but it’s a poor analogy because customers don’t just buy at one time. Customers buy at two different times – when they’re ready to spend money (e.g. the holidays), and when there’s something new to buy. To stretch your analogy, one could be lunch and one could be dinner. But Apple currently insists on feeding everyone at lunchtime.

          3. Okay, okay I get your point. Bottom line, Apple needs to focus on meeting demand whenever that might be. And I can only assume Tim Cook is on it. After all, he’s an operations/logistics guy. Plus, when you consider for a moment the number of iPhones produced in each quarter in 2014 vs 2007…it’s incredible. Okay, I’m done. Sorry about the typo in my previous comment.

  3. Very logical article for all the wrong reasons. I agree with Mike G on this one. The once a year is tough on suppliers but Apple is interested in Customer First and Foremost and all the suppliers can line up with Samsung or other if they can’t make the grade.

    1. I don’t care if it’s tough on suppliers – it’s tough on Apple. It can’t meet demand with adequate supply for three months after the iPhone launches, and it wouldn’t have such a big problem if it didn’t launch right into the holiday season. It also creates three lull quarters afterwards. Again, I don’t care about the impact on suppliers, but it doesn’t seem to be helping Apple.

      1. Could you explain why you think apple would be more profitable by following your advice because it does seem you are more concerned about the supply chain and how quarters graph out than profitability.

        1. More sales –> more profits. What I’m saying is that I think they’re forgoing some revenues by structuring the year’s launches the way they do at present.

  4. Given Cook’s acumen in the supply chain, what affect if any do you think this played in their decision to go for the Fall launch? Is there some potential cost benefit in this timing?


    1. For one thing, it’s incredibly impressive that Cook and his team have steadily eroded the amount of time it takes for supply and demand to get in balance. But it still took most of the fourth quarter last year, which meant for three months iPhone demand was not met by adequate supply. I’m not aware of any potential cost or logistics benefit from the current timing.

      1. I guess my question is ultimately unknowable outside of Apple, but I was just wondering if the supply chain is actually best utilized with this timing vs moving the timing. Certainly by now Apple has enough data to know if demand is better met with a Fall launch than the Spring, even if demand is still not fully met.

        Then there is also the adage, strike while the iron is hot, right? Maybe this maximizes demand, even at the expense of some demand not being met.

        Nice analysis. I’ve always wondered why the move from Spring/early Summer to Fall. It must equalize or maximize something, just not sure what.


        1. Without a doubt it would be more efficient for them to produce products at a steady rate all year round. They would require less capacity (lower capital expenditure on machinery), there would be less peak demand for labor (lower labor costs). But currently they design only one chip/one new OS per year and release it just in time for the Christmas buying season. This means they have the newest/best product during the busiest season. To change that strategy would be to give up having the newest/best product at the best possible time.

      2. The reason that Apple moved to a yearly update was complaints from there customers about equipment being outdated in 3-4 months, buyers remorse.

        I do agree that Apple should move some of its product lunches, I’m thinking large iPad and Macs to spring to maximise the education market and iPods to the summer, not that they make much difference now which seems a bit weird for a multi billion dollar line.

        However maximising sales by releasing new products when they are most likely to sell is just good business, also Apples problem isn’t components which can be smoothed over the entire year, but assembly. And if that’s a problem for Apple it must be a bigger problem for everyone doing smaller runs.

  5. Apple should always launch iPhones in the fall, then new iPads six months later that include the latest iPhone improvements. So we would have had Touch ID iPads available in April. That would give Apple a second chance to get the press and customers attention regarding the last iPhone innovations and not make the iPad seem so far behind.

    If iPads sales are more holiday/impulse oriented than phones, they could do the reverse.

  6. Your thesis seems to be dependent on differences between financial reporting periods, which are artificial, based on the calendar. Supply constraints will always follow in the days, weeks, months, and perhaps quarters after a new, best selling product announcement regardless of the time of year. It has nothing to do with when it is announced during a quarter. And the Osborne effect will apply whenever a new product announcement is anticipated – regardless of the time of year. It’s unrealistic to have surprise announcements at varying intervals to avoid customer anticipation.

