iPhone X: Reaching supply demand equilibrium for Christmas

From a note to subscribers by Loup Ventures' Gene Munster:

iPhone X supply improved materially over the past week both in-store and online. We now believe iPhone X will be near global supply demand equilibrium by the end of December or early January. Previously, we had anticipated iPhone X would reach global supply demand equilibrium by mid- to late-January.  This means the Mar-18 outlook will have only a fractional bump up from December iPhone X demand getting pushed in the Mar-18 quarter. We believe the bigger story is that the Street is under estimating the positive ASP impact from the iPhone X over the next few quarters, which should play out as a positive to the Apple story. Our FY18 overall iPhone ASP is $740 vs. the Street at $705.

From friend-of-the-blog Chuck Jones, writing in Forbes:

  • On Friday, October 27th, the first day that orders were taken for the X, its lead-time was 5 to 6 weeks.
  • A week later on Friday, November 3, when it first started shipping the X’s lead-time had fallen to 3 to 4 weeks.
  • It only took 1 1/2 weeks after first selling for the lead-time to drop to 2 to 3 weeks and
  • After just under a total of 3 weeks it was at 1 to 2 weeks
  • It yo-yoed between 1 to 2 and 2 to 3 weeks for a couple of weeks and
  • Settled at just over a week a week ago
  • It stayed there until yesterday when it dropped to 4 to 6 days, except for T-Mobile

My take: How did Ming-Chi Kuo get this so wrong?

UPDATE: Could this be a sign of weakening demand? See FUD and anti-FUD.

9 Comments

  1. Scott Davis said:
    Fellow AAPL Nerds:
    Please reassure me that these recent data points are due to increased production capacity and not disappointing demand for the X falling off a cliff. I already know how Wall Street will interpret this. The real tell will be, of course, earnings for the current quarter and next quarter guidance. We won’t know for sure until late January/early February. Any thoughts?

    Thanks,
    Dr. Scott

    0
    December 10, 2017
    • Fred Stein said:
      Dear Dr. Scott,

      We are wise ignore flash reports, and especially rumors from folks like Ming-Chi Kuo. Likewise ignore Wall Street’s reactions. Rather consider that the iPhone Installed Base market share keeps rising vs. Android, despite seasonal and cyclical shipment variations, and the Apple Watch is the killer in a new category, and that Services CAGR indicates that Services will double every 3 or 4 years, and that some iPhone X capabilities will arrive on iPads and lower priced iPhones over the next two years driving more upgrades, and that any dip in AAPL means Apple buys back more shares concentrating future EPS. Besides all that, Apple likely has more surprises, in stealth.

      2
      December 10, 2017
    • Gregg Thurman said:
      Historically March quarter results decline from December results by about 20%. The degree of decline this cycle may differ, but demand is certainly going to decline.

      0
      December 10, 2017
    • David Drinkwater said:
      My take is that demand is fine. But I applied a little “experienced reader” trickery for my iPhone X acquisition.

      I was awake unusually early on Saturday, December 2, so I went online to reserve on at Apple Knox Street. The “experienced reader” trick is to recall old articles about tracking iPhone inventory from morning to evening and back (shipments of new inventory are logged overnight), and to realize that the best time to make your reservation (regardless of when you intend to actually pick up your product) is in the morning.

      I saw the phone I wanted in inventory, ordered it, and walked into the store and walked out with my new phone that very same day. I don’t know how Apple can expect to run a successful business that way! 😉

      That store is pretty close to me, so I pass by it fairly regularly. It’s been very busy lately.

      1
      December 11, 2017
  2. Gregg Thurman said:
    “My take: How did Ming-Chi Kuo get this so wrong?”

    Because he is an attention grabbing blowhard, loved by the media for his click generating “research notes”.

    The bigger question to PED’s above is why does the media justify referring to Ming as “respected”, “well connected”, “knowledgeable”, and other undeserved superlatives.

    To answer the inevitable question: No, I do not like Ming. His “research” has harmed many. Ming is an idiot or a liar, either way I think his conduct is unconscionable. Certainly it dooen’t conform to an “analysts” fiduciary responsibility to investors.

    2
    December 10, 2017
  3. Gary Morton said:
    The $trillion dollar question. Is this due to increased production capacity or lower than expected demand? Usage data from Mixpanel https://mixpanel.com/trends/#report/iphone_8_X/from_date:-65,report_unit:day,to_date:0 would indicate that the demand is certainly strong. On the current trendiness, the total iPhone 8, 8P, and X usage by the end of the quarter will be approximately 14% of the installed base. With 1.5% of that being sold last quarter, that leaves 12.5% for FY18Q1 sell through. On an estimated 670million installed base (multiple sources) that 12.5% translates to 83.75 M new phones. Add in another 10M for the 7, 6s, 6SP, and SE and it will be another record quarter in iPhone sales. Fiscal Q2 comparisons will be all about China. The trends there also appear to be positive.

    3
    December 10, 2017
    • Gregg Thurman said:
      Interesting way to look at potential iPhone unit sales during the December quarter.

      If your numbers become reality (I think they will) then Apple will report about $87.9 Billion in revenue.

      0
      December 11, 2017
  4. Robert Paul Leitao said:
    Apple continues to sell every iPhone X the company can produce. Production capacity will determine the number of units Apple reports as sold in the December quarter. Even with the recent increase in production capacity, channel supply may be below the target range at the end of the period. This suggests March quarter guidance will reflect not only continuing strong demand leading into China’s Lunar New Year cerebrations but also the beneficial impact of reaching channel supply goals on a look-forward basis.

    0
    December 11, 2017
    • Gregg Thurman said:
      If my June quarter results estimate is anywhere near accurate Apple will expand channel inventory by about 6.3 million units during the March quarter, all of them being iPhone Xs.

      Sell through for the March quarter will be about 60 million.

      I arrived at these estimates by averaging Q1 to Q2 units sold deltas for FQ2/2014, FQ2/2015, FQ2/2016 and FQ2/2017. I believe the seasonal reduction in unit sales calculation to be overly aggressive, due to current pent up upgrade demand. So I wouldn’t be surprised at all should FQ2 and FQ3 iPhone unit sales exceed my current estimates.

      0
      December 11, 2017

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