Editorial: Latest IDC estimate of Q1 2019 iPhone sales 'highly inaccurate' to the point of...

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in iPhone
IDC is one of the market research companies that confidently reports quarterly shipments, market share and growth figures for PCs, smartphones and other products with an implied accuracy down to the tenth of a percentage point. But, the company's latest figures are "highly inaccurate" to the point of "embarrassing," according to well-regarded analyst Neil Cybart of Above Avalon.


IDC data is often taken as fact. It's not.


In its Mobile Phone Tracker for the first calendar quarter of 2019, IDC estimated that Apple only shipped 36.4 million iPhones, which it stated was a 30.2 percent annual drop, whittling down Apple's share to just 11.7 percent of a total of 310.9 million global smartphones shipped in the quarter.

That figure put Apple in a distant third place behind Samsung's nearly 72 million units and Huawei's almost 60 million units. Because Apple sells only premium phones-- as most analysts define as selling for about $400 or more-- it's not surprising that high-volume vendors of mostly lower-end phones would be outselling Apple in terms of unit sales.

However, IDC's portrayal of more than a 30 percent drop in iPhone units over the previous year is nothing short of shocking. It's also, as Cybart noted on Twitter, not just "embarrassing" but "impossible to achieve given Apple's stated iPhone revenue." Cybart stated that "IDC isn't close with their iPhone unit sales estimate for the quarter that Apple just reported."

IDC isn't close with their iPhone unit sales estimate for the quarter that Apple just reported. Apple sold way more than 36M iPhones. Plug 36M into an earnings model & you will find out that number is impossible to achieve given Apple's stated iPhone revenue. Embarrassing for IDC pic.twitter.com/C3CwVClZto

-- Neil Cybart (@neilcybart)


Apple stopped detailing its unit sales of iPhones and other devices in Fiscal 2019, but the company still reports revenues for each business segment. This week, Apple reported March quarter iPhone revenues of $31.051 billion, representing a 17.3 percent drop over the year-ago quarter.

The only way Apple could have seen unit sales drop as fast as IDC reported would be if buyers had suddenly upgraded to extremely expensive phones, driving Apple's Average Selling Price to above $850. That's absurd, and inconsistent with historical quarterly shifts in average selling price.

Apple's ASPs are extremely high in the industry, but not that high. In fact, iPhone ASP appeared to peak with the launch of the $999 and up iPhone X last year, reaching a few dollars shy of $800. This year, market data shows that Apple's sales were lead by iPhone XR, which starts at $750. There's no possible way Apple's ASP rocketed upward as Apple's product mix shifted to a model that cost three quarters as much.

Cybart estimated that Apple sold more than 43 million iPhones in the quarter, which wouldn't change Apple's third place position in global unit sales, but would represent a difference in unit sales that at least makes sense when compared to its reported decrease in iPhone revenues. Those sales would imply an iPhone ASP in the March quarter of about $722.

Wild contradictions between market data sources

IDC's, "embarrassing" estimate has already lead some commentators to jump to absurd conclusions. Jack Purcher of Patently Apple pointed to IDC's data and called it an "eye opener," even while contrasting contradictory data from Canalys-- which estimated Apple sold 40.2 million iPhones.

Those figures differ by an incredible 3.8 million units supposedly sold within three months, with Canalys' estimate more than 10 percent higher. So Canalys, looking at the same industry, reported that Apple sold on average 8,888 more iPhones every day than IDC was able to count.

Cybart's model points to quarterly iPhone shipments that were more than 18 percent higher than IDC's. Clearly, they're not all close to being accurate! But IDC's figures don't even pass a basic smell test when looking at Apple's reported revenues.

Notably, the Canalys estimate of total smartphone shipments in the quarter is only 1 percent higher than IDCs. So IDC wasn't just counting phone sales differently. It clearly ran with non-sensical numbers for Apple that don't align with the actual revenue numbers Apple reported.

A major reason for IDC being so out of line with facts is that this year, it couldn't simply wait for Apple to report its actual shipments and then estimate the rest of the industry around Apple's numbers.

No other smartphone maker reports how many units they sell quarterly. When Apple was reporting units, it was the only company to do so. That enabled IDC and other companies to report estimates that appeared grounded in reality because, sure enough, Apple's numbers matched what IDC reported, at least in reports where IDC waited for Apple's figures.

Apart from Apple, no other smartphone makers break out their quarterly revenues from smartphones. That means market data estimates apart from iPhones are completely untethered to any real fact-checkable data.

Samsung, for example, reports revenues from its IM Mobile group, but those include not just smartphones but also PCs, netbooks, tablets, watches and everything else compatible to Apple's total sales, not just its shipments of Galaxy S phones and its huge volumes of low-end phones shipped to the third world to sell for $150 or less. That explains why two market research groups came up with shipment data for Samsung that depicted an annual percentage of change that differed by about 25 percent.

