"Doubts Grow At Apple" That A $1,000 Smartphone May Not Have Been A Winning Idea

iPhone X demand - which was already looking soft - could be even worse than some of the most pessimistic estimates.

While analyst expectations have mostly been negative for Apple heading into its next quarterly earnings report on May 1, it looks as though the iPhone X may have performed worse than most analysts have estimated. With a smartphone market that is globally becoming heavily saturated, it turns out that there may not be as many people as originally thought that get excited about the idea of shelling out $1000+ for a smartphone with features that have already become ubiquitous.

As Fast Company becomes the latest to report, Apple not only overshot the mark with the amount of iPhone inventory it had produced, and is now trying to "burn off" the rest at a time when demand has "stalled", but doubts are starting to spread within Apple that a $1000 smartphone may not have been the best idea...

The narrative is growing that demand for the $1,000 iPhone X has stalled in the first part of 2018. It’s further bolstered by new information from a supply chain source with direct knowledge of Apple’s plans saying the company has ordered the production of only 8 million iPhone X units in calendar Q2 of 2018.

This source says Apple ordered the production of too many units of the iPhone X in the last calendar quarter of 2017, and is now trying to “burn off” the inventory that has piled up at its resellers.

Apple sold 77.3 million total iPhones during the 2017 holiday quarter. Apple CEO Tim Cook said the X outsold all other iPhone models every week of the first quarter after the device’s launch on November 3, 2017, launch. And a high average sale price of $796 across all iPhone models suggested that the X, Apple’s most expensive phone, was indeed a heavy seller. Above Avalon analyst Neil Cybart says that the X contributed about 35% of total phone sales during the holiday quarter, which works out to about 27 million phones.

But as the global smartphone market has ceased to grow, and as smartphone owners hold on to their current devices longer, consumers may be less apt to part with more than a grand for a phone.

Our source says Apple is disappointed with sales of the iPhone X, and doubts have grown within the company that releasing a $1,000-plus smartphone in the current global smartphone market was a winning idea.

Hardly coming as a surprise in light of poor earnings reports by Apple semiconductor suppliers , the article goes on to confirm that iPhone X channel checks suggest a collapse in both demand and channel checks.

The new Q2 production data point comes on the heels of Samsung’s quarterly earnings, in which the company reported soft demand for its OLED displays. Samsung makes the OLED display used in the iPhone X. The South Korean company said it expects this slow demand to continue through the second calendar quarter. The softness isn’t entirely attributable to Apple; Samsung uses its OLED displays in its own smartphones, sales of which were impacted by competition in the high-end phone market, the company said.

Earlier this week the iPhone X supplier TSMC warned investors about slow demand for its smartphone chips. Analysts had been expecting $8.8 billion in revenues from the chip maker, but Taiwan-based TSMC dropped its second quarter guidance to between $7.8 billion and $7.9 billion.

The Austrian laser tech company AMS, which supplies components used in the iPhone’s facial recognition system, also ratcheted down its revenue expectations, stating it expected revenues in its second quarter to be half of what they were in the first.

And as we reported previously, analysts' targets for Apple's upcoming quarter have become increasingly pessimistic, and the company is widely expected to put up numbers that aren't going to impress:

Some analysts won’t be very surprised by Apple’s low Q3 X production. Last month Nomura’s Anne Lee reduced her estimate of iPhone X calendar Q1 sales to between 8 million and 12 million. Citi analystsbelieve Apple will sell 14 million iPhone X units in calendar Q2 and just 7 million in calendar Q3. Both of the analyst reports cited consumer hesitation at the X’s high price tag as the likely cause.

In a time when virtually all smartphones, including prepaid 7-Eleven "specials", have much of the same core functions, Apple's iPhone is no longer far ahead of the pack; in fact compared to recent Samsung offerings, it has been years behind in some cases. Competition in mobile phones has driven quality higher and prices lower – something one would expect in an efficient industry when the government isn't insuring or subsidizing preferred providers – consumers can get actually get a better product for much less money

We previously reported earlier this week, that one of Apple's key suppliers had what analysts dubbed was a "spectacular miss" and that this likely painted an ugly picture for iPhone demand. It was another day, another flashing red warning that sales of the iPhone X are far worse than Tim Cook had ever expected; courtesy of Austrian chipmaker AMS AG - which makes the optical sensors that control brightness and color  - which just days after a similar warning from semiconductor giant Taiwan Semi, became the latest Apple-supplier to cast doubt over the iPhone's chilled reception.

AMS shares plunged as much as 14% several days ago, the most this year, after warning on negative operating margins because of low production capacity at its Singapore factories, and after its guidance for sequential revenue drop in 2Q missed the lowest estimate among analysts in a Bloomberg survey, adding to the recent negative datapoints in the iPhone X supply chain.

Mirabaud analyst Neil Campling said AMS’ "spectacular miss on guidance" was so bad, "it’s surprising the company didn’t preannounce." Campling also said that major product changes and product transitions blamed are “all Apple, specifically iPhone X" and added that "phasing down iPhone X has taken the supply chain by surprise."

