Apple Inc. Admits to Slowing Old iPhones: Will This Hurt AAPL Stock?

Apple slows old iPhones - Apple Inc. Admits to Slowing Old iPhones: Will This Hurt AAPL Stock?

Source: Apple

Apple Inc. (NASDAQ:AAPL) has been in the headlines over a new round of accusations that it is deliberately slowing older iPhones. A long-held conspiracy theory suggests Apple slows old iPhones to drive up sales of new iPhones, boosting AAPL stock. Yesterday afternoon, the company came clean and confirmed that it is throttling some older iPhones with degraded batteries. But they are doing it to prevent unexpected iPhone shutdowns.

This admission should put the conspiracy theories to rest — Apple isn’t up to anything sinister here — but a big question with implications for AAPL stock is now out there. If simply replacing an iPhone battery can make an older iPhone faster again, will that impact iPhone sales going forward?

Confirmation: Apple Slows Old iPhones

Yesterday, we reported on a new development in the long simmering story about older iPhones beginning to feel sluggish after installing a new version of iOS.

Testing of multiple generations of iPhone had previously debunked these rumors. But when a developer tried a different type of test, he discovered that previous generation iPhones (specifically iPhone 6 and iPhone 7) with aging batteries confirmed the conspiracy theory.

He was able to prove that the iPhones with older batteries had their performance throttled and iOS prevented their CPUs from hitting maximum processing power. When there was a new battery in play, no such issue was found.

Yesterday afternoon, Apple finally confirmed the suspicions. The company included code in iOS 10.2.1 earlier this year that was a fix for iPhone 6 users experiencing sudden shutdowns. It turns out that fix was to throttle the CPU from hitting maximum performance if the iPhone’s battery was degraded. Apple subsequently extended that functionality to include the iPhone 7. The company told The Verge:

“Our goal is to deliver the best experience for customers, which includes overall performance and prolonging the life of their devices. Lithium-ion batteries become less capable of supplying peak current demands when in cold conditions, have a low battery charge or as they age over time, which can result in the device unexpectedly shutting down to protect its electronic components.

Last year we released a feature for iPhone 6, iPhone 6s and iPhone SE to smooth out the instantaneous peaks only when needed to prevent the device from unexpectedly shutting down during these conditions. We’ve now extended that feature to iPhone 7 with iOS 11.2, and plan to add support for other products in the future.”

In other words, yes Apple slows old iPhones. But it doesn’t slow them overall, just during peak CPU usage, and only if there is an older battery. And it does so to ensure the iPhone keeps running smoothly when CPU demand exceeds a worn battery’s ability, rather than risking abrupt iPhone shutdowns.

Implications for AAPL Stock

There are some real implications for AAPL stock in this announcement. While the company could have been a lot more transparent, now that we know the reasoning it seems unlikely the company will lose customers. But if a new battery will restore their phones, how many people will buy a new iPhone just because their old iPhone is starting to feel like it can’t keep up?

When the iPhone 7 was released last year, Business Insider reported on a survey of buyers that listed the reasons why they upgraded.  Two of the top reasons were features you might expect to draw upgraders. iPhone 7 was the first to be water resistant and the first to have a dual camera system. But the number one reason for upgrading was longer battery life. The fourth most popular reason was faster processing speed.

Apple has now admitted that simple battery replacement would fix both of these issues.

We’ve always known that batteries wear down with time. But it’s largely shrugged off with smartphones — it doesn’t help that the battery is not user replaceable. And because it’s so gradual, progressively shorter battery life is ignored by most people, until it’s time for a new iPhone.

Now that degrading battery performance with time is in the spotlight — and has been linked to sluggish performance — will that impact iPhone sales?

Clearly, iPhone battery life is a big deal to upgraders, as is speed. Now we know for certain that Apple slows old iPhones with reduced battery capacity. So will the owners of these devices opt for a $79 battery replacement to restore battery life and performance? Or will they still upgrade to a new iPhone?

That’s a (multi) billion dollar question for AAPL stock, which remains tied to those yearly iPhone upgrades.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.

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