The only really strong data point that IDC and other market research groups have to anchor their phone industry data is now Apple's revenues, and IDC's data completely fails in that regard.

Beware of free gifts

IDC's subset of publicly reported data isn't designed to give away valuable free information as a public service. Market research groups sell their reports to companies for $10,000 or more, so when they issue free bits of public data, journalists should review these reports with some healthy skepticism and consider why they're getting free data that tells such compelling stories.

This is particularly the case because those stories are often wrong to the point of clearly not being just a mistake. There's a history of market data firms releasing bad data coached to make winners look like losers and losers look like winners.

In fact, that's a primary goal of these groups, as history shows beyond a shadow of a doubt. These companies even admit that they work, not to enlighten the public with free data, but to help their paying clients with "influencing consumer behavior and buying preferences."


Research groups, including Strategy Analytics, have publicly admitted that they work to spin data to influence behavior and purchases, not merely to report what's being sold

The curious history of IDC, Gartner & Strategy Analytics' public data on Apple

We've caught IDC and other market research groups reporting estimated numbers that didn't align with Apple's actual data before, including massive underestimations of Mac sales as part of an overall misleading history of reporting in PC sales and of course in tablet sales.

IDC spent years spinning figures that tried to suggest that Apple's iPad wasn't really very successful and would quickly be sidelined by Microsoft Surface sales, and then painted a picture that iPad was being left behind by incredible sales of Android tablets. The company even retroactively shifted its reported tablet estimates by ten million units, quite clearly to create the impression that Apple's actual sales of iPads were falling behind an incredible surge in demand for Android tablets.

But that was never true, and that pretense was impossible to sustain as it became clear that Android tablets were not actually being used--they were curiously invisible in web analytics--and were doing nothing to shift buyers' interest in tablet apps or services. Last fall IDC was forced to acknowledge that Apple is clearly leading the tablet market "unabated."

This wasn't news to companies building software for tablets, who were quite aware of this reality long before IDC dropped its charade in portraying iPads as desperately suffering from "shrinking market share."

In 2014, at the height of IDC's "iPad is losing" narrative, and just before the company laid out its rosy prediction for Microsoft's Surface devices overtaking Apple, Microsoft itself exclusively released tablet-optimized versions of its Office apps for iPad far in advance of Android, despite IDC reporting that Android tablets had close to twice the "market share" of shipments. Pretty clearly, Microsoft wasn't fooled by IDC's public reports on the economics of the tablet market.

Purchaser's report on IDC's data gravely warned that "If IDC's statistic [on Q1 iPhone shipments] is actually correct [] you'd have to say that Wall Street analysts are not being honest with their shareholders to not reveal this incredibly important statistic." It's easier to accept that it's IDC that is not being honest, or is otherwise purely incompetent.

He also stated that "if this was Samsung having dropped 23-30% in Galaxy phone sales they would have been mercilessly slashed in the press, making headlines around the world."

However, Samsung's phone shipment volumes did drop by that much this summer and nobody batted an eye. It wasn't just a marketing firm estimate. Samsung officially reported a 22 percent drop in mobile revenues and a 34 percent collapse in year-on-year profits. Counterpoint Research estimated that Galaxy S9 series shipments specifically "declined 24 percent in Q2 2018 as compared to Galaxy S8 series in Q2 2017."

Despite being clearly unaware of what's been happening in the mobile market, Purchaser reached the conclusion that "Huawei destroyed Apple's iPhone growth," confusing correlation with causation.

Huawei did appear to roughly double its smartphone shipments while Samsung's collapsed-- particularly in China and other markets where Huawei can sell its phones-- and at the same time that Apple's sales fell. But for Huawei to have caused Apple's dip is conjecture, not fact.

And in reality, Huawei's huge volumes of new sales couldn't have been largely poached from among Apple's potential buyers because there weren't enough missing iPhones to account for Huawei's sales growth. Further, some of Apple's "missing iPhone upgrades" disappeared in the US, where Huawei can't even sell its products. That's pretty basic math and logic.

There were, however, large decreases in sales of Samsung, Xiaomi and Oppo Androids that all sell in the same price range as Huawei's models. That makes it pretty clear that Huawei's rise is not something new and unprecedented in the history of Android phones. The commodity nature of Androids means that each year, the vendor offering the best or cheapest set of models sees huge swings up while their competitors see huge swings down, with little apparent impact on iPhone sales.


Huawei is cited as a threat to Apple, but it's really killing Samsung. Source: Morgan Stanley Research


We have no data showing that vast numbers of iOS users are abandoning Apple's platform in any region. In fact, even in China, we know that Apple's installed base of iPhone users is remaining solidly stable-- even growing slightly to closely rival Huawei in the last quarter, despite the reported surge in Huawei shipments globally.

