Demand for iPhone 11 outpacing supply chain expectations

Posted:
in AAPL Investors
The increase in lead times for the iPhone 11 suggests demand for the new iPhone models is higher than the supply chain anticipated, according to JP Morgan, with the lead time growth for the value-based model seemingly indicating consumers are not focusing their purchases on the higher-end models as was previously predicted.

iPhone 11 sales Apple Store Japan


An analysis of the supply chain and preorders by the JP Morgan iPhone Availability Tracker, in an investor note seen by AppleInsider, reports the delivery lead times for the iPhone 11 Pro and iPhone 11 Pro Max was at roughly 21 days across the first and second week of preorders for the top four US carriers.

However, while the iPhone 11's lead time is relatively lower than the iPhone 11 Pro range, it reported six days for the first week and 12 days in the second week. The doubling of the lead time "implies to us increased interest in the 'lower end' model that initially anticipated by Apple and the supply chain," writes JP Morgan.

The strong pre-order momentum for the iPhone 11 also "limits risks" for the 2019 product cycle, the firm suggests, with the current forecast of this year's models tracking 64 million units in the second half of the 2019 calendar year. The earlier availability of the iPhone 11 compared to the iPhone XR in 2018 also limits risks relative to 2019 volumes, with extra potential upside if the momentum continues.

JP Morgan's iPhone Availability Tracker
JP Morgan's iPhone Availability Tracker


"Unsurprisingly, we anticipate iPhone 11 to be the largest driver of iPhone shipments over the next 12 months," JP Morgan muses, with a higher portion of the mix relative to the iPhone XR over the XS models. "However, we expect shipments to be more skewed towards the mid-end model, iPhone 11 Pro relative to iPhone 11 Pro Max, in contrast to the stronger sales for the high-end iPhone XS Max in the 2018 vintage."

JP Morgan is maintaining its shipment forecast of 184 million units for the full calendar 2019 year, followed by 195 million units in 2020, and a return to quarterly year-on-year growth by the second calendar quarter of 2020.

While the improvements to iPhone demand are welcomed by analysts, JP Morgan has previously indicated the new models offered "limited surprise" to investors at the time of their launch, and indicated other areas of the company, such as its Services businesses, will help drive revenue.
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Comments

  • Reply 1 of 37
    MacProMacPro Posts: 18,456member
    Apple is Doomed ™
    stoneyganantksundaramAppleExposedwatto_cobra
  • Reply 2 of 37
    MacPro said:
    Apple is Doomed ™
    Needs a "still" or "again" in there, but yep, spot on. 
    viclauyycAppleExposedwatto_cobra
  • Reply 3 of 37
    FolioFolio Posts: 652member
    Apple total rev forecast to jump from US$265 billion to $325 billion in 2021, by Merrill analyst wamsi Mohan. Watch and Accessories to be third biggest contributor, after iPhone 55% and services 21%. What I like about this year's Watch release is the price stratification--voluntary choices of Al, Ti, stainless and ceramic, not to mention bands, etc. Everyone gets same functionality, but you can get wife ceramic and kid aluminum. Get a bonus splurge on Hermes. This may offset some of the squeezed margins elsewhere. Plus the $199 series 3 might entice newcomers to the ecosystem. An Apple watch plus new iphone cheaper than Huawei flagship (stripped of YouTube, Google Maps, gmail). This could turn into a good year for Apple
    applesnorangeswatto_cobra
  • Reply 4 of 37
    lkrupplkrupp Posts: 7,462member
    Once again Apple confounds the pundits and trolls. Will they ever learn? Not likely. After all, negativity is the norm on the Internet. 
    flyingdphydrogendick applebaumAppleExposedwatto_cobra
  • Reply 5 of 37
    Lots of fancy words to convey a simple message. 
    watto_cobra
  • Reply 6 of 37
    lkrupp said:
    Once again Apple confounds the pundits and trolls. Will they ever learn? Not likely. After all, negativity is the norm on the Internet. 
    I think you know as well that this “analyst” and “reporting” bs is nothing but the desperate attempt to create 5 secs of attention and short-sell instead of earning a sustainable reputation. 
    AppleExposedwatto_cobra
  • Reply 7 of 37
    cpsrocpsro Posts: 2,516member
    This item is so poorly written, one can read whatever they want in it.
  • Reply 8 of 37
    First, I wouldn't put much weight in this type of analysis.

    However, isn't their conclusion exactly backwards using their own logic?

    However, while the iPhone 11's lead time is relatively lower than the iPhone 11 Pro range, it reported six days for the first week and 12 days in the second week. The doubling of the lead time "implies to us increased interest in the 'lower end' model that initially anticipated by Apple and the supply chain," writes JP Morgan.

    Think that through.  There is a longer lead time for the Pro and Pro Max than the non-Pro model.  In other words, demand is outstripping supply more for the high end models than the "low end" non-Pro model.  Doesn't that imply that there is increased interest in the "higher end" models?

