Technology

Apple Inc. Expects Weak iPhone X Demand During March Quarter

Apple Inc. (NASDAQ:AAPL) had been able to ramp up the iPhone X production in time to meet the holiday quarter demand. Despite strong sales, the company was offering the same day or the next day delivery to most customers. However, the iPhone X sales momentum may not sustain going into the new year. Fresh reports suggest that the iPhone X demand would fall significantly during the March quarter.

iPhone X Demand
Image Source: Apple.com (screenshot)

Shares of Asian suppliers fall on reports of slowing iPhone X demand

Citing Taiwanese newspaper Economic Daily News, Bloomberg reports that Apple has trimmed its first-quarter iPhone X sales forecast from 50 million units to 30 million units. Foxconn, the sole manufacturer of the iPhone X, has stopped recruiting workers in China. The reports of a weaker than expected iPhone X sales have triggered a decline in the share prices of Apple’s Asian suppliers.

Shares of Shenzen Desay Battery Technology Co, Lens Technology Co, and Largan Precision Co fell Monday following the report. Foxconn shares plunged on Monday, and again on Tuesday. Shares of General Interface Solution Holding declined 8.4% on Tuesday. Wall Street analysts have also lowered their iPhone X shipment projections for the March quarter.

A lower consumer demand means Apple will place fewer orders with suppliers. Sinolink Securities Co analyst Zhang Bin has revised down their iPhone X shipment projections from 45 million to 35 million units. Zhang told investors that the “high price of the iPhone X” would weaken the demand in March quarter after the first wave of demand has been fulfilled.

Bloomberg says another research firm JL Warren Capital has trimmed its first-quarter iPhone X shipment estimates from 30 million to 25 million units. JL Warren Capital told clients in a report that Apple has reduced orders at some suppliers. The firm attributed the decline in iPhone X sales to a “high price point and a lack of interesting innovations.” All the hype and publicity has failed to boost the global demand for the anniversary iPhone.

A few weeks ago, UBS Securities noted in a report that the iPhone X sales were good, but not indicative of the so-called supercycle. Cowen & Co. analyst Karl Ackerman has also claimed that the iPhone X shipments had been “below initial expectations.” Ackerman predicts Apple would ship 56 million iPhones (including the older models) in the March quarter.

High price, lack of innovative features hurting iPhone X demand

The iPhone X has a starting price of $999. It costs as much as $1600 in many countries including Hungary, Denmark, Russia, and India. Even the US consumers may have to shell out close to $1500 for the device, thanks to a variety of hidden costs. For instance, the AppleCare+ will set you back by $199. If you want to enjoy fast charging, you’ll have to buy a wall adapter and USB-C cable for around $75. If you haven’t taken the AppleCare+ protection, the screen repair would cost $279. And if you crack the rear glass, you are going to spend $549 to get it repaired.

The iPhone X certainly looks gorgeous. But it doesn’t have enough new technologies to justify its ridiculously high price. The only new features in the device are the TrueDepth camera – which supports Face ID and Animoji – and a bezel-less OLED display. If you take out these two features, the iPhone X is same as the iPhone 8 Plus. We have argued in the past that the iPhone 8 Plus could be a better buy than the anniversary model.

The iPhone X is expected to boost Apple’s revenues to record levels in the December quarter. Loup Ventures analyst Gene Munster predicts the iPhone X’s higher price would increase the iPhone’s average selling price (ASP) from roughly $619 in the fiscal year 2017 to $740 in the fiscal year 2018. Apple forecasts December quarter revenues between $84 billion and $87 billion, which is much higher than the $78.4 billion Apple recorded in the 2016 holiday quarter.

Older iPhones see a surge in popularity

Cowen & Co told investors that consumers have shown a preference for older models such as the iPhone 8 series and the iPhone 7 series over the iPhone X. The iPhone 7 and 7 Plus prices were slashed in September, which helped boost their sales. However, Morgan Stanley and RBC Capital Markets analysts have claimed that the iPhone X was the most popular iPhone model in China, the world’s largest smartphone market.

RBC Capital Markets found in a consumer survey that 62% of prospective iPhone buyers in China were planning to buy the iPhone X. Also, more than 66% of potential iPhone X buyers said they would go for the 256GB model, which should boost Apple’s profit margins.

Apple will reportedly launch three new iPhone models next year. One of them will have the same old LCD display, and would be priced in the same range as the iPhone 8. The other two phones will have a 5.8-inch OLED display and 6.4-inch OLED panel. Apple will be sourcing 180 million to 200 million OLED panels from Samsung Display next year.

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