Rosenblatt’s Jun Zhang sheds more light on the shift in production from iPhone 8 to iPhone X.
From a note to clients that landed in my inbox Friday morning:
Strong Pre-Orders: JD.com [Jingdong and formerly called 360buy] posted 1.1 million iPhone X early preorders ahead of the official start next week. We believe this is a strong number and could end up totaling total 3-4 million units, higher than iPhone 8/8 Plus levels, when the official preorder starts next Friday in China… We believe a subset of Chinese consumers are willing to pay a 20-30% premium to have the iPhone X sooner, which could be a factor on why the early preorders are so strong. We believe some retailers are preordering/purchasing the iPhone X from Apple’s authorized retail channels, in order to resell the phone for profit in China.
Our Take on the News Regarding iPhone 8 Production Cuts: We have not yet heard of actual production cuts, and we do not expect Apple to cut production before the holiday season; however, we do expect Apple to reduce iPhone 8 production and likely maintain iPh-one 8 Plus production in November due to weak demand. We anticipate iPhone 8/8Plus production to trend down from the current 12M units/month run-rate to 7-8M units/month in November/December before any production cuts, as iPhone X production likely ramps in November/December. We believe production cuts of 30-35% are likely on the iPhone 8 and very small production cuts on the iPhone 8 Plus. We expect Apple to allocate more production capacity to the iPhone X in the March quarter. Until the iPhone X launches and Apple understands the market’s reaction to each phone model, we do not expect any further production adjustments.
Zhang maintains his Neutral rating and $150 price target.
My take: Good reporting from Jhang, who covers China Mobile. Not clear, given what he’s seeing, why he’s sticking with his near-street-low price target. See Look whose Apple price targets are underwater now.