Apple will report Q1 earnings on May 1, and investors and analysts will be watching very closely to see if the iPhone glut is as bad as it reports suggest. The good news, for Apple, is that courtesy of its quarter trilion in cash, the company will just end up buying back more stock to make up for any material shortfall. The problem is that unless it can also hand over billions to consumers around the globe to buy its products, Tim Cook may have no choice but to sharply lower prices in a field that is becoming increasingly commoditized as Apple joins Amazon in the hunt for the lowest profitable margin, even if Cook appears to have lost the race to become the world's first $1 trillion market cap company prematurely.

Comments

Bitchface-KILLAH TheWholeYearInn Fri, 04/27/2018 - 14:10 Permalink

I've decided the whole "mobile computing" blitz bullshit is one big advertisers scheme.  This is all like as if the advertisers had a "do-over" on recreating the Internet from the start.  Your phone has become one big billboard for all their ads.

Even if your phone does have a processor that is faster than a CPU from a traditional computer from a few years ago, it can't match the speed, bus, cache, memory of a modern Desktop.  They will never be useful for crunching big numbers or doing any of the heavy lifting in computing.

In reply to by TheWholeYearInn

beaker Bitchface-KILLAH Fri, 04/27/2018 - 15:09 Permalink

Used to be that every year there was a quantum leap in cellphone technology and I looked forward to getting a new one.  I still have a 3 year old Samsung Note 5 and cannot see any compelling reason to fork out $1K for a phone whose enhanced speed  and camera quality is mostly undetectable to me.  WTF?

In reply to by Bitchface-KILLAH

ldd D503 Fri, 04/27/2018 - 21:36 Permalink

i bought the original smartphone for $900 back in the day because it allowed me to use it for everything (camera, organizer, email, etc.) and was worth it for me at the time. I have generally upgraded every five years as the software no longer supports necessary stuff. i have many phones, generally one for each country i spend time in and they range in specs but only one good smartphone. they are useful for what they do and i will always pay top dollar for the functions i need and use them as long as they are viable (software). they can never replace work computers and i have two fast notebook computers that never get upgraded (software) or connected to the net and a tablet which also serves a function. these machines work well for a long time. their only limitation is software. what has been happening is that software is becoming the money spigot as more and more firms are moving to subscription systems as opposed to buying the programs outright because the upgrades even in software (except for the new stuff) is not worth the upgrades.

In reply to by D503

Bai Suzhen beaker Fri, 04/27/2018 - 16:15 Permalink

 I went from a Galaxy S4 to S6 and the improvement was significant.  Now Samsung is up to 9, but I'm planning on keeping the 6 until it stops working.  Wife has a Note 5 and she's making that the stop.  There's just no point in spending dollars just to spend them.  I keep getting carrier ads begging me to upgrade.  Last one was a S9 BOGO.  Not interested.

In reply to by beaker

inhibi beaker Fri, 04/27/2018 - 18:43 Permalink

Damn, note 5? Im still on my Note 3 lol...

Every time I compare it to a new phone, I find virtually nothing different. Screen is still beautiful and bright, battery is accessible which is like 99% of what I look for. Reinstalled the OS and it works like new. Ill be sad to see it go - im sure one day in the near future the charging port leads will wear out.

But damn, ive had this phone for 5 years, dropped it uncountable amount of times, and never had a single thing go wrong.

My wife got a note 6, dropped it once, and the screen has a vertical crack the entire length of the phone.

Not only do they charge you more but the design has definitely become less and less reliable. They want a fancy bevel, so now the screens are proud of the edge, unlike my old note that had a frame that took all the load when dropped. Batteries permanent. The new iPhone has such a complicated battery hookup you cant really do it yourself.

This reminds me of the newer sports cars. Nissan, for example, put a conductive gel in their TCM (car computer) for GTRs so that if you try to mod the car, you will essentially render it unusable. Forced me to spend thousands getting licensed software to change a few maps for the turbo. Dont get a GTR

In reply to by beaker

keep the basta… beaker Fri, 04/27/2018 - 21:45 Permalink

little iphone 5c in yellow case. Barely used until recently, now use for navigation. First upgrade ever yesterday to ios 10 and waze instead  of google maps. goes faster but ios 10 is intrusive. waze is great protects from $300 speeding fines in country areas without signage.

There is so much crap pre-installed on my new ipad( use where no computer in the country) intrusion with shit news lies crap music flogging fbook twit etc al ready to go on both iphone and ipad. siri in there to scream at, how dare they impose that thing. 

In reply to by beaker

pigpen Bitchface-KILLAH Fri, 04/27/2018 - 15:50 Permalink

Bitchface, I assume you use a mobile adblocker on your phone as I don't understand how anybody can do without it.

My preference is brave browser. Brave blocks advertising malware and tracking by DEFAULT on any device and operating system rendering digital advertising model useless.

