Most people are aware of Samsung’s problems with the Galaxy Note 7, but one of Apple’s issues with the iPhone 7 Plus aren’t getting as much press. True, most investors are aware of the debate about whether the iPhone 7 will bring a return to unit growth, but one key factor could play a major role in whether that happens.
It seems that the shortage of the iPhone 7 Plus continues, and needless to say, if the company’s suppliers can’t make the phones, then it can’t sell them. A new survey suggests that this could be a bigger problem than most are being led to believe.
iPhone 7 Plus shortage continues
Analysts from multiple firms have been emphasizing that consumers seem to prefer the iPhone 7 Plus and that this is great for Apple’s margins. Analysts have also said that the long wait times for the phone point to just how popular it is. Mizuho Securities analysts Fumihide Goto and Kento Sugimoto have been tracking lead times and inventory sufficiency ratios for the iPhone 7 Plus and its smaller counterpart for some time.
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In their research note dated Dec. 12, they said that they did observe some improvement in wait times in all regions (U.S., China, Japan) for the 7 Plus in the week ending Dec. 11. Of course this is certainly good news because it means that there are more phones available in time for Christmas. The Mizuho team found the greatest improvement in China as stores are tending to have the phone in stock now.
They also observed inventory sufficiency ratios at some U.S. Apple stores at around 60%, however, which indicated no big change last week.
The analysts add that iPhone 7 wait times and inventory sufficiency ratios had already been showing improvement, and the situation has not changed.
Most consumers would be likely to switch brands in the case of a shortage
One of the reasons Apple has been so successful has been the stickiness of its products—a feature analysts have highlighted time and again over the years. However, it’s worth questioning what would be enough to convince consumers to switch?
One issue that could be a cause of concern is the inability of the company’s suppliers to make enough iPhone 7 Plus handsets to sate consumers’ appetite. Elementum, developer of a real-time supply chain management platform, found in a recent survey that 63% of Americans are somewhat to highly likely to switch brands in the case of a shortage impacting their favorite electronics brand. Just 14% said they would remain loyal.
In the case of Apple, it can be expensive to switch brands because it means purchasing apps that were bought on iOS previously on the new platform, so this factor will certainly impact the decision to switch. Then there’s the Apple brand, which enjoys much greater loyalty than most other tech brands, but still, this is something to watch, particularly as Christmas approaches. The iPhone maker is racing against the calendar in terms of making enough of its Plus-sized phones available for the holiday, and while it has made vast improvements, it may still come up short. Of course how short is anyone’s guess.
Of course the good thing for Apple is that Samsung is in an even worse position in terms of the results of this same survey. Elementum said its survey indicates that Americans are even less loyal when a company issues a recall, with 74% saying they would lose trust in their favorite electronics brand. Thirty-eight percent said it would take more than a month for a company to regain their trust, while 12% said it would take more than a year and 9% said the brand would never regain their trust.
Apple’s supply chain in good shape
All signs point to Apple having a solid iPhone 7 cycle this year, and JPMorgan analysts recently upgraded the company’s supply chain. They reported in a research note dated Dec. 9 that year over year comparisons for the iPhone have turned positive for the first time since the third quarter of 2015. They expect this trend to continue into next year, particularly as Apple moves into the iPhone 8 cycle (or “supercycle,” as some are calling it).
Despite recent rumors suggesting the contrary, JPMorgan analysts are counting on three iPhone 8 models in 2017, with all three having 2.5D glass back covers laminated on top of metal frames. They expect the 4.7-inch and 5.5-inch models will still have LCDs, while they look for the rumored 5.8-inch model to have an OLED screen built on a flexible plastic substrate. They predict that the two largest models will have a dual-lens system and that the phones will support wireless charging.
Shares of Apple stock slipped by as much as 0.91% to $112.91 during regular trading hours on Monday.