J.P. Morgan: Why the iPhone this July was spared the usual summer doldrums

From a note to clients by analyst Samik Chatterjee that landed on my desktop Monday:

Recent surveys from Wave7 Research into US sales trends across various carriers in July 2021 continues to indicate that iPhone sales remain strong, despite the upcoming September iPhone launch, led