    Perhaps bringing out most (all?) new products in the fall is a burden for the retail stores but you do not prove that it is a problem with suppliers or Apple itself. Your contention that Apple is leaving money on the table is totally unproven. It is not clear who Apple’s product launch cycle causes a problem for – other than you.

    1. I’ll take your points one by one:
      (1) “Artificial” reporting periods – they may well be artificial, although arbitrary might be a better word. They’re very real from a financial reporting perspective, and that’s why they matter.
      (2) Yes, supply constraints will always follow launches, but with Apple’s current schedule there are two drivers for supply constraints rather than just one – the holiday period would be much more manageable if it wasn’t combined with the first full quarter after a launch.
      (3) I haven’t mentioned retail stores at all, and this isn’t really about retail stores – it’s about the whole supply chain.
      (4) You are correct that my assertion that Apple is leaving money on the table is unproven. However, that’s not the only issue for Apple as I outline in the piece. The bigger one is that the first quarter is so big that the rest of the year falls flat. This isn’t great in terms of providing a predictable revenue stream over the course of the year, but it also massively increases risk – one bad Q4 ruins the whole year.
      (5) I agree that the trained Osborne effect can’t be avoided altogether, but staggering launches would lessen the impact of the lull quarters it causes. Even just putting iPhone and iPad launches at different points in the year would help somewhat with this.

      1. $30-40B “flat” quarters that remain highly profitable are still predictable. I just don’t think Apple sees one humongous quarter as much of a problem, especially when even their weakest quarter is triple Facebook’s annual revenue.

        At this point they are going full bore simply trying to meet the 12 month cycle. Shortening it to 11 months would be very difficult and really not alleviate the “problem” much. Neither would extending it 1-2 months, since that would only bring the launches closer to peak holiday season. Pushing it past December wouldn’t make sense and then there’s the Chinese New Year surge.

        1. They get hammered every time by financial analysts and others that don’t understand the cycle – that’s what I mean by predictable. Smooth is probably a better word for what I meant.

          1. The regular analysts are finally catching on to the cycle, and thus, it’s become predictable or smooth in that way. Of course, there are still and always will be publicity-seeking analysts who seek out receptive CNBC to air their contrarian views, either due to great stupidity or great intentionality.

          2. I know it’s a publicly traded company, but is that really a reason they should be taking into consideration. Also, for all the fuss the news cycle and financial analyst make, it’s the share holders who they need to appease.

      2. ” that’s not the only issue for Apple as I outline in the piece. The
        bigger one is that the first quarter is so big that the rest of the year
        falls flat. This isn’t great in terms of providing a predictable
        revenue stream over the course of the year, but it also massively
        increases risk – one bad Q4 ruins the whole year.”

        I really don’t understand why you are portraying this as a problem when the fact remains that just four-five years ago Apple had a staggered release schedule (Ipad in spring, iphone in summer, ipod in fall, various mac lines spread throughout the year), and they have since then moved away from that to the current scheme where essentially everything comes out in the fall except for occasional Mac spec bumps.

        Apple has *purposefully* moved to the current schedule. Which must mean that they have crunched the numbers and they decided that the sales benefits of having everything released to time with the back to school/holiday shopping season outweighed all the disadvantages that you feel are so profound.

        1. I believe it’s a problem, you don’t. I suspect we’ll have to leave it at that. I’m sticking my neck out here and saying I wouldn’t be surprised if in the next year Apple releases an iPhone or iPad update in the first half of the year. We’ll know soon enough whether I’m right or wrong!

