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The circular, silver lining to Apple’s shock earnings warning

This article is drawn from the Circular Weekly newsletter from GreenBiz, running Fridays.

While it may be a happy new year for many, Apple hasn’t had a great week. CEO Tim Cook’s letter to investors Wednesday announced a cut in first-quarter revenue guidance, from $91.5 to $84 billion, leading Apple stock to its largest single-day loss in six years. Ouch.

Citing a confluence of factors — notably, the U.S.-China trade war and China’s economic slowdown — Cook also mentioned another notable dynamic at play: People are keeping their iPhones longer.

A circular economy can be achieved only if the economics work, and it’s not encouraging that Apple’s business model is based primarily on people trading in or upgrading their phones on a regular basis. However, there’s a strong case to be made for a circular, silver lining.

Some consumers have begun to realize that, in fact, a smartphone need not have a mere two-year lifespan. “Phones used to be toys, and shiny objects,” said Cliff Maldonado, founder of BayStreet Research, in an interview with Wired. “Now they’re utilities. You’ve got to have it, and the joy of getting a new one is pretty minor.” 

He points out that apps such as Facebook and email look the same on both old and new phones, and that “old” cameras still take great photos. Given consumers’ continued appetite to buy stuff, particularly on the coattails of a robust holiday spending season, this is a significant statement about shifting consumer behavior.

The environmental implications are significant, too: According to Apple’s most recent sustainability report (PDF), manufacturing each Apple device generates an average of 90 pounds of carbon emissions. Not a lot individually, but in its fiscal 2018, the company reportedly sold 218 million iPhones, not to mention millions more iMacs, watches and other gizmos.

Despite its meaningful goal to use only recycled or renewable materials in its products, Apple doesn’t have the best track record when it comes to repair and product life extension, from the Batterygate episode to the company’s lobbying against “right to repair” legislation. Given the impact that longer lives for iPhones seems to be having on the company’s bottom line, Apple’s opposition to consumers or other outsiders repairing or upgrading its products should come as no surprise. (Apple does have a network of certified repairers, but critics complain that proprietary screws, unibody enclosures and other features make it difficult for others to easily take their devices apart.)

As I said, there’s a silver lining. Other consumer electronics makers have found that increasing reparability builds brand loyalty. Although customers may not replace their iPhones as frequently, Apple could continue to unlock new, digital revenue streams such as Apple Music, subscription-based apps and TV shows, and still keep to its non-extractive circularity goal. But shareholders seeking returns over a much shorter time horizon still may object.

Accordingly, circularity asks us not only to rethink material flows and business models, but also to revisit the metrics and timescales we use to quantify success.

Source: GreenBiz