Apple Watch supplier misses 2M unit break-even point for Q2, FUD flinging ensues

Posted:
in Apple Watch edited September 2015
A report on Friday floated more doom and gloom sales estimates for Apple Watch, noting a key component supplier ASE failed to meet its "break-even volume" of two million units per month in the second quarter. It also doesn't plan to reach that level in the third or fourth quarters.




According to Bernstein Research analyst Mark Li, cited by The Wall Street Journal, a subsidiary of Taiwanese firm Advanced Semiconductor Engineering revealed the "disappointing" numbers during a recent conference call for investors. ASE is responsible for assembling Apple Watch's S1 system-in-package design.

"The shortfall of Apple Watch is a disappointment," Li wrote in a research note. "We came in with a low expectation but below break-even still surprised us."

It is unclear what role the ASE subsidiary, or ASE itself for that matter, plays in Apple's supply chain. While many of Apple's supply chain partners are well known, the intricate web of alliances -- from smelters to chipmakers to assemblers and beyond -- and inventory operations pose major obstacles to predicting sales with any accuracy. Apple CEO Tim Cook addressed the issue during the company's most recent earnings call, warning analysts not to draw conclusions from supplier reports as such information is but a small part of a much larger picture.

Apple refuses to break out Apple Watch sales numbers to prevent competitors from gaining unwanted operational insight, and instead lumps the wearable in with iPod, Apple TV, Beats hardware and accessories in an "Other" accounting category. Interestingly, the segment turned a profit for the first time last quarter, the first to include Apple Watch, jumping 56 percent sequentially.

Cook during Apple's conference call for the third fiscal quarter of 2015 dispelled reports that Apple Watch sales collapsed after what appeared to be strong initial demand, saying shipments have held steady and actually peaked in June.

Despite Apple's assurances that Apple Watch is meeting internal expectations Wall Street saw the non-announcement as a miss. The reaction was a swift one that briefly sent AAPL stock tumbling even after the company posted yet another record quarter.

Adding to the confusion are analysts who continually adjust their own wildly differing forecasts. Piper Jaffray's Gene Munster, for example, estimates Apple moved 2.5 million Watches last quarter and will ship the same amount for the upcoming three-month period. On the high side, Canalys believes Apple shipped 4.2 million units in the prior quarter. Noted analyst Ming-Chi Kuo, who forecast some of the lowest estimates for Apple Watch, predicts Apple will ship 4 million units during the upcoming quarter.

At this point analysts, pundits and mainstream media reports are extrapolating from supposition, hearsay and cherry-picked data to the detriment of readers and themselves.
«13456716

Comments

  • Reply 1 of 301
    mdriftmeyermdriftmeyer Posts: 7,229member
    So? In short, they sold less than 6 million units this past quarter. What's your point?
  • Reply 2 of 301
    so ASE break even is 24 Million watches annual, for an entirely new product? Not only were ASE overly ambitious, i doubt they will remain a supplier leaking out info like this
  • Reply 3 of 301

    OH NOES! SKY IS FALLING!



  • Reply 4 of 301
    SpamSandwichSpamSandwich Posts: 30,849member

    If a supplier was blabbing to an analyst with proprietary sales information, I'd immediately cease doing business with that supplier.

     

    Also, it's about time for Apple to start pulling out of China altogether. Replace all the human workers with robots and seal off access to manufacturing.

  • Reply 5 of 301
    mac_128mac_128 Posts: 3,399member
    Quote:

    Originally Posted by SpamSandwich View Post

     

    Also, it's about time for Apple to start pulling out of China altogether. Replace all the human workers with robots and seal off access to manufacturing.


    Or Oompa Loompas.

  • Reply 6 of 301
    entropysentropys Posts: 1,622member
    I dunno, Oompa Loompas always scare the hell out of me.
  • Reply 7 of 301

    "Apple Watch. Nuestra creación más personal hasta ahora. Desde U$S 949."

     

    that was taken from one of the authorize resellers here in my country, Uruguay. Apple Watch, our most personal creation yet. starting at 949 US dollars for the 38mm Sport version.

     

    Daaaaaamn

  • Reply 8 of 301
    rogifanrogifan Posts: 10,669member
    Ah the same WSJ that said on January 13, 2013 Apple reduced iPhone 5 orders by half due to weak demand. The same WSJ that reported ?Watch would contain over 10 sensors and then when they were proven wrong claimed that Apple scrapped the health and fitness stuff and then scrambled to find a purpose for the device. Mind you they first reported on the 10 sensors in June 2014. So if their later report is to be believed then within the span of 3 months Apple completely scrapped a health and fitness device and rewrote all the software to turn it into a general purpose smart watch. I wouldn't trust the WSJ as far as I could throw them.
  • Reply 9 of 301
    bkkcanuckbkkcanuck Posts: 854member
    Quote:

    Originally Posted by mdriftmeyer View Post



    So? In short, they sold less than 6 million units this past quarter. What's your point?

