RACHEL MARTIN, HOST:
Apple has reported that iPhone sales fell 15 percent in the last three months of 2018. And while this bad news was not entirely unexpected, it does mark a new low point for the tech company, whose iPhones, obviously, revolutionized the mobile phone industry. Joining me now to talk about what all this means for the company - NPR's Laura Sydell. Good morning, Laura.
LAURA SYDELL, BYLINE: Good morning.
MARTIN: What's going on with Apple? I mean, it was just last year that the company became the first American public company to hit a trillion-dollar valuation, right?
SYDELL: I know. It's amazing. But since the fall, the company has lost about a third of its value. And there are a few factors that are playing into what got us to this moment. There is China, which, along with Taiwan, analysts say, brings in close to 20 percent of Apple's business. And the Chinese economy's slowing, so customers there are buying fewer iPhones. In fact, many Chinese are turning to cheaper smartphones made by native companies like Huawei and iPhone knockoffs. In an earnings call, Apple CEO Tim Cook also pointed out that the dollar has been really strong. And that's raised the price for the phone outside of the U.S. And I will say it's not just China. People in the U.S. and other developed countries are also buying fewer new iPhones.
MARTIN: Well, why's that happening in the U.S.? I mean, the U.S. economy's doing pretty well, right? People still aren't buying iPhones then.
SYDELL: No. In the earnings call yesterday, Tim Cook, Apple's CEO, blamed a couple of factors for that. One is that the phone carriers, like AT&T and Verizon and so forth, have actually stopped subsidizing new phones. And this has been happening slowly over the past few years. So now when you go and buy a phone, the price of the phone service has gone down but you actually have to pay for your own new phone. And a new iPhone can cost you, like, a thousand bucks, right?
MARTIN: Right.
SYDELL: So there are a lot of people who are just holding onto their phones longer. Cook also said the company's decision to replace iPhone batteries at a cheaper price means a lot of people have just decided to hang onto the phone they have.
MARTIN: OK. So I want to go back to something you said earlier. You mentioned the company Huawei. And there will be people in our audience who recognize that name because that's the name of the Chinese telecom that the U.S. Treasury has sanctioned - right? - for intellectual property violations. Is...
SYDELL: Absolutely.
MARTIN: How does this connect to decreasing iPhone sales?
SYDELL: You know, it doesn't directly connect other than today, there are high-level Chinese officials coming to Washington for trade talks with the Trump administration. And since Apple would prefer we had better relationships with China...
MARTIN: Right.
SYDELL: ...Of course, it might not bode well for the talks because the Chinese might be in a bad mood. I will say, though, the other thing is it isn't just Apple. There are other companies who are feeling the slowdown. Nvidia already - its quarterly outlook said their sales were slowing because of China. Also, Caterpillar, the industrial equipment maker, also ran into that. So there's a lot riding on China.
MARTIN: Meanwhile, on top of all the bad news for Apple about the iPhone sales, the company got bad publicity this week because a 14-year-old discovered a security breach. What can you tell us?
SYDELL: Yes, he was playing a game. And he's - he was a 14-year-old in Arizona. And he discovered that when he called a friend using FaceTime, which is Apple's video conference call, he could eavesdrop on his friend before his friend actually picked up the call. His mother spent more than a week trying to bring the problem to Apple's attention before Apple finally acknowledged it and began working to fix it. Researchers say it should not have taken that long. And Apple has banked a lot on security and privacy, saying, we're the company for security and privacy.
MARTIN: Right.
SYDELL: And then this happens.
MARTIN: It doesn't bode well for them.
SYDELL: No, it doesn't look good.
MARTIN: NPR's Laura Sydell, thanks so much.
SYDELL: You're welcome.
(SOUNDBITE OF MARLEY CARROLL'S "SEVEN CROWS") Transcript provided by NPR, Copyright NPR.
