1. Apple does innovate. Every year. But doesn't tend to follow fads or new technologies for the sake of newness and those tend to be confused with innovation all the time.
2. As markets saturate and the smartphone becomes an everyday object, the behavior starts to resemble the fashion and accessories industry where brand image, and customer loyalty plays a larger role in purchase decisions. If Louis Vuitton sales 10% less bags YoY in China, nobody thinks it's because they have not innovated enough in handbag technology.
Apple is ok. At least as of now. They are still selling 84 billion $ worth of products on a given quarter.