      3. Regardless of when Apple (or any other electronic maker) launches their products a bad Q4 will ruin the whole year.

  7. You, like many analysts, take too much of a US centric view on some things. Your argument is greatly weakened by the fact that Apple product launches are not worldwide simultaneously. As production of new products proceeds and meets demand in initial markets, new markets (countries) are added over a several months long time span. Worldwide availability is something Apple is constantly working on to make happen sooner everywhere. Spaced introductions of new models of the different iPhone versions would only confuse many customers, something that is anathema to Apples’s mindset and way of doing business.

    1. I think your point would have been more true in the past, but is much less true now, when new devices like the iPhone and iPad become available in many major countries around the world very quickly after launch. The iPhone 5S was available in most major countries on day 1, including the US, UK, China, Japan, Australia, France and Germany. It was available in almost every country by early November. Arguably, the fact that the quarter is so supply-constrained makes it harder for Apple to launch in many countries at once. Again, this would be helped by moving some launches elsewhere in the year.

    2. Jan,

      You also missed the fact that in China and east Asia, the Lunar New Year is the first quarter is the major gift giving holiday. Apple cannot afford to have products that are long in the tooth for this major sales period. As Apple continues to grow the Asian market, this becomes even more important.

  8. What Apple could do is have their iPhone & iPad launches in the Fall, as they do now, and have their Mac launches in March / April.

    1. Mac launches don’t really figure into this all that much. The numbers are so much lower that (a) demand is usually met by adequate supply within weeks (with the exception of the US-made Mac Pro) and (b) these numbers don’t have a big impact on overall financials. In addition, the Mac is very fragmented between different categories (MBP, MBA, Mac Pro, iMac, Mac Mini) and don’t launch on a predictable annual schedule. It only really matters when Apple launches new iPhones and iPads.

      1. I am glad someone brought up the discussion about Apple’s Mac (desktop/laptop) lineup. From my perspective the main thing that will be holding up Apple releasing new Mac’s this year will be Intel and their ability to ship in volume their 2014 chips. Apple does not want to make the mistake that I believe that Microsoft made with the Surface Pro 3 and launch it with last years chips. So I do suspect that we will see new MacBook Air’s, MacBook Pro’s, iMacs and hopefully Mac Mini’s later this year but that all depends on Intel.

        Of course these same issues should not apply with their IOS devices as they have more control of the parts that go in them so there should not be any excuses for delays there other than ramping up production on new innovative components like Touch ID or the rumored sapphire screens.

  9. But with the Osborne effect making the iPhone most desirable in the quarter following its launch, don’t you maximize sales by putting that (plus the attention generated by a heavily-publicized launch) right at the time when the most people are shopping—the holiday quarter? If they launch in the spring, then by November Samsung or someone else will have the latest and greatest phone, which may attract a material number of those casual buyers.

    You may be arguing that this is outweighed by sales lost to supply constraints, but what data supports that?

    Also consider that from a PR perspective, “oops, we’re selling so many that supply can’t keep up” is a much better problem to have than “oops, people are buying our competitor’s phone because it’s newer and shinier.” And what if, as they continue to improve their supply infrastructure, Apple is eventually able to meet demand while still getting the marketing benefits of launching for the holiday quarter?

    1. I don’t think many people going into the holiday season will buy a different phone just because it’s newer. People buy phones for many reasons, but I don’t think “which launched most recently” is a major one.

      1. It might make a motivational difference to those first time iPhone/other Apple product buyers Cook often cites, though.


      2. I have to fundamentally disagree with that statement. People want the best, the best in technology is almost always the newest. This is even more true in a new market where processors are seeing 30% gains, cameras are improving and features are being added. I would cite the domination of sales during launch quarter of the 5S against the 5C as evidence. Apple’s strategy is brilliant because they ensure that they have the newest/best product going into the busiest season.

      3. Without more evidence for that, I have to disagree.

        1) In the fast-progressing mobile device world, “which launched most recently” is a surprisingly good proxy for “which has the best performance & features for the price”.

        2) The combination of “I’ve been waiting till Christmas to buy something special” and “oh look, new X just came out” can be a powerful force.

