Analyst: Apple iPhone demand momentum not rebounding

From a note to clients by Cowan semiconductor analyst Karl Ackerman that landed in my inbox Wednesday:

The AAPL supply chain trade had a challenging set up from an operational perspective this past earnings season, as we expected, with companies providing below-consensus MarQ guides on demand challenges from the iPhone X. Our field work in Asia last week entering the Chinese New Year indicates builds for CQ1 [Apple’s fiscal Q2] are now 52.5MM, down from our prior below-consensus view of 56MM 30 days ago. The key variable from this month vs. our last update, unsurprisingly, is lower build expectations for the iPhone X which now stand at 21MM units (vs. 28.5MM)…

Demand momentum going into CQ2 doesn’t appear to be rebounding, either, with our field work signaling a preliminary view of CQ2 procurement for ~44MM units, up 3% Y/Y. This number is inclusive of 13-16MM units for the iPhone X (down from the original plan of 30MM units in Oct/Nov ’17). While unit procurement numbers are underwhelming overall, and not indicative of a “super-cycle,” these units appear to support current consensus expectations for the RF suppliers AVGO, SWKS and QRVO. [emphasis his]

Our field work continues to support a feature-rich three-model launch, all having Face ID and expected to launch in CQ3:18 (consistent with prior launch times). While it is still a little early, overall units for the three new models combined look to be ~175-205MM units, in line w/ the ~193MM for the iPhone 7/7+ and projected 186MM for the 8/8+/X. Of this total, our field work has noticed a shift in procurement plans toward the lower-priced 6” TFT- LCD model, now planned from 55-60MM units to 75-85MM units.

My take: Dovetails, perhaps unsurprisingly, with what we’ve been hearing from KGI’s Ming-Chi Kuo.

iphone demand momentum not rebounding

Note: Cowan does investment work for Broadcom (AVGO).

6 Comments

  1. Gregg Thurman said:

    It would be interesting, if not informative, to study all these “research notes” for accuracy.

    0
    February 21, 2018
  2. Robert Paul Leitao said:

    I disagree with Mr. Ackerman’s view that the current sales dynamic is not indicative of a so-called super cycle. I’ll use a baseball analogy. A high arcing hit appears spectacular to the spectator but on a linear line does not travel as far as a hard line drive.

    Apple is demonstrating a remarkable level of pricing control in the smartphone market and is gaining marketshare, revenue share and profit share. This evidences not only a widening economic moat, it’s setting the proverbial table for this fall’s new handsets.

    Apple’s pace of innovation is distancing the company’s products from any competition while facilitating further expansion of the eco-system by providing the most robust development platform on the planet.

    This super cycle will be marked not by a short-term, high arc spike in unit sales but by its duration. Revenue growth is occurring in constituent revenue segments – Other Products and Services – at levels never seen before.

    A high arcing solo home run is spectacular to watch as the batter slowly trots arounds the bases. But a hard hit line drive that clears the fence with the bases loaded puts more runs on the scoreboard and is more apt to put the game out of reach.

    6
    February 21, 2018
    • Fred Stein said:

      Agree Robert. As “X” features roll out to lower priced iPhones and to iPad, and maybe Macs, the revenue and profits we roll in. Might take 2 years or more.

      Also, Apple stated that they left C4 ’17 with slightly extra channel inventory. Cowen and Co’s bar chart reflects supply chain, where C1 ’18 has to burn off a couple million iPhones,

      2
      February 21, 2018

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