    Yet AI says:

    The increase in lead times for the iPhone 11 suggests demand for the new iPhone models is higher than the supply chain anticipated, according to JP Morgan, with the lead time growth for the value-based model seemingly indicating consumers are not focusing their purchases on the higher-end models as was previously predicted.


    edited September 20 FileMakerFellerwatto_cobra
  • Reply 9 of 37
    I live close to a large Apple store located inside to a fancy outdoors shopping / living development. It's basically a multimillionaires' playground where houses start at a couple million dollars and go up, and you can't have a nice lunch for 2 for less than $100. The Apple store is next to the Tesla store, and the streets are filled with fancy boutiques where normal people cannot afford anything. However, the area around is very affluent, so there are always crowds of people shopping in there. Since it's the only Apple store in the 25-mile radius, people of all backgrounds come to the Apple store there.  

    Back in 2017, I stood in line in front of this Apple store to get an iPhone X for my wife, and there were probably around 80 people or so in line when I got there around 8:00 AM.  The Apple store is huge, and there's plenty of room in front of it to camp out for those who are so inclined. Mind you, 2017 was the first year of Apple selling a $1,000+ iPhone. This morning, I was there at 8:00 AM just to see how many people were lined up. There were 20-30 people in line. I wasn't buying anything this time around but simply dropped by the store to get a sense of how many people are rushing to get new iPhones. 

    So, I don't think there's quite as much interest in the iPhone this time around as it was in 2017, and back then, a lot of people were shocked by the price. I skipped the 2018 release date altogether, so I don't know how today's release compared to the 2018 release at the local Apple store. Seems like iPhone 11 is a decent upgrade from iPhone 6, 6s, 7, and maybe even 8, but Apple's margins on iPhone 11 are much slimmer than they were in the recent past. I don't think many people will be buying iPhone 11 Pro, since next year's iPhones will feature 5g, and most people's phones are good to last another year. My phone is iPhone 7, and I'm completely uninterested in upgrading. In the past, I wanted to upgrade every year, and I did upgrade every two years. This time around, my iPhone 7 is 3 years old, and my wife's iPhone X is 2 years old; neither one of us are interested in the new iPhones. 
    edited September 20 muthuk_vanalingam
  • Reply 10 of 37
    First, I wouldn't put much weight in this type of analysis.

    However, isn't their conclusion exactly backwards using their own logic?

    However, while the iPhone 11's lead time is relatively lower than the iPhone 11 Pro range, it reported six days for the first week and 12 days in the second week. The doubling of the lead time "implies to us increased interest in the 'lower end' model that initially anticipated by Apple and the supply chain," writes JP Morgan.

    Think that through.  There is a longer lead time for the Pro and Pro Max than the non-Pro model.  In other words, demand is outstripping supply more for the high end models than the "low end" non-Pro model.  Doesn't that imply that there is increased interest in the "higher end" models?

    Yet AI says:

    The increase in lead times for the iPhone 11 suggests demand for the new iPhone models is higher than the supply chain anticipated, according to JP Morgan, with the lead time growth for the value-based model seemingly indicating consumers are not focusing their purchases on the higher-end models as was previously predicted.


    Apple got burned last year on the overproduction of the iPhone Xs and Xs Max. They most likely cut the production this time. In the past, lead times were 4-6 weeks, so the lead time of a couple weeks is much shorter than the lead times of the yesteryear. You can't extrapolate demand from the lead time. Most likely, Apple has manufactured iPhone 11 in much larger quantities than iPhone 11 Pro. Apple doesn't consider a two-week lead time to be too dramatic for them to take a risk and overproduce iPhone 11 Pro again. 
    philboogie
  • Reply 11 of 37
    FolioFolio Posts: 652member
    Today's report on ship dates by Merrill analyst Wamsi Mohan appears to be more comprehensive. Besides US he has shipping in China,Japan, Mexico, UK, Germany, Australia, France. "In China, ship dates for most configurations are 2-3 weeks out, versus last year when they were 1-2 weeks out." In US, ship dates for 512 GB versions are more extended, which bodes well for higher mix. Is demand higher, or inventory lower? "The longer ship times this year could be the result of higher demand this year, especially given our checks suggesting an earlier start of iPhone builds and concurrent launch of all three models (vs 2 last year)." Helping demand is installed base, where At least 200 million iPhones are "really old" (iPhone 6 and prior)
  • Reply 12 of 37
    sirozha said:
    First, I wouldn't put much weight in this type of analysis.

    However, isn't their conclusion exactly backwards using their own logic?

    However, while the iPhone 11's lead time is relatively lower than the iPhone 11 Pro range, it reported six days for the first week and 12 days in the second week. The doubling of the lead time "implies to us increased interest in the 'lower end' model that initially anticipated by Apple and the supply chain," writes JP Morgan.