  10. Great piece. Another reason to spread out product launches is to prevent this long lull that creates a vacuum which gets filled by the media and financial press spreading D&G and FUD; saying Apple has run out of ideas and can’t innovate anymore.

    1. This is true. The media, Wall Street and some nerds need more releases throughout the year or they get board and start to make up lies and spread fear and doubt about Apple’s ability to innovate. The thing is that Apple is too smart to fall in to that trap and produce silly and gimmicky products like Google Glass or the current generation of SmartWatches. Apple builds products for real people. Not nerds and Not Wall Street. So they normally release products when the technology is ready and not before.

  11. Jan,
    Why do you think Apple moved iPad launches from Q1 to Q4? The original schedule seems perfectly good especially in dealing with the problems you outlined.

    It does seem like Apple deliberately chose to optimize around Q3/Q4 versus a smoother year.

    1. There are two possible explanations for the current pattern: one is that the iPhone slipped back a quarter because Apple was running late that year, and it’s been extremely difficult to move it back up. The other is that it was a deliberate decision. Either way, once the iPhone moved back, since iOS is so closely tied to it, it made sense to move the iPad to the same time of year, and that change almost certainly was deliberate. All I know is, there are downsides to the change, and I suspect they’d be better off moving at least some products back out of the last 15 weeks of the year.

  12. You can question Apple if you want, but why would people constantly second-guess the way Apple is being run? Is it that you think they don’t know what they’re doing? That they can’t figure out things the same way you are doing? Why don’t you go and ask Tim Cook why he’s running Apple this way? You might be able to clue him in on something he never thought about. /s The way I see it is I’m not privy to internal management decisions so I don’t know their reasons for making those decisions you feel aren’t maximizing the company’s potential.

    Yes, I can sit on my couch and build a whole bunch of scenarios which I think would produce better results for Apple sales. But I’d hardly think that they haven’t already played that same scenario for themselves. I’m sure that Apple is leaving a lot of money on the table in many ways, but so what? Exactly how much money must Apple have to satisfy Wall Street’s greed. I can assure you if Apple reaches $135 a share, there will be people saying that Apple is leaving money on the table and why can’t they figure out how to make more money. I think at some point a company should simply sit back and work on projects that have nothing to do with making more money.

    It might be easier for Apple to take on temporary staff at the holiday season to fill the retail stores with help. It may be easier for Foxconn to hire 100,000 employees for a shorter period than all year round. You would actually have to sit down and talk with upper management about how Apple has to work with other component companies. I understand how Apple is being run may not make any sense to you and if you’re just curious, well, that’s fine. I think Apple is smart to catch everyone in the holiday season while buying is at a fever pitch trying to max out their credit cards. Consumers just go out of control in the season of giving and receiving. Goods that sat in stores all year long get fought over just so someone else doesn’t get it during Christmas. I like Apple’s holiday push because it attracts attention from the news media when they see long lines and crowded stores. Pure adrenaline rush.

    Anyway, send all your ideas to Tim Cook and maybe he will appoint you as some part-time adviser when things start getting really tough for Apple and all their people can’t figure out what to do to increase sales.

    1. There’s a simple way to look at this – either I’m right and Apple will end up shifting some products to other quarters, or I’m wrong. Within a year we’ll know which it is. I’m not saying I know better than Apple – I’m saying this is what I think Apple should do. They may feel the same, or they may feel differently. We’ll know soon enough.

  13. As a customer I would much prefer one super big event a year with a refresh of all hardware items, and the introduction of new products. Then it would be clear, there is going to be a new this, a new that and so on. I could then decide what do I change this year without having to think about their cycle. The car industry is like that. I think they should make back to school the main event, around August 15, then start shipping in September rather. As the year advance, just like the car industry, lower their price slightly. My two cents…

  14. Chips have forced Apples hand on the products that really matter. To be competitive, you need to put your best possible processors into your tablets and phones as soon as it is possible. This means you could stager the two products by a month or so to help deal with production volumes but not much more and that is where we are. The real problem is the other items, like AppleTV, iWatch, iPods and to a much lesser extent desktops and laptops.

