Is the New iPhone SE a Flop? Apple Slashes Production Amid Weak Sales

The iPhone SE may offer some of the best bang for your buck among 5G smartphones, but it seems that consumers aren’t snapping up Apple’s new wallet-friendly iPhone nearly as quickly as the company had hoped.

Over the weekend, supply chain sources revealed that Apple is slashing production of the new iPhone SE less than three weeks after debuting the upgraded 5G-capable version. However, the weakened demand for the iPhone SE may not be entirely Apple’s fault.

According to Nikkei Asia, Apple is now planning to produce 20 percent fewer iPhone SE models this coming quarter than it had initially forecasted due to weaker-than-expected demand.

This represents a reduction of between two and three million units for the next quarter in raw numbers. However, Nikkei pegs the weakened demand on something that Apple couldn’t have possibly anticipated: the Russian invasion of Ukraine.

As is often the case with major international conflicts, the war in Ukraine is threatening to drive up inflation, which is naturally making consumers think twice about whether it’s the best time to buy a new iPhone.

Well-known Apple analyst Ming-Chi Kuo has also heard the same and has cut his estimate for the quarter down from his original 25–30 million unit prediction, now suggesting that Apple will only sell 15–20 million iPhone SEs for the quarter.

AirPods Are Also in a Slump

It’s not just the iPhone SE that’s struggling, either. Nikkei adds that Apple has also reduced orders for AirPods by more than 10 million units for the entire year. Sources say demand has been “lukewarm,” and Apple doesn’t want to keep producing more AirPods to have them sitting unsold in warehouses.

Insiders say that AirPods shipments may effectively decline this year, although they didn’t specify how much. A reduction of ten million units may sound like a lot. Still, Apple is estimated to have shipped about 76.8 million AirPods in 2021, and we have no idea what the company had forecasted initially for its 2022 production.

The iPhone 13 Is Doing Fine

While Nikkei says that Apple also asked supplied to “make a couple of million fewer units of the entire iPhone 13 range,” this adjustment has more to do with normal seasonal fluctuations, as we move into a time of year when Apple ordinarily sells fewer iPhones anyway.

However, Apple may not be entirely alone here. Nikkei spoke with Counterpoint Research analyst Brady Wang, who said that the overall smartphone market has “unreasonably high levels of inventory” right now. Something will eventually need to be done to correct that across the board.

We see the end demand for smartphones in China is quite weak. … In addition, the Russia-Ukraine war will likely have spillover effects to the whole European market and on consumer demand.Brady Wang, Counterpoint Research

As a result of the uncertainties brought on by the ongoing Ukraine war, Counterpoint has revised its forecast for the smartphone market, predicting only five percent growth over the remainder of 2022.

It’s somewhat understandable how the iPhone SE is more likely to bear the brunt of this. As Apple’s most affordable iPhone, its target customers have less disposable income. As one executive at an Apple supplier told Nikkei, they are more prone to “save the money for food and for heating” when faced with economic uncertainty.