Apple blogger calls BS on IDC’s iPhone unit sales estimate

“IDC isn’t close with their iPhone unit sales estimate for the quarter that Apple just reported.” — Neil Cybart, Above Avalon

From IDC’s Smartphone Shipments Experience Deeper Decline, posted Tuesday:

Apple had a challenging first quarter as shipments dropped to 36.4 million units representing a staggering 30.2% decline from last year. The iPhone struggled to win over consumers in most major markets as competitors continue to eat away at Apple’s market share. Price cuts in China throughout the quarter along with favorable trade-in deals in many markets were still not enough to encourage consumers to upgrade. Combine this with the fact that most competitors will shortly launch 5G phones and new foldable devices, the iPhone could face a difficult remainder of the year. Despite the lackluster quarter, Apple’s strong installed base along with its recent agreement with Qualcomm will be viewed as the light at the end of the tunnel heading into 2020 for the Cupertino-based giant.

Cybart IDC iPhone BS

From Niel Cybart’s Twitter feed:

IDC isn’t close with their iPhone unit sales estimate for the quarter that Apple just reported. Apple sold way more than 36M iPhones. Plug 36M into an earnings model & you will find out that number is impossible to achieve given Apple’s stated iPhone revenue. Embarrassing for IDC.

Okay. I’ll bite…

  • iPhone revenue fiscal Q2 (via Apple): $31.052 billion
  • IDC’s unit sales estimate: 36.4 million
  • IDC’s implied ASP (average selling price): $853

Cue Statista’s historical ASP chart:

cybart iPhone IDC BS

Back to Cybart:

This continues the trend of industry research firms running with highly inaccurate estimates for Apple product shipments. The methodologies / processes used to derive these estimates aren’t good. One has to assume the shipment estimates for other companies are off just as bad.

Up to last year, Apple was the only company that would disclose unit sales. Many research firms waited until Apple reported earnings (and unit sales data) before publishing their industry shipment reports and numbers. Now we know why.

My take: Given the rebates, price cuts and the popularity of the iPhone XR, we can be pretty sure iPhone ASPs declined last quarter. By how much? Your estimate is as good as mine. It can’t be worse that IDC’s.

UPDATE: IHS Markit has published its own global smartphone estimates. It has Apple shipping 43.8 million iPhones in the March quarter. That’s more like it.

10 Comments

  1. Turley Muller said:

    $852 ASP it would have to be. Impossible. Not even in the right zip code.

    Philip, remember that IDC email from back in the day about the sausage making ? Pure gold.

    3
    May 2, 2019
    • Robert Paul Leitao said:

      Building on Turley’s comment, in FQ2 2018, the iPhone’s ASP prior to the reclassification of revenue for the period, was $728. After the reclassification of revenue, the iPhone’s ASP in the period was reduced to $719.

      Considering the continued forex headwinds and the model mix (the iPhone XR as the top-selling model) in the March quarter, it’s simply not possible Apple experienced a $134 increase in the iPhone’s ASP from $719 to $853. That would be an increase in the iPhone’s ASP YOY in the March quarter of about 18.6%. It just didn’t happen.

      Using Apple’s revised iPhone revenue total for FQ2 2018 of $37.559 billion, the reported YOY revenue decline in FQ2 2019 of about $6.5 billion (to $31.051 billion) is about a 17.33% revenue decline. There’s no way this outcome supports IDC’s claim of a 30.2% decline in global unit shipments.

      1
      May 2, 2019
      • Robert Paul Leitao said:

        Just to follow-up this evening, I estimate Apple sold about 43.50 million iPhone units in the March quarter or about a 16.7% decline in unit sales from the March quarter one year ago. That’s close to the 17.33% revenue decline for the iPhone line in the period.

        There’s simply no way to work into IDC’s quarterly unit sales estimate with Apple’s reported iPhone revenue, the reclassification of revenue that allocates a bigger portion of the iPhone’s selling price to Services revenue and knowledge the iPhone XR was the most popular model in the quarter worldwide.

        0
        May 3, 2019
  2. Fred Stein said:

    Embarrassing, yes. And why bother counting iPhone unit sales? About 1/3 of iPhones sell on second hand platforms or are hand-me downs.

    More impactful: 390M buyers of paid subscriptions, up by 120M YoY. Continuing simple arithmetic, we can roughly assume that the 390M are the main consumers of Services at $44B annually (and growing), or over $100 of Services revenue on average from the top 40% of the Installed Base.

    While my numbers above are full of guesstimates, the message is compelling: The paid Subscription business is high growth. Apple’s recent Services announcement add fuel as they roll out.

    1
    May 2, 2019
    • Robert Paul Leitao said:

      Fred:

      I agree. However, when firms publish estimates that debase unit sales it can cloud Apple’s narrative. Apple is promoting services because the services are amazing. Suggesting iPhone unit sales have plummeted by 30% obfuscates that narrative and suggests Apple is promoting services in part because iPhone unit sales are in a steep decline. I don’t see that as fact.

      I think we both know with a robust global market for pre-owned iPhones, the number of devices in use continues to rise despite the highly cyclical nature of new iPhone sales. As the number of active device users continues to rise, greater services attachment is not only an imperative, services enhance the user experience and widen the company’s economic moat by increasing the costs of switching platforms.

      0
      May 3, 2019
      • Richard Weathered said:

        Least we should forget, the success of wearables especially because Apple Watch is tied to the iPhone, the Apple Watch will not work with android, and continues to march in lockstep with hand me down, trade in, and new iPhones.

        0
        May 3, 2019
  3. Turley Muller said:

    It is worth mentioning those $790 numbers are anomalies- X and XS/MAX launch quarters. First, we didn’t have the lower priced models (IP8 & XR) being released and competing for sales mix., Second, and most obvious, we see 10-15M units move in the week typical of an iPhone launch. Third, 10-15M units (or more for Dec demand) sold into the channel to establish inventory. Thus, the sales mix is heavily skewed towards the new models that are launched resulting in those ~$790 ASPs. Channel fill creates that distortion in the absence of a simultaneous launch of the IP8 / XR. I would say ASPs could be in the high 700’s for normal quarters, but unlikely given unfavorable currency, price cuts, and popularity of XR. In addition, there is about 9 bucks taken out the sales price and deferred that never comes back into iPhone revenue, recognized in Services instead.

    IDC needs tp ask themselves- If the most popular iPhone sells for $750, $700 or less wholesale, then how does $850 make sense. It would take a lot of sales of the high storage configurations .If that were the case, it would be obvious from the much higher product gross margins.

    0
    May 2, 2019
  4. David Emery said:

    Of course, anyone who remembers high school physics remembers that you should always have a confidence interval/statistics with a number like that. It really pisses me off how we get spoon fed a single number (whether this one, or sea level rise, or most other things) without the associated error range. At least you get that when they report the results on political polls (most of the time…)

    1
    May 2, 2019

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