    Stacking all of these “want” products together makes it difficult to get apple followers to dump the cash at an impulse. 3-6 months later when you have some additional disposable income the shine is off those little additional devices. But by the same token, those are the gift products for the christmas buying season. So I don’t think there is a perfect answer.

    One thing (and it is what I thought Cook was doing last year) would be to do a mid year bump. So come May as the excitement around the new products is falling off but well before people are really waiting for the next big thing, just do a simple spec bump. I expected this to happen with the 5s, 5c and iPads. The idea of a 16GB iOS device 4 years after it was set as a minimum for standard definition iPads is insane!!! My guess was that come May Apple would quietly kill off the 16Gb iOS devices and effectively reduce the price by $100 (maybe introduce a 128GB or 256 iPad). This way the industry can’t say products are failing so Apple is cutting prices (because they didn’t). Apple simply bumps the specs because of efficiencies.

    You have to be careful not to piss off early adopters so dramatic increases would not be good, but minor revision bumps should’t be a problem and would help goose sales going into the new product launch with out reseting pricing expectations. IMHO

  15. The claim that lull quarters are inherently a bad thing is never established in the article. It appears to be taken as a given.

    Now if you are talking about AAPL (rather than Apple), you may have a case to make.

  16. I was a bit surprised when Apple moved the iPad launch from around March to the 4th quarter for exactly the reasons outlined.

    In the past, I had noted that Apple seemed to spread out its product launches/refreshes to one major product a quarter and one minor refresh. They also seemed to time their launches at the end of a quarter, so that the initial sales burst would overlap two financial quarters. It all seemed so well planned out to smooth out Apple’s sales cycle that when Apple changed its launch strategy I was surprised.

    To me, the first change was the iPhone 4S which not only didn’t come in the usual Summer window, but came even after the end of the 3rd quarter, which struck me as very odd. The obvious conclusion I could draw was that Steve’s failing health impacted the company enough to push it off its usually carefully choreographed timing.

    I’d love for Apple to return to its staggered launches, but I’ve always assumed there were more complex reasons for the change to its launch strategy.

  17. From what I can see, Apple intentionally moved both its iPhone and iPad launches to the fall. There were multiple reasons, including the timing with WWDC and iOS software releases, but one of them, I think, is they determined that an end-of-3rd qtr release was better. (Without a doubt, WWDC could’ve been moved earlier if Apple wanted to.)

    How so? First, releasing in Sep/Oct creates huge competitor-suffocating mindshare. No one else even dares launch around the same time. (Remember Palm tried it (probably unintentionally) and got crushed.) Rumor has it Samsung is going to release a new phone/phablet in Sept this year; we’ll see how that turns out. Second, for that smaller niche group that is more spec-focused, i.e., reads Anandtech, iPhone performance (CPU, GPU, battery, etc) gets to zoom over and ahead of its competitors, who mostly release their flagships in April-May (when they catch up or even go ahead in performance). (I haven’t had time to check if there is any seasonality to Qualcomm/Nvidia chip releases and if Apple is taking advantage of that.) Third, as mentioned by others, during a holiday season, consumers are more predisposed to spend, and to spend more, both for others and themselves, and this can make a difference especially for higher-priced products. (In China, this is just before the Lunar New Year, instead of Christmas, which is usually in Feb or Jan. But fall is still appropriate for that.)

    This was not as much of an issue initially as Apple was staggering releases by country. But as more
    countries were moved into the 4th quarter, this has made the supply issue worse. But Apple has said many times that it believes that consumers who want iPhones will wait.

    Regardless, Apple’s behavior over the years has shown it repeatedly to be willing to leave money on the table. In this case, I think Apple is indicating it is more important to them to get updated-Axx-chips-mated-to-the-latest-iOS-release deployed as soon as possible, which results in both its new flagship iPhone and iPad getting released very close to one another.