Android shipment volumes can and do slosh dramatically between commodity producers without having any real impact or relation on Apple's sales, the same way that surging histories of "tablet shipments" once attributed to Samsung, or Amazon or to no-name "white box" vendors in China had and still have very little real impact on Apple's iPad sales.

Journalists need to take a more critical look at IDC's "embarrassing" numbers and not simply take them at face value. Microsoft didn't.
fotoformatlolliver

Comments

  • Reply 1 of 20
    sfolaxsfolax Posts: 48member
    Don't worry girl - Apple's super obvious secret is services.
    Phones are so 2007.
  • Reply 2 of 20
    lkrupplkrupp Posts: 7,060member
    IDC has a long history of being wrong about Apple. It once predicted that Windows Mobile would dominate the smartphone field. After the introduction of the iPad IDC predicted that Android tablets would dominate within two years. And those two are just for starters. 
    magman1979lolliverpscooter63correctionswatto_cobra
  • Reply 3 of 20
    maestro64maestro64 Posts: 4,562member
    and no one saw this coming, IDC is now running completely blind, no company reports out actual numbers so they can make up number and no one can prove them wrong. Apple would publish their actually number and IDC was always wrong and industry never said a word, now people are upset that IDC is wrong.

    These analysis are spending too much time sniffing the toilets of part supplies and retail channel and to figure out how many phones were sold by how many times worker sat on the crapper. This is perfect example of Crap in Crap out.
    magman1979StrangeDayslostkiwicorrectionswatto_cobra
  • Reply 4 of 20
    lkrupplkrupp Posts: 7,060member
    IDC’s reports are taken as gospel by the industry. Reports from tech blogs rebutting IDC's findings, not so much. The real losers here are investors who base their portfolios on IDC’s and other’s negative narratives regarding Apple. They sold their positions in AAPL because they were told it’s a failed company on the verge of disappearing. Except for the Oracle of Omaha, of course. He apparently didn’t believe them. I had to demand that my financial advisor add some AAPL to my portfolio, which he did grudgingly. 
    magman1979lollivercorrections
  • Reply 5 of 20
    DAalsethDAalseth Posts: 610member
    Reason #39761 why I don't trust analysts reports. They have a ve$ted interest in skewing the results to fit their clients wishes. 
    magman1979muthuk_vanalingamlostkiwilollivercorrections
  • Reply 6 of 20
    maestro64maestro64 Posts: 4,562member
    In a previous job, I had access to both Gartner and IDC paid data as well as quarterly conference calls with their head analysis for the report, and it not very different than what they show publicly.

    They may be trying to influence the markets, but I found they show us obviously bad data, and try to get us to comment on it and tell them or share with them our actually numbers and costs. The conversation were always one way them telling us what they though we never gave them our own data.

