UBS: The iPhone 11 sold faster than the iPhone 12

From a note to clients by analyst David Vogt that landed on my desktop Monday:

iPhone 12 wait times continue to decline the past seven days. Utilizing UBS Evidence Lab (>Access Dataset) data that tracks product availability across 30 countries, we compare iPhone 12 models to last year’s iPhone 11 to gauge customer demand and supply. Over the past couple of weeks, the data suggests the iPhone 12 is widely available, implying potential softer demand compared to launch and as recently as seven days ago (Figure 1 & 2). Moreover, iPhone 12 availability in the U.S relative to the iPhone 11 launch last year (Figure 3) suggests a noticeable easing in wait time yr/yr…

iPhone 12 mix could modestly pressure product margins in Dec quarter & FY21. We estimate the iPhone 12 Pro and Pro Max contribution margins are below last year’s comparable products by 300 and 500bps respectively. Furthermore, our teardown analysis suggests the iPhone 12 is the only model with higher contribution margin compared to last year driven by a $100 price increase. If the iPhone mix skews more towards the Pro and Max SKUs away from the iPhone 12 as procurement and availability data suggest, we believe there could be modest pressure on our product gross margin forecasts. We model product gross margin of 33.9% and 31.7% in FY1Q and FY2021 respectively that could see modest pressure driven by iPhone mix.

Maintains Neutral rating and soggy $115 price target. 

Cue Figure 3:

apple UBS iPhone 12

My take: On the other hand, J.P. Morgan’s report last week suggested that iPhone 12 lead times may be short because supplies are plentiful.

See also: Carriers say Apple’s iPhone 12 is selling better than the Pro

5 Comments

  1. Gregg Thurman said:
    analysis suggests the iPhone 12 is the only model with higher contribution margin

    Isn’t this what I said yesterday discussing relative lead times?

    I thought then, and believe today, that Apple is trying to steer buyers, via supply, to a higher margin iPhone 12 and away from a lower margin iPhone Pro.

    Ease of build (camera) is probably another factor in extended iPhone Pro lead times and why Apple favors selling the iPhone 12 over the Pro.

    2
    November 16, 2020
  2. Bart Yee said:
    IMO, neither scenario, more iPhone 12 vs 12 Pro/Max is a huge deal. Why? Because there will be a significant volume of users who choose the 128 or 256GB upgraded memory options in any model iPhone 12, effectively raising the ASP and gross margins by ~5% and ~0.7% respectively. Also, any downward pressure on GM by iPhone mix is countered by the same iPhone’s services purchases (AppleCare+, subscriptions, App Store, etc.) where margins are running 65%+.

    I’ll still go with Luca’s earnings call guidance that margins will be substantially consistent with last quarter’s 38.2%.

    3
    November 16, 2020
  3. David Emery said:
    There’s a strong implied -fallacy- in Vogt reasoning, that Apple doesn’t change its production mix based on predictions of phone sales.

    But don’t let the facts (of Apple’s ability to predict and adjust its supply chain) rob you of a story to denigrate Apple…

    3
    November 16, 2020

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