I do agree with you that Apple could shift the mid-tier model (5c) release to the Mar-Jun time-frame. And if there really are two new iPhone 6 models (4.7 and 5.5) this fall, I fully expect the updated 5c to shift. In other words, Apple would continue to sell the iPhone 5s (as the next tier down) until the 5c gets replaced with new plastic, colored models with the A7 chip.

    1. I question if a delayed 5C/second tier phone would be better off being released in the spring. First they are only changing the casing, so the supply chain is already in place, why wait 6 months to release it. What would they do for a tier 2 phone? If they keep selling the old one, then they are sacrificing margin by not using the cheaper plastic casing.

      I’m not saying it’s a bad idea to release a product in the spring, but not an existing product line. They could do this for a new product in order to put the excess capacity to good use. That’s why the IPad launched in the spring initially, but once they increase production capacity it should be moved to the fall to put the freshest product on the shelf.

      1. Good point. But some counterpoints:
        1. Apple gets to publicize a “new” phone six months later, possibly launched at a discount ($49 vs. $99). Gain some mindshare when Samsung is about to launch its new flagship S6.
        2. The offset could allow Apple greater efficiency in the use of A-team staff.
        3. Assuming rumors are correct about 4.7″ (and 5.5″), Apple gets to keep a “premium” 4″ 5S phone in its lineup – premium in that it isn’t plastic. It also keeps open the possibility that there will be another Apple premium 4″ phone in the future.
        4. If the 6C is going to have TouchID and A7 (and I think it needs to have both), it delays the shift of TouchID and A7 to the non-premium line by six months. Thus making the 6 even more attractive (relatively) and keeping more sales focus on the 6. And not add more demand for TouchID sensors.
        5. If iWallet (and HomeKit/HealthKit) is launched with iPhone 6 and requires TouchID, and 6C has TouchID, then it paves the way for Apple to market the availability of iWallet to the non-premium line six months from now. If iWallet happens, I assume it will be a key selling point for the premium 6 (and 5S), and become quite popular.

  18. One thing that we did not discuss below is that Apple seems to be living dangerously in some ways. Firstly, they rely on “strategic” parts (i.e. A7, touch ID and maybe sapphire) that are not available to competitors, but which cannot be sourced elsewhere. Secondly, they use high-end materials (e.g. aluminium) that require expensive tooling and may cause production bottlenecks. Thirdly, they are sometimes cutting it close when using new technologies (e.g. retina screens), where scaling up production can be challenging.
    Looking at those risks, it is actually remarkable how well Apple has done. However, AAPL the stock, does not really benefit much from such heroics. AAPL would be much better off if the seasonal peak were not as extreme. It would be interesting to see an article on Tech.pinions on what type of price discrimination tactics might work for a business like Apple’s (e.g. discounts on end-of-life products, varying features (underclock lower price models), launch schedules, etc.).
    Having said that, obviously you do not want to launch the products for the holiday season too early, because that will give the Shenzen ecosystem too much time to copy your wares.

  19. Jan,

    “Software is eating the world.” We have a single jewel of a sw code base with two UI variants: iOS and Mac OSX.

    This code base has on the order of $100B of past investment in it and perhaps is the most VALUABLE economic man made ‘thing’ in the world.

    Apple is happy (perhaps ‘needs’) to make things as simple as possible for OS development by having only one major release each year,

    Maybe this is why Apple has every major hw device shipping in Sept/Oct. Do you agree?

  20. The basic premise of the article is that Apple is missing out on profits by not meeting demand, but by increasing demand their products would be less scarce and ASP would fall. The scarcity of their products is one of the reasons they are not given away in 2 for 1 specials, discounted and resell for good money on Ebay. This is the same strategy of artificial scarcity that is employed by De Beers to drive up the cost of diamonds. I would argue there is an upside to keeping the product scarce.

    1. Diamonds have no intrinsic value – their whole value is in their scarcity. Apple’s products do have intrinsic value, and I’d argue that you have it backwards – they don’t discount them because they do have that intrinsic value, and hold it well. Scarcity is driven by demand, not the other way around.