     

    So the high side analysts were expecting less sales than the break even point of one of the component suppliers?  Wow, corporate stupidity in action, leading to.... FUD....

  • Reply 10 of 301
    starbird73starbird73 Posts: 538member
    Also, it's about time for Apple to start pulling out of China altogether. Replace all the human workers with robots and seal off access to manufacturing.

    I believe that will happen once all these data centers and the new HQ are done. They will replace cheap foreign labor with robots and fewer, yet higher paid, people, likely state side. These higher paid people will be responsible for maintaining the robots.
  • Reply 11 of 301
    rayzrayz Posts: 814member
    If Apple pulls manufacturing from China then China will make it very difficult for Apple to sell stuff in China.
  • Reply 12 of 301
    jax44jax44 Posts: 78member
    Crap in one hand, WSJ story in the other. Which smells worse?.
  • Reply 13 of 301
    robin huberrobin huber Posts: 3,246member
    Analysts' jobs are to churn the market. They have been very successful.
  • Reply 14 of 301
    When analysts play the lottery, they are also disappointed that entropy and randomness failed to live up to their predictions.
  • Reply 15 of 301
    ecatsecats Posts: 272member

    Analysts are astonishingly off on iPhone estimates despite Apple supplying quarterly unit sales and reasonable supply chain cues (since there are only so many manufacturers who can put out such large production volumes, their sales are proportional to apple's production.)

     

    Now we have a product where the numbers aren't announced and the production volumes are at a size where a large number of suppliers would have the manufacturing capacity to be involved. There is simply going to be too much noise to determine any sense of accuracy. This is shown by Apple's most recent quarterly reports, no single analyst was able to hold a strong opinion and the ones that did (i.e. Slice) were so far off that it raises question marks over their other services.

     

    While the watch is a huge publicity item, it is going to be a small business in comparison to iDevice and Mac sales for several years. The iPod is a good comparison, it is not a device which everyone has a need for, but as people worked it into their lives it became a massive hit.

     

    Shareholders are just going to have to work with Apple's reported earnings. The Watch business is small and share holders don't really need to even concern themselves with the sales numbers: it's not what is currently generating Apple's massive earnings. However the Watch is a worthwhile pursuit and over time will become an important business for Apple (and nearly every major technology company.)

     

    In retrospect this will seem inanely obvious, the only people who would be interested in sales are competitors: So they can ask themselves, is this a product we should copy? Because let's face reality, the smart phone business as it currently stands is nearly homogenous, these devices are all just grandchildren of the iPhone.

  • Reply 16 of 301
    robbyxrobbyx Posts: 472member
    Quote:

    Originally Posted by ECats View Post

     

    Analysts are astonishingly off on iPhone estimates despite Apple supplying quarterly unit sales and reasonable supply chain cues (since there are only so many manufacturers who can put out such large production volumes, their sales are proportional to apple's production.)

     

    Now we have a product where the numbers aren't announced and the production volumes are at a size where a large number of suppliers would have the manufacturing capacity to be involved. There is simply going to be too much noise to determine any sense of accuracy. This is shown by Apple's most recent quarterly reports, no single analyst was able to hold a strong opinion and the ones that did (i.e. Slice) were so far off that it raises question marks over their other services.

     

    While the watch is a huge publicity item, it is going to be a small business in comparison to iDevice and Mac sales for several years. The iPod is a good comparison, it is not a device which everyone has a need for, but as people worked it into their lives it became a massive hit.

     

    Shareholders are just going to have to work with Apple's reported earnings. The Watch business is small and share holders don't really need to even concern themselves with the sales numbers: it's not what is currently generating Apple's massive earnings. However the Watch is a worthwhile pursuit and over time will become an important business for Apple (and nearly every major technology company.)

     

    In retrospect this will seem inanely obvious, the only people who would be interested in sales are competitors: So they can ask themselves, is this a product we should copy? Because let's face reality, the smart phone business as it currently stands is nearly homogenous, these devices are all just grandchildren of the iPhone.




