- Sources inside Apple’s Asian manufacturing supply chain paint a gloomy picture of iPhone sales.
- A period of flat or declining sales is likely to continue for much of the rest of the year, they told Longbow Research.
- “The iPhone X didn’t sell well during the holiday season,” one said. “We didn’t get as many 1Q orders as previously anticipated.”
- There is talk of an iPhone SE2.
To hear Apple CEO Tim Cook tell it, everything is always fantastic at Apple. “We’re thrilled to report Apple’s biggest quarter ever, which set new all-time records in both revenue and earnings,” he told analysts on his last earnings call.
Of course, it’s not as simple as that. The company is doing well financially, but that is because it has raised prices — via the $1,000 iPhone X. It’s actually selling fewer phones than before. Device sales declined 1% in the last quarter.
Sources inside Apple’s Asian manufacturing supply chain paint a much gloomier picture than Cook. This period of flat or declining sales is likely to continue for much of the rest of the year, they told Longbow Research analysts Shawn Harrison and Gausia Chowdhury. “The iPhone X didn’t sell well during the holiday season,” one told the Longbow team. “We didn’t get as many 1Q orders as previously anticipated.”
Harrison and Chowdhury don’t disclose which supply companies their sources work for. And their quotes are anonymous, likely because Apple makes its vendors sign strict legal confidentiality agreements that prevent them from talking. But some spoke of a business that was flat or in decline. The comments are interesting because they work at companies like Cirrus Logic, Qorvo, and Jabil, who have knowledge of how many iPhone units Apple needs to produce to meet demand.
‘The March quarter has been low and we’re expecting flat production year over year’
“The cut for 1Q is worse than usual and worse than what has happened in prior years,” one said. “The March quarter has been low and we’re expecting flat production year over year,” another added.
One said that the advantage of the extra money Apple was earning from the high-priced iPhone X would soon disappear. “The ASPs [average selling prices] were high during 4Q because of the X, but ASPs will decrease during the March quarter, since the share of the X has gone down.”
Longbow is neutral on Apple. The analysts lowered their iPhone sales estimates to 219.4 million devices, up 1%, for fiscal Q2 (calendar Q1) versus expectations of 6% growth. The believe that full-year growth will be up 2%, lower than analyst consensus of 3%.
One wild card in the mix is the possibility of a new “iPhone SE2,” Harrison and Chowdhury told their clients. The iPhone SE is Apple’s smallest and cheapest phone. “A SE2 remains under consideration,” they said. “There is talk of an iPhone SE2 model,” one of their sources said.
Here’s a sample of their other sources’ colour commentary on iPhone demand:
- “The iPhone 8 actually did better, we saw some improvement during the March quarter.”
- “iPhone production looks like it will be flat during the March quarter. It’s not only Apple, Chinese OEMs are seeing the same.”
- “We think there might be some improvement year over year for the June quarter, but it’s too early to tell.”
- “We think total iPhone shipments for 2018 will be flat compared to last year.”
- “For FY18, it could be low-single-digit growth.”
- “The new models launched in September or October won’t pick up the entire year immediately.”