    Think that through.  There is a longer lead time for the Pro and Pro Max than the non-Pro model.  In other words, demand is outstripping supply more for the high end models than the "low end" non-Pro model.  Doesn't that imply that there is increased interest in the "higher end" models?

    Yet AI says:

    The increase in lead times for the iPhone 11 suggests demand for the new iPhone models is higher than the supply chain anticipated, according to JP Morgan, with the lead time growth for the value-based model seemingly indicating consumers are not focusing their purchases on the higher-end models as was previously predicted.


    Apple got burned last year on the overproduction of the iPhone Xs and Xs Max. They most likely cut the production this time. In the past, lead times were 4-6 weeks, so the lead time of a couple weeks is much shorter than the lead times of the yesteryear. You can't extrapolate demand from the lead time. Most likely, Apple has manufactured iPhone 11 in much larger quantities than iPhone 11 Pro. Apple doesn't consider a two-week lead time to be too dramatic for them to take a risk and overproduce iPhone 11 Pro again. 
    They most likely did NOT cut production this year, since last year iPhones were still back-ordered. There’s a difference between cutting production capacity from the get-go and turning down production capacity as demand slacks.

    So the reason for the increased demand lies elsewhere, not reduced production capacity. Nice try, no cigar.....
    AppleExposed
  • Reply 13 of 37
    saareksaarek Posts: 1,157member
    Makes complete sense, short of the screen and telephoto camera you’re getting the same phone for a lot less.

     Most people can live without the telephoto lens and the display is more than adequate.
    watto_cobra
  • Reply 14 of 37
    What dope would have “previously predicted” that the higher-end models would be the top sellers, given that the Xr was famously the top seller last time around?
    watto_cobra
  • Reply 15 of 37
    avon b7avon b7 Posts: 4,302member
    lkrupp said:
    Once again Apple confounds the pundits and trolls. Will they ever learn? Not likely. After all, negativity is the norm on the Internet. 
    So three years of flat sales and a profit warning leave nothing for Apple or you to learn?

    Apple hasn't confounded anyone. For the last three years it has been the same, right down to the kind of statement you just made. And as usual you are running with an analyst statement! The same analysts you always criticise!

    Have you forgotten about 'the iPhone X is the most popular iPhone'?  That, in the end, didn't change anything. Things still came out flat.

    If anything, the opposite to what you are saying is true. Apple has learnt (the hard way) and as a result we have a much stronger lineup at far cheaper prices - right down to the iPhone 8.

    Thank the competition for that, too.
    chemengin1AppleExposedmuthuk_vanalingam
  • Reply 16 of 37
    sirozha said:
    So, I don't think there's quite as much interest in the iPhone this time around as it was in 2017...
    The thing is that these days you're encouraged to reserve a specific pickup time to get your new phone and/or watch. 

    As such, you arrive at your 9-to-9:30 appointment time to get your phone. Doesn't do much good to arrive early and it makes sales judgements by checking the length of the line pretty much irrelevant. It's not like the old days where you stood in lines a couple of hundred of people long to try to get the model you wanted...
    muthuk_vanalingamwatto_cobra
  • Reply 17 of 37
    The doubling of the lead time "implies to us increased interest in the 'lower end' model that initially anticipated by Apple (...)
    Isn't that bad for stock holders, more people buying the cheaper version? Ah, AAPL dropped ,50 No biggie, but it also didn't go through the roof either.
  • Reply 18 of 37
    hmlongco said:
    sirozha said:
    So, I don't think there's quite as much interest in the iPhone this time around as it was in 2017...
    The thing is that these days you're encouraged to reserve a specific pickup time to get your new phone and/or watch. 

    As such, you arrive at your 9-to-9:30 appointment time to get your phone. Doesn't do much good to arrive early and it makes sales judgements by checking the length of the line pretty much irrelevant. It's not like the old days where you stood in lines a couple of hundred of people long to try to get the model you wanted...
    Not to mention, phones aren't the new gadget they were years back.  Why wait in line when you can just order it online, in advance, and get it on day one anyway...  I waited in line exactly once, and it was on a whim when I got my first iPhone (I held out until the 3GS).  Every phone after that was either ordered, or I would randomly stop by the Apple Store when I was in the area to see if they had any in stock and got it then.  I'm on my fifth iPhone (XS) and will likely upgrade again next year (assuming they add 5G and I decide it's worth it at that point).
    watto_cobra
  • Reply 19 of 37
    wood1208wood1208 Posts: 2,027member
    No surprise here. Next few weeks upgrading 4 family phones to iPhone 11. Just waiting for AT&T to allow BOGO deal for non unlimited plan customers.
    watto_cobra
  • Reply 20 of 37
    I traded in my maxed iPhone XS for $400 under the IUG for a maxed out iPhone 11 Pro.  The total cost for the XS was $57 x 12 - $400 == $684 - $400 == $284... that’s $24 a month... Hell, I spill more than that!
    edited September 20 tmayRonnnieOwatto_cobra
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