Date
25 May 2018
The high-priced iPhone X is said to be encountering poor market response, a development that may drag on iPhone shipments throughout the year. Photo: AFP
The high-priced iPhone X is said to be encountering poor market response, a development that may drag on iPhone shipments throughout the year. Photo: AFP

Is the iPhone past its glory days?

Apple is scheduled to announce its quarterly results next week. Investors are eager to learn about the company’s latest guidance on iPhone shipments as external sources have said sales were significantly down in the first three months of the year, casting a shadow on the global smartphone market.

Apple’s fiscal second quarter is considered a low season after the peak first quarter, which covers the Christmas holiday season.

In the first three months last year, the company sold 50 million units, earning US$33 billion. For the same period this year, Apple gave a sales forecast of US$60 billion to US$62 billion, representing a 17 percent year-on-year growth. If iPhone sales accounted for 60 percent of the total sales, then iPhone sales could be around US$37.2 billion for the last quarter.

At an average selling price of US$796, Apple could have sold 46.7 million iPhones during the period, down 6.6 percent from a year earlier. That would be the second consecutive year-on-year decline of iPhone shipments, although sales were up.

The market would pay close attention to the iPhone’s performance in the China market. According to market research firm Sino-MR, iPhone shipments in the first three months this year reached 16.8 million units, ranking third in the market behind OPPO with 18.52 million units and Vivo with 17.34 million units. Huawei ranked fourth with 14.42 million units.

If that is the case, iPhone shipments in China appeared on a growth track in China as it sold over 5 million units each month in the first quarter, while in December it sold below 5 million units.

It’s a bit difficult for the market to forecast iPhone shipments for this fiscal year, considering that the price range has become wider – from US$349 to US$1,149.

The iPhone X, the smartphone’s 10th-anniversary edition which launched last fall, will be the focus among analysts as there is speculation that the high-priced model is encountering poor market response, a development that may drag on iPhone shipments throughout the year.

However, from Apple’s perspective, the strategy may not be about the shipment numbers; the focus may be on the average selling price as well as the company’s share of profit in the market.

Investors focus on iPhone’s average selling price as it represents how well Apple has differentiated iPhone from rivals through market segmentation and brand loyalty. The iPhone’s average selling price for the first quarter was US$796, 15 percent higher than the same period last year.

According to a survey conducted by market research firm Counterpoint, Apple earned 86 percent of the industry profit for the fourth quarter of 2017. Its flagship iPhone X cornered 35 percent of the global smartphone market’s profit, topping iPhone 8, which had a 19.1 percent share, and iPhone 8 Plus with 15.2 percent.

However, the poor guidance given recently by Taiwan Semiconductor Manufacturing Corp., one of the largest suppliers of iPhone chips, has prompted investors to believe that it reflects the weak demand for iPhone.

So not too many people will be surprised when Apple reports a weak revenue guidance next Tuesday. In fact, it would indicate that Apple resellers and mobile operators may start a new round of price cutting to boost buying sentiment, especially among non-Apple fans who are always seeking the cheapest deal to own an iPhone.

Last year, several local operators offered two free iPhone units for each subscriber to their phone plan. As such, the poor outlook given by upstream suppliers may not fully reflect the sales performance of iPhone.

The TSMC guidance could also indicate that Apple may decide not to keep existing iPhone models for sale after new products launch this fall. That could affect TSMC orders in the short term. But the momentum could return when new chips enter Apple’s production schedule in June or July for the September launch.

The iPhone X may not be as hot as Apple had thought it would be. But no worries. The company will launch a new small-screen iPhone SE2, aimed at the younger generation, as early as June. Apple may also launch three successors to the iPhone X with a bigger screen size in response to customer feedback.

So it may a bit too early to say that the iPhone is losing steam. Tim Cook and his team could still pull a surprise with new products that will widen the gap with its Android rivals.

– Contact us at [email protected]

CG

EJ Insight writer

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