Cheers,

Pigpen

In reply to by Bitchface-KILLAH

Mr Hankey junction Fri, 04/27/2018 - 14:35 Permalink

Monkey -tapping on a  $90 samsung here  

35 dollar a month data plan & it not only takes" cute"videos of my cat,it actually takes& makes phone calls.

It also adds,subtracts, multiplies & divides!

Hey,gimme a break...until a year ago the only electronic device I had was a $20 burner flip-phone.10 years ago I had to run a 50' phone line to my room & 30 seconds of video took 20 min to load.

In reply to by junction

inhibi TheSilentMajority Fri, 04/27/2018 - 18:56 Permalink

There wont be any groundbreaking innovation in the phone space for decades.

We are hitting the limits of what we can do with the current silicon wafer tech, and screens are already at their limit. Improvements in resolution are barely noticeable and add lots of processing & power loads. Bendable screens/slanted screens are just meh. No one gives a fuck, they just want a nice large rectangle to look at. Everything else is just fodder for the sales pitch.

They already went full tilt on efficient CPU tech. Only minor improvements to be gained.

Batteries still remain shit, and probably will for a long while. Also finding limits of what can be done at reasonable expense in the needed size. Some neat things regarding lithium carbon complexes, but dont expect to see a battery that can last more than a week for a very long time.

In terms of software, I dont know what they could do to make phones better or easier. I almost feel as if any change at this point is just for the sake of appearance instead of practicality. 

So I dont see a bright future in terms of growth for phone companies. It was THE product of the early 2000's, now its already become a commodity. I cant even tell the difference between phones anymore. Remember when they actually had styles, like the Moto Razr/Edge, or the Sony Ericson? now they all look the same.

 

In reply to by TheSilentMajority

Endgame Napoleon LSD - Lower Sl… Fri, 04/27/2018 - 14:08 Permalink

You forgot spoiled mommas with free “independent” apartments, free groceries, free electricity, monthly cash assistance and EITC refundable child tax credits up to $6,431, all for working part time to stay below the earned-income limits for welfare and for doing what their grandmothers would have been ostracized for: sex and reproduction out-of-wedlock. Only basement-dwelling snowflakes are trashed, while iPhone-toting moms on the discounted family mobile plan are above critique. Sex pays. 

In reply to by LSD - Lower Sl…

JuliaS LSD - Lower Sl… Fri, 04/27/2018 - 15:03 Permalink

Despite rising prices and articles such as this one on ZH, Yet I keep seeing an increasing number of people with white snot hanging from their ears (earpods or whatever they're called). Consumers are moving up. A phone is a status symbol for many and the whole idea is to showcase your possession. Apple figured out the desire of their customer base to stand out in order to feel superior. Conformist non-conformists (like antifa fascists).

Apple can't be both an elite brand and an everybody's go-to company. They've chosen a niche and they've painted themselves into a corner. If they made an affordable phone for everybody, they'd have much more competition and without innovation it's a futile effort. So Apple does what makes sense within their business model.

People like their stuff, are willing and able to spend money on iDevices - fine. No objection from me. I don't like Apple. I gravitate towards maximum access and control, so Apple it's simply not my kind of company, but I'm not going to impose my standards onto others. Everyone deserves to vote with their own wallets. It's the only kind of voting that counts (politics included).

In reply to by LSD - Lower Sl…

cheech_wizard BarkingCat Fri, 04/27/2018 - 16:01 Permalink

I always love the trinkets. (Fidget spinners and water bottles comprised the last set of trinkets). We do business with a lot of companies. I passed it along to management that we should knock the price down a little bit in exchange for other company's swag. (I want more sports shirts with other company's names on them as it saves me from having to buy more garments myself...)

In reply to by BarkingCat

buttmint LSD - Lower Sl… Fri, 04/27/2018 - 17:21 Permalink

LSD

Tell me about it!  I rented to a female millenial. No smoking,  no dogs as stipulated in our Lease.  I return from travel and now she has bf who's moved in,  two fucking dogs that bark non stop and both "smoke outside." Yeah,  right. 

I'll be giving them the boot.  They are Millenial Children.  All have every gadget Apple has produced,  yet they are consistently late with rent. 

 

Babysitting 203 

In reply to by LSD - Lower Sl…

SJEqualizer Fri, 04/27/2018 - 13:27 Permalink

Who cares?  They have other great models that cost less, and are not polluted with Google (Android) software.

Apple and Goole both suck, but Apple makes money off of hardware where Google makes money off of your information.  I can buy whatever phone I want and I wouldn't use an Android device unless NOTHING else was available...and I am very familiar with both operating systems.

Pick your poison.

Tijuana Donkey Show NVTRIC Fri, 04/27/2018 - 13:34 Permalink

The face scanner on the X works great. Very slick, but not for the general market. I bought mine to keep others from reading my alerts. It can tell when you are looking, and will display them. I did take the free financing from Apple, but I have cash for it. Android is a wreck, I've built Android apps and hardware, and I wouldn't use it for a daily phone. 

In reply to by NVTRIC