Apple’s Hopes of an iPhone Upgrade ‘Supercycle’ Seemingly Fade Away

Iphone Xs Max In Hand Apple Store Credit: TZIDO SUN / Shutterstock
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Thanks to new supply-chain and analyst reports, we’re learning that Apple’s latest iPhone XS and XR handsets might not be resonating with consumers (and their pocketbooks) quite as much as the Cupertino tech-giant had previously banked on.

Some of Apple’s biggest suppliers have already said the company’s reduced component orders, which in turn has caused them to reduce sales forecasts and, ultimately, suggests that the latest iPhone models aren’t as “in demand” amid the broader slow-down of the high-end smartphone market.

On Monday, The Wall Street Journal published a new report echoing some of these sentiments, noting that Apple has reduced orders for its latest iPhone XS and XR handsets, which has unfortunately caused disruption among the company’s Far East supply chain.

“In recent weeks, Apple slashed production orders for all three of the iPhone models it introduced in September,” an anonymous source with knowledge of the matter told WSJ, adding that the move has been “frustrating executives at Apple suppliers as well as workers who assemble the handsets and their components.”

The report goes on to point out that Apple’s suppliers in the Far East are far more vulnerable to this volatility, with one anonymous supplier noting that “when [production] slows, rocks start to show up in the bottom of the ocean,” and that “doing business with Apple is very risky as it often reverses what it has promised.”

Last week, Apple’s No. 1 TrueDepth camera supplier, Lumentum, noted in a statement that one of its biggest clients for VCSEL 3D imaging components required for Face ID reduced its previous orders to an extent which sent the camera-maker’s stock tumbling 28 percent in a single day.

The famed Apple analyst Ming-Chi Kuo, in a recent research note, also moved to increase his previous iPhone XR order reduction predictions by nearly 10 million units through the end of 2018, even further suggesting that Apple simply isn’t selling as many iPhones as it made provisions for.

The Wall Street Journal report goes on to echo Kuo’s predictions, citing a supply-chain source who noted that Apple has so far slashed iPhone XR orders by as much as a third.

Apple, who’s reportedly selling a larger percentage of older iPhone models like the 7, 8 and 8 Plus this year, has also been directly hit by these reports, with its domestic stock (NASDAQ; AAPL) having shed around 18 percent so far this month.

But, a bit of silver lining (if you’ll call it that?), is that Apple’s in the unique position where it’s overall iPhone ASP (average selling price) is set to rise again, which essentially means the company will be able to get by selling fewer iPhone units while still generating profit within a predetermined range. 

We may never know what that range is, as the company also announced it’ll stop sharing key iPhone sales figures during its quarterly conference calls; meaning that, come January, we may not even know how these new iPhones actually performed during the holiday quarter.

Apple’s sales are typically off-the-charts during the busy holiday shopping season, though. And so, from that vantage point, it’ll certainly be interesting to see the broader figures in its upcoming January 2019 earnings call covering the October-December 2018 quarter. 

Current guidance suggests that the tech-giant will bring in revenue of between $89 and $94 billion, which happens to be on the lower end of Wall Street’s expectations.

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