    I agree that shareholders shouldn't be concerned about Watch numbers at the moment.  That said, Apple hyped the Watch so much that it's understandable that shareholders, and even the general public, are interested in numbers.  A lot of people were expecting a big hit, maybe not iPhone big, but big nonetheless.  I'm curious why you think the category is worth pursuing, though?  I don't think smart watches will ever be a mainstream product category.  Wearables as a category seems rather gimmicky to me until sensor technology improves in a big way.  And even then, I don't imagine interacting with the wearable, but rather wearing a discreet little pin or ring or something with a variety of health-related sensors that feed data to my phone or the cloud.

     

    I also don't think the iPod is remotely comparable to the Watch.  Portable music players were already a huge business.  Granted, they were mostly CD and tape-based.  A few companies had created hard drive-based players and Apple saw an opportunity and delivered a far better product and experience.  You make it sound like Apple created this whole new market and people eventually warmed to it.  That's not true.  SONY was selling millions upon millions of Walkman players and had been for years.  Apple delivered the right product at the right time as the market transitioned to digital files from physical media.  And it was a HUGE hit.  But the consumer was already well accustomed to carrying his or her music around.  The Watch market is nothing like that.

  • Reply 17 of 301
    tbelltbell Posts: 3,146member
    If a supplier was blabbing to an analyst with proprietary sales information, I'd immediately cease doing business with that supplier.

    Also, it's about time for Apple to start pulling out of China altogether. Replace all the human workers with robots and seal off access to manufacturing.

    Right everybody should do the same. With robots doing everyone's jobs we will see how many people can afford Apple products.
  • Reply 18 of 301
    robbyx wrote: »
    I agree that shareholders shouldn't be concerned about Watch numbers at the moment.  That said, Apple hyped the Watch so much that it's understandable that shareholders, and even the general public, are interested in numbers.  A lot of people were expecting a big hit, maybe not iPhone big, but big nonetheless.  I'm curious why you think the category is worth pursuing, though?  I don't think smart watches will ever be a mainstream product category.  Wearables as a category seems rather gimmicky to me until sensor technology improves in a big way.  

    Apple wasn't hyping the watch. They were creating a luxury category and needed the buy-in from the top luxury-goods mavins. This Christmas season sales will be telling whether Apple was successful in establishing the ?watch as a Luxury brand in a slightly expanded luxury watch category.

    Keep in mind the actual sales of the ?watch, while important in and of themselves, may be secondary to Apple's other goals of using the watch to boost the Apple brand firmly into the luxury category. Accomplishing this will shine a brighter halo on ALL the products, and increasing sales all-over.

    If Apple is successful, and early indications seem to point to that, then modest or better sales of the watch will underwrite the expansion of all product categories, and especially the iPhone to which the ?watch is tied. It's like luxury cars in a way. Some brands haven't been as outstanding as they once were, but still command a status symbol and/or luxury appeal. Breaking into that strata changes everything, and is worth the effort to pursue, and the ?watch is the product to bring it about.

    I feel Apple is seen by most of the public as an "affordable luxury". It may be out of reach by some people, but generally still affordable. It's extremely important to Apple's long term success to not let its products fall into the commodity product category where price becomes the greater driver of sales. I believe the Apple watch is one of the most visible ways Apple is attempting to lift itself away from that category. So, numbers, by themselves, is not as important as the effect the ?watch can make.

    Speaking to the title of this thread: Apple may have given the vendor a good reason to expect to surpass 2 million units per month, but there also may have been some misunderstanding how quickly that level would be reached. Only recently has Apple begun sales outside of the USA in other locations besides Apple retail stores (and a handful of luxury stores). The initial production shortages may have also tempered sales, but that seems to have all been over-come.
  • Reply 19 of 301
    jungmarkjungmark Posts: 6,664member
    **** these analysts. Spreading doom and gloom because they can't admit they're wrong.
  • Reply 20 of 301
    atlappleatlapple Posts: 496member
    Quote:

    Originally Posted by jungmark View Post



    **** these analysts. Spreading doom and gloom because they can't admit they're wrong.



    No one can prove they are wrong because Apple didn't release any numbers. Besides doom and gloom is to be expected the way Apple hyped this watch. They had Jony Ive out taking pictures with fashion designers that looked they they died ten years ago. This was the product that was going to change the fashion industry. 

     

    Also I fully believe that Apple did not release the numbers because right now the doom and gloom predictions are not as bad as the actual numbers. Apple is using terms like 'beat internal expectations/numbers" or sales are healthy. It defies logic if the numbers were great and would stop the bad press Apple would release the numbers. Clearly the numbers aren't good or are at least bad enough Apple believes they would hurt the stock price. 

     

    The whole we don't want to let the competition know how well it's doing is BS. The iPhone is the most copied product in history and they release numbers days after the iPhone 6 was released. 

Sign In or Register to comment.