Analyst: Apple may stop making the iPhone X midyear — updated

From a note to clients by Rosenblatt analyst Jun Zhang that landed in my inbox Friday:

Based on our most current research we believe that AAPL may be planning to cut iPhone X production for the June quarter by as much as 10 million units reducing output to 15 million. This move drives our latest view that Apple could be planning to stop iPhone X production midyear to ramp up for the various models of the coming Xs.

Much of the published industry speculation drives our current thinking which points to three models as follows:

  • A new 5.8 “ iPhone Xs (OLED) that would completely replace the current iPhone X with a potentially lower selling price($799-$999).
  • A 6.5” iPhone X Plus that could be sold at the same price as the current iPhone X which ranges from $999-1,299
  • An LCD version of iPhone X with 6.1” screen that could be priced at $650 to address middle market demand

Based on this view, we believe that iPhone X cuts could be partially driven by the shorter life cycle of the phone. Based on history, we believe Apple does not want to hold inventory of iPhone X before the new Xs launches. That is why we look at the iPhone X cuts differently from the cuts on the other models.

Maintains Buy rating and $180 price target. 

My take: Yesterday Zhang—one of the better supply chain watchers—was calling BS on reports of of sharp cuts in iPhone X production in the March quarter. Now for the June quarter he’s contemplating the sharpest cut of all. Go figure.

UPDATE: KGI’s Ming-Chi Kuo too is speculating that Apple may phase out the current iPhone X this summer. He adds his observation that demand for the phone seems weak. Excerpted from 9to5Mac:

A new report from KGI defies market consensus claiming that iPhone X shipments are not as strong as many believe. The analyst says that it believes Apple will ship around 18 million iPhone X units in the current quarter, significantly below estimates in the 20-30 million range from other analysts. It primarily blames longer replacement cycles in China for the weaker demand for iPhone X.

However, KGI reaffirms its predictions of a three tier 2018 iPhone lineup with a 6.1-inch LCD model, a successor to iPhone X and a 6.5-inch OLED ‘iPhone X Plus’ launching in the fall. In fact, KGI suggests that Apple may stop making iPhone X altogether when production of the new 2018 models ramp up.

4 Comments

  1. Gregg Thurman said:

    First of all, Apple’s revenue is seasonal as follows:

    DEC quarter: 33.xx% of full year revenue
    MAR quarter: 24.xx% of full year revenue ((26.xx% QoQ decline)
    JUN quarter: 20.xx% of full year revenue (further 16.xx% decline QoQ)
    SEP quarter: 22.xx% of full year revenue (9.xx% QoQ increase)

    Historically (all the way back to FY2005 (first year I began charting results) the June quarter is Apple’s weakest, so it would be natural for production to be cut anticipating seasonality.

    Based on iPhone pricing structure ($100 tiers) I believe that the current iPhone X will continue to be produced for the next 3 years, dropping $100 in price each subsequent year.

    I’m not buying the 3 new models, as bandied about, for FY2019. I think Apple will introduce an iPhone X Plus and 2 iPhone 9 as incremental upgrades of the iPhone 8. The iPhone X Plus will be introduced at $999 and $1,149, with the iPhone X being reduced to $899 and $1049.

    That fills all $100 tiers:

    iPhone X Plus $999
    iPhone X $899
    iPhone 9 Plus $799
    iPhone 9 $699
    iPhone 8 Plus $699
    iPhone 8 $599

    Such a pricing schema increases ASP about $100 over a 3 year period without the consumer recognizing the increase.

    Also, it and makes sense from a marketing and production point of view. Availability of OLED screens will be much greater and cost less, as will the XCSEL tech required for Cameras and Face ID. Also, the consumer would see such a pricing move as a price REDUCTION, having recovered this year’s sticker shock (if there was any).

    Also, such a move would take the oxygen out of Android sales without disrupting Apple’s gross margins.

    3
    January 19, 2018
  2. Gregg Thurman said:

    I’ve never liked Kuo. I take a contrary view on everything he says.

    I’m not too fond of research notes claiming production problems, cuts, etc., either. They have never proven accurate.

    2
    January 19, 2018
    • Ken Cheng said:

      If memory serves, Kuo is highly dependent upon his channel check sources which have mostly been wrong. And, I vaguely always connected Tim’s comment about not relying upon supply chain sources as there are too many involved with Kuo’s past misfiring.

      1
      January 19, 2018
  3. Gregg Thurman said:

    https://www.barrons.com/articles/apple-bright-outlook-for-the-next-wave-of-iphone-x-says-rosenblatt-1516375502

    There is nothing logical in Zhang’s “research note”. His assumptions fly in the face of everything Apple has previously done.

    Adding to my previous post: I think there is a strong reason why Apple introduced the OLED iPhone as iPhone X (PRONOUNCED “TEN”).

    That naming convention leaves a hole between iPhone 8 and iPhone X (10), to be filled with an LED iPhone 9 upgrade of the iPhone 8. An iPhone 9 satisfies his conjecture for a lower cost iPhone.

    0
    January 19, 2018

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