  21. Timing is everything. While it can be argued that peaks in “Ber” months refresh causes supply-demands imbalances, the Christmas rush-holiday sales, people generally in the “collective spending mood” still far outweighs the argument of spreading their products refresh all throughout the year. I think its this reason why the execs in Apple still employ this strategy.

  22. I suppose they will spread the product launches more in the future. If iPhone 6 be in 2 or 3 sizes, and maybe a iWatch etc..
    All the iPads included, TV box and so on.
    Their product portfoli will be much larger than just some years ago. So it are not the same company now than during Steve Jobs.

  23. The problem I saw with iPads previously being in earlier quarters, is that the iPad is a popular Christmas gift. Well what happens when a bunch of people get iPads for Christmas, and two months later its already outdated with a new model? They’re not too happy. And this isn’t just with early adopters who need the latest. Average consumers also feel burned when they buy something close to being updated. Hence the popular meme that “Apple products become obsolete a few weeks after you buy it.” I’ve seen this in plenty of the mainstream media and consumers, they have this notion that Apple updates their products too rapidly and their new product gets replaced soon after purchase.

    So I think this was very intentional on Apples part. They realized iPads sold most during Q4, and wanted to make sure their models are refreshed during this active buying season. Not AFTER.

    It does create the problems you described in the article. But obviously Apple is willing to accept that. I personally would prefer if Apple refreshed Macs in earlier months, and then iOS devices in the fall. But they’re kind of dictated by Intels schedule, not much they can do there. Which might make for that compelling reason to make A-series based Macs. Then they’re not beholden to another company’s roadmap.

  24. I broadly agree with points made in this article, but the discussion is too narrowly focused to , recommend a different policy for iDevice launches.

    Most fundamentally, the article doesn’t seem to recognize, or respect, the fact that Apple’s existing production/supply chain was created by Tim Cook to support with the concentrated fall launch cycle that now exists. Before recommend that Apple alter the product launch cycle to avoid over-stressing the supply chain, it is first necessary to present evidence that Apple’s supply chain is not up to the job.

    Second, Apple’s production/supply chain is not a fixed thing, but has changed in recent years. Foxconn is investing big time in a new generation of robots that would reduce by about 50% the amount of labor time required to assemble each iDevice. And for the past couple of years, Apple’s growing partnerships with component suppliers (GTA, TSM, Sharp, etc.) have reduced uncertainties of working with independent parts makers. Both of these developments lower the likelihood of encountering future supply constraints, so the case for altering the launch calendar is weaker now than if it had been made a year or two ago.

    However, my biggest objection to altering iPhone and iPad launch dates relates to the article’s focus on “production” issues for setting the launch schedule, while paying little or no attention to consumers, revenues or profits — as though cost minimization is synonymous with profit maximization. But it’s not. Costs are minimized by producing zero units.

    It appears highly likely that marketing experts have advised Apple to launch its main products during the fall to better capture the public’s attention (free advertising) and a large share of holiday spending. After all, the exhibit/table in the article shows that Apple has a lot of experience launching iPhone and iPad at other times during the year, so Mr. Cook is not exactly rolling the dice when scheduling iPhone launches. If consumer demand is strongest during the final quarter of the year, Apple either must launch its products then, or make fewer total sales over the course of the year.

    If Tim Cook didn’t strongly believe that annual revenues are higher with the Sept-Oct launch schedule, what other reason would he have for adopting it? The article shows that if production cost and management comfort were the only considerations, iDevice launches would never “accidentally” be scheduled in such close proximity to each another.

    I conclude that Apple schedules iPhone and iPad launches around the peak period in consumer demand — not only selling the products that buyers want most, but delivering those products when buyers want them most. To accomplish that, the company’s production/supply chain has been optimized around the fall launches, and can now support the fall launch schedule without encountering lengthy delays in delivering product to market.

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