A couple of months ago, we reported that Apple had slashed its lofty production forecasts for the next generation of iPhones as the supply chain crunch came for the world's most valuable consumer-tech behemoth.
And on Thursday, Apple shares tumbled in premarket trading following news reports that demand for the iPhone 13 was starting to wane. After confronting the global supply crunch creating headaches for the dozen or so contractors responsible for actually building the iPhones, Apple is now facing something even more insidious: a paucity of demand for the next generation of phones.
Bloomberg reports that Apple has told its suppliers - whom just weeks ago it was whipping to accelerate production by any means necessary - that demand for the latest line of new phones has weakened. They characterized it as a sign that consumers are giving up on the hard-to-find product.
The company has told its component suppliers that demand for the iPhone 13 lineup has weakened, people familiar with the matter said, signaling that some consumers have decided against trying to get the hard-to-find item.
As we have reported, Apple has already cut its iPhone 13 production goal for this year by as many as 10MM units, down from a target of 90MM, due ostensibly to a lack of parts. The company's hope is to make up much of this shortfall next year, when supply is expected to improve. Unfortunately Apple is now informing its vendors that those orders may not materialize.
For better or worse, Apple is still on track for a record holiday season, with analysts projecting a sales increase of 6% to $117.9 billion in the final three months of the calendar year. However, it likely won’t be the blockbuster quarter that Apple and Wall Street analysts like Dan Ives had originally envisioned. Shortages and delivery delays have already frustrated millions of consumers.
Apple shares tumbled more than 1% in premarket trade.
The iPhone is Apple's flagship product, accounting for about half of its $365.8 billion in revenue during the last fiscal year. So, the decision to skip the latest iPhone and wait until next year (consumers typically upgrade on two-year cycles) isn't too surprising. The new iPhone lineup, which starts at $799 for the standard model and $999 for the Pro, is considered a modest update from the iPhone 12, which had a whole new design.
For Apple's suppliers, this probably sounds like good news. Last month, Apple’s main iPhone assembler, Hon Hai Precision Industry Co., (better known as Foxconn) predicted that its business will shrink in Q4 from a year earlier, a ruction caused by declines in demand for consumer electronics and computing as the company continues to struggle with chip shortages.
Bigger changes are expected for the 2022 model, giving some shoppers a reason to wait.
And with inflation and the omicron variant bringing fresh concerns to pandemic-weary shoppers, many may forgo expensive gift purchases, especially if the omicron hysteria inspires people to hold off on in-person holiday gatherings.