    The reports I was looking at was based on actual data the supplier published and they number were usually off and they had all kinds of excuses. Like my supplier came in told me their company sold x units last quarter and analysis would say y units, and I ask why the difference and the usually best answer was the analysis never count channel inventory and WIP, like they know what are those numbers, only units which made it to the end consumer. The numbers got a lot murkier when you try to break it down by business segments and your competitors
    thtlolliverpscooter63corrections
  • Reply 7 of 20
    Disinformation from IDC, a "credible news source" about Apple sales.   Amazing that lies are put out and repeated over and over as the truth.   Kind of like "Russian collusion".  It's amazing how many lies are accepted at face value with zero critical thinking and actual facts to support the claim.   Usually, its enough to just repeat the lie over and over - IDC or your favorite news source - and the lie replaces the truth.  And then becomes the truth.
    watto_cobra
  • Reply 8 of 20
    IDC = I Don't Care. They obviously don't care whether their analysis is sound or not. They got their money already.
    StrangeDayspscooter63correctionswatto_cobra
  • Reply 9 of 20
    lkrupp said:
    IDC’s reports are taken as gospel by the industry. Reports from tech blogs rebutting IDC's findings, not so much. The real losers here are investors who base their portfolios on IDC’s and other’s negative narratives regarding Apple. They sold their positions in AAPL because they were told it’s a failed company on the verge of disappearing. Except for the Oracle of Omaha, of course. He apparently didn’t believe them. I had to demand that my financial advisor add some AAPL to my portfolio, which he did grudgingly. 
    I work in the industry and buy IDC and Gartner research. No one who knows what they are doing considers it the gospel. We understand that there are limitations to the data and we talk directly to the analysts to understand what they are and use our experience to work within the limits.
    corrections
  • Reply 10 of 20
    StrangeDaysStrangeDays Posts: 7,556member
    sfolax said:
    Don't worry girl - Apple's super obvious secret is services.
    Phones are so 2007.
    That isn't what the other editorial said. It said that the obvious secret to services is software. That creating good services will come more readily to those already producing good software. (No, not software subscriptions; we're talking the ability to produce good software, as a trade.)
    lolliverpscooter63
  • Reply 11 of 20
    rogifan_newrogifan_new Posts: 3,979member
    Apple provides revenue data. If your unit sales figure results in a ridiculously high or low ASP then your number is wrong.
  • Reply 12 of 20
    chasmchasm Posts: 1,516member
    Maybe tomorrow DED will publish this same article again, with only the word “Gartner” search-and-replacing the word “IDC,” because while Gartner’s biases and numbers are slightly different, their record of inaccuracy is every bit as awful. There should always be a “historically inaccurate” disclaimer warning on stories about “analyst” guesses.
    lostkiwiSpamSandwichlollivercorrectionswatto_cobra
  • Reply 13 of 20
    tzeshantzeshan Posts: 1,965member
    lkrupp said:
    IDC has a long history of being wrong about Apple. It once predicted that Windows Mobile would dominate the smartphone field. After the introduction of the iPad IDC predicted that Android tablets would dominate within two years. And those two are just for starters. 
    I remember this too.
    chasmwatto_cobra
  • Reply 14 of 20
    SpamSandwichSpamSandwich Posts: 31,087member
    chasm said:
    Maybe tomorrow DED will publish this same article again, with only the word “Gartner” search-and-replacing the word “IDC,” because while Gartner’s biases and numbers are slightly different, their record of inaccuracy is every bit as awful. There should always be a “historically inaccurate” disclaimer warning on stories about “analyst” guesses.
    Quite right. Or a large banner across the top of the page: “RAMPANT SPECULATION”
    chasmlolliverwatto_cobra
  • Reply 15 of 20
    crossladcrosslad Posts: 492member
    So according to IDC, last year Apple sold 52 million phones for $37 billion an ASP of £711.  This year the sold 36.4 million phones for $31 billion, an ASP of $851. I do not think that the ASP of iPhones has jumped by about 19%, more likely IDC were way off mark with their figures. 
    correctionswatto_cobra
  • Reply 16 of 20
    silvergold84silvergold84 Posts: 70unconfirmed, member
    Idc report is clearly false. Everybody understood it. iPhone XR is top seller in Japan, USA and Europe. Samsung lost 60% (from their official financial report). Huawei sell only in the medium price ,not in the premium and ultra premium price line. 
    watto_cobra
  • Reply 17 of 20
    retrogustoretrogusto Posts: 719member
    IDC is usually pretty far off, which is why I’m always a little irritated by headlines like this, that state their findings as if they were fact, even if the article goes on to explain the dubious source of the headline’s claim:
    https://appleinsider.com/articles/19/04/30/apple-iphone-shipments-declined-30-in-q1-now-in-third-place-behind-samsung-and-huawei

    It should be more like “IDC Claims...in New Report.” There’s a big difference between “Elvis Found Alive in Pittsburgh” and “National Enquirer Claims to Have Located Elvis in Pittsburgh.”


    edited May 2 thtwatto_cobra
  • Reply 18 of 20
    thttht Posts: 3,209member
    It should be more like “IDC Claims...in New Report.” There’s a big difference between “Elvis Found Alive in Pittsburgh” and “National Enquirer Claims to Have Located Elvis in Pittsburgh.”
    Heh. Can you imagine all the literature, writing, English and journalism majors in the media, who have spent their formative year learning how to write well, with witty and beautiful grammar that clearly and concisely communicate their thoughts?

    Then, when they are in the real world, they end up writing with basically the worst grammar, worst sentence construction in the world that goes against the very principles of what they learned in school. 

    They must be screaming inside, slowly dying from thousands upon thousands of cuts on their soul. 
    watto_cobra
  • Reply 19 of 20
    carnegiecarnegie Posts: 725member
    IDC's iPhone numbers used to be pretty accurate, because it just used the numbers that Apple reported. (Though sometimes they would have been a little off because Apple's fiscal quarter didn't line up with the calendar quarter.) It can't do that anymore, of course.

    The iPhone ASP for Apple's 2018 second fiscal quarter was, adjusted for the new accounting standard, about $719. It's possible that the ASP went up some YoY, but as the OP suggests it likely didn't go up to $850 as would be needed for IDC's iPhone units number to be accurate.
  • Reply 20 of 20
    A lot to chew on here. However, when Strategy Analytics marketing blurb talks about "influencing consumer behavior" I think it is referring to the analysis of what influences consumers. The author is taking gross liberties in interpreting it to mean they are the ones doing the influencing. It's not as if it reads influencing *industry* behavior anyway. Market research firms simply don't have much consumer awareness or hold that kind of sway with consumers.  Lost in translation from Queen's english?
    edited May 7
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