High iPhone XR sales in China not enough to stop iPhone production estimate cuts
Sales of the iPhone XR picked up in China during the country's "Singles Day" retail event, Jun Zhang from Rosenblatt Securities claims, but the boost isn't enough to prevent the analyst from further reducing its production estimates for iPhones over the next two quarters.
Blue iPhone XR
Sell-through for the iPhone XR "largely improved" during the "11.11 holiday," a note to investors seen by AppleInsider reads, with the sales increase claimed by Rosenblatt to be due to many online retailers providing a discount of between 10 percent and 15 percent on the device.
The firm's research claims that, after one month of unit sales, the iPhone XR has reached the same level as the iPhone XS Max, and has surpassed the iPhone XS after both devices had two months of sales in China. While the improvement is encouraging, analyst Jun Zhang writes of the possibility the iPhone XR production will see "downside risk" after the holiday season, with the belief current iPhone XR production is still above sell-through rates.
Despite the bright news for the iPhone XR, the investor note continues to advise of reduced production estimates, continuing a trend in notes released over the last month.
In an October 29 note where Rosenblatt highlighted initial sales of the iPhone XR was weak compared to initial iPhone XS and XS Max sales, the firm revised its production estimate for the new iPhone models from 90 to 95 million units down to 88 million units for the current quarter, while production for Q1 2019 was predicted to be around 36 to 37 million units.
Just over a week later on November 7, Rosenblatt advised it thought iPhone XR sales were "weaker than initially expected," suggesting Apple could cut iPhone XR production by an extra 5 million units this quarter. In Wednesday's note, the firm is again lowering its estimates for total iPhone production, down to 74 million units in total for the current quarter, and 39 million for the first quarter of 2019.
If the iPhone XR's unit sales "slightly surpass" total unit sales for the iPhone XS and XS Max, currently speculated to be 18 million units this quarter, Rosenblatt believes Apple might need to only produce between 25 million and 28 million units in the current quarter.
"We believe Apple is targeting production of 32 million iPhone XR units in C4Q, which is why we believe the company might need to cut production again after the holiday season," the note states.
If Apple cuts production after the holiday season, Rosenblatt believes this may "lead to stability within the Apple supply chain in the March quarter due to stabilizing iPhone XR sales." Sell-through rates for the iPhone XS and XS Max will face "normal seasonality" during the first quarter of 2019, "while iPhone X sales might be relatively stable due to the late launch of the model."
Shipment speculation for the cheapest option in Apple's 2018 iPhone range has already caused some issues among investors, with some offloading Apple stock over analyst pessimism.
In China, Rosenblatt suggests Apple is facing increased competition from the local Huawei, which has seen high sales of the Mate 20 and has sold out of the Mate 20 Pro. Despite LG Display panel quality issues, it is estimated the Mate 20 Pro's sales are a 20 to 25-percent year-on-year increase from the Mate 10.
"We believe may high-end consumers switched to Huawei's smartphones over the last two years," Zhang writes, "leading to the company taking share in China not only from Samsung, but Apple as well."
Blue iPhone XR
Sell-through for the iPhone XR "largely improved" during the "11.11 holiday," a note to investors seen by AppleInsider reads, with the sales increase claimed by Rosenblatt to be due to many online retailers providing a discount of between 10 percent and 15 percent on the device.
The firm's research claims that, after one month of unit sales, the iPhone XR has reached the same level as the iPhone XS Max, and has surpassed the iPhone XS after both devices had two months of sales in China. While the improvement is encouraging, analyst Jun Zhang writes of the possibility the iPhone XR production will see "downside risk" after the holiday season, with the belief current iPhone XR production is still above sell-through rates.
Despite the bright news for the iPhone XR, the investor note continues to advise of reduced production estimates, continuing a trend in notes released over the last month.
In an October 29 note where Rosenblatt highlighted initial sales of the iPhone XR was weak compared to initial iPhone XS and XS Max sales, the firm revised its production estimate for the new iPhone models from 90 to 95 million units down to 88 million units for the current quarter, while production for Q1 2019 was predicted to be around 36 to 37 million units.
Just over a week later on November 7, Rosenblatt advised it thought iPhone XR sales were "weaker than initially expected," suggesting Apple could cut iPhone XR production by an extra 5 million units this quarter. In Wednesday's note, the firm is again lowering its estimates for total iPhone production, down to 74 million units in total for the current quarter, and 39 million for the first quarter of 2019.
If the iPhone XR's unit sales "slightly surpass" total unit sales for the iPhone XS and XS Max, currently speculated to be 18 million units this quarter, Rosenblatt believes Apple might need to only produce between 25 million and 28 million units in the current quarter.
"We believe Apple is targeting production of 32 million iPhone XR units in C4Q, which is why we believe the company might need to cut production again after the holiday season," the note states.
If Apple cuts production after the holiday season, Rosenblatt believes this may "lead to stability within the Apple supply chain in the March quarter due to stabilizing iPhone XR sales." Sell-through rates for the iPhone XS and XS Max will face "normal seasonality" during the first quarter of 2019, "while iPhone X sales might be relatively stable due to the late launch of the model."
Shipment speculation for the cheapest option in Apple's 2018 iPhone range has already caused some issues among investors, with some offloading Apple stock over analyst pessimism.
In China, Rosenblatt suggests Apple is facing increased competition from the local Huawei, which has seen high sales of the Mate 20 and has sold out of the Mate 20 Pro. Despite LG Display panel quality issues, it is estimated the Mate 20 Pro's sales are a 20 to 25-percent year-on-year increase from the Mate 10.
"We believe may high-end consumers switched to Huawei's smartphones over the last two years," Zhang writes, "leading to the company taking share in China not only from Samsung, but Apple as well."
Comments
So, despite setting sales records, the iPhone XR is a failure, and Apple are desperately cutting orders from suppliers?
Must be November.
Seriously, don't we get the same garbage every year?
When I last checked there was only ONE site saying Apple was the top seller on Alibaba's Single's day. That site, CNBC, provided No links to ANY information and Alibaba itself hadn't provided any either. Has that changed? Other sites, AI included, simply echoed that CNBC piece.
Your assumption that Apple 'destroyed' Huawei has no truth in it all.
We don't even know what CNBC was referencing. Was it revenue or units? We don't know how many units were made available for discounting by the manufacturers or retailers. We don't even know the difference between the top three manufacturers.
As for models, you are barking up the wrong tree. Huawei has consistently topped Apple in China but never had a model in the top spots.
How is that possible? Well, Apple released exactly three phones this year and probably won't release any more until very late next year. Huawei has released over thirty. That's why 'model sales' are completely and utterly irrelevant in a wider context. Tally them up though and you get a better idea of the picture.
That is without taking into account where the actual 'data' comes from in the first place! But seeing how Apple itself often references places like IDC, I suppose we can use that information in a general sense as long as common sense prevails.
I guess some expect Apple to sell more and more and more iPhones every single quarter. There is a threshold with this. Any company is only going to go so high with sales of their flagship product.
But in the end, negative Apple news gets them clicks!