J.P. Morgan: Apple is selling iPhone SE's as fast as it can make them

Wherever analyst Samik Chatterjee looked last week, demand for the budget iPhone was getting ahead of supply.

From a note to clients that landed on my desktop Sunday:

US: iPhone SE lead times triple from Week 1 to Week 2. In the US, delivery-at-home timing extended for the iPhone SE (across most SKUs) from 24 Apr (order on 17 Apr EST) to 12-19 May (order on 24 Apr EST), implying a tripling of the lead time from ~8 days in Week 1 to ~22 days in Week 2. Recall, the US accounts for roughly ~35% of iPhone shipments.

China: immediate pick-up in a physical store but extended delivery-at-home timing: China demand is a critical trial balloon for monitoring the iPhone SE demand, especially where there’s a feasibility of pick-up in a physical store... Recall, China accounts for ~15% of iPhone shipments.

Western Europe (Germany & UK): iPhone SE lead times expand modestly from Week 1 to Week 2... Recall, Western Europe accounts for roughly ~15% of iPhone shipments.

India: iPhone SE currently unavailable; however, keeping an eye on given market importance. While the iPhone SE is currently unavailable for ordering in India given tight government restrictions in the country prohibiting the shipment of iPhones as well as many other consumer goods, we believe the market is an important one to keep track of given our view that the iPhone SE is key to Apple’s strategy to penetrate lower price tiers of the smartphone market, particularly in emerging markets, like India, with significant growth opportunities. Recall, India accounts for a low-single digit percentage of iPhone shipments.

Cue the chart:

apple jpmorgan iphone se lead times

Click to enlarge.

My take: As Chatterjee points out, it's impossible to separate demand from what he calls "logistics."

9 Comments

  1. Gregg Thurman said:
    When my ex ordered her iPhone she was told (via email) that delivery would be by the end of the month (April). Yesterday she received a delivery update that now advises May 5.

    Of course what we don’t know is how many SE’s Apple is producing/shipping. In a typical environment Apple ships about 3500 iPhones (all models) per week. That’s of little help when assessing the success of the new iPhone SE.

    0
    April 26, 2020
  2. Dan Scropos said:
    4 of the top 5 iPhones currently in worldwide use are the 7, 6S, 8 and 6. For whatever reason, these users have not yet opted to upgrade. The iPhone SE addresses form factor and price point, and does so with pretty current specs. Throw in the ability to get 3% cash back with Apple Card and a year of free Apple TV+ and you have the groundwork for a smash hit.

    That’s an awful lot of value for $400 and the initial sales seem to indicate that many smartphone users agree. I think they’ll smash the estimates of 20 million first year iPhone SE sales. I’ll also be listening keenly to Tim Cook’s comments if/when he talks about first time iPhone users that purchased iPhone SE. This phone should bring Apple a lot of defectors and that brings value beyond just the current quarter.

    8
    April 26, 2020
    • Fred Stein said:
      I upvoted your comment.

      Buyers will own their new SE’s for 4 years. With trade-in credit, that’s 25 cents a day, or the price of bottled H2O, when purchased in bulk.

      0
      April 26, 2020
  3. David Baraff said:
    I bought two SEs yesterday for friends.
    (One friend, who wanted one for herself and one for a daughter.)

    1
    April 26, 2020
  4. Bart Yee said:
    It is my understanding that in India, importing and selling iPhones is not prohibited but imports are tariffed (to the tune now of 30%) to “encourage” local production as a “Made in India” initiative. Prime Minister Modi made this a huge deal over the past 3 years, and successive raises (from 10 to 15 to now 30%) in the tariffs pushed both Samsung and Apple to establish manufacturing in India. Samsung built their own plant, Apple uses partner Wistron to assemble iPhone XR, 6S, and the original SE for the Indian market.

    The manufacturing of iPhone in India is also complicated by additional tariffs on imported circuit boards, the tariffs being similar amounts. Thus, Chinese built boards get marked up by tariffs, increasing the cost of even Indian assembled iPhones. Again, this is to “encourage” makers to build their boards also in India, never mind that board fabrication, stuffing and wave soldering are difficult to set up with any semblance of quality control and qualified workers are limited.

    Anyway, the cost of an iPhone SE, per Apple’s India website is 42,500 rupee. This works out to about $557 USD base 64GB model. On Twitter, Apple SE ad tweets are met with Indian consumers decrying its high cost and why is Apple is so greedy and treating Indian consumers so badly. If Apple charged $399 and it translated directly to rupees, that’s 30,436 Rupees, add in 30% tariff and you get $518 USD / 39,514 Rupee. The difference of 2986 rupee is only $39 or aprox. 10% of the original MSRP.

    So, IMO, it is the “fault” of the Indian government policy as to why the price of the Apple SE “not made in India” is that high, intentional tariff markups along with additional local tariffs/taxes or a 10% margin to deal with those issues. Its been reported in the Indian/Hindustan press so I wonder why the Indian consumers don’t complain to their government (maybe because it won’t do any good).

    IF and when Apple makes the SE in India (and I’m sure they will), the resulting (hopefully) decrease in price will make a very compelling value for would-be iPhone users.

    4
    April 26, 2020
  5. Gregg Thurman said:
    OT:

    Asian markets (as well as US Futures) are broadly up, a reversal of how they traded lead into last Monday (a day wherein I lost my cool).

    It would appear that light is shining ever brighter at the end of this tunnel.

    0
    April 27, 2020
    • Gregg Thurman said:
      4:35 AM EST

      Lots and lots of green in world indexes. AAPL is up $3.00+ in pre-market.

      USD down a bit against EURO, GBP and Chinese Yuan. All good things.

      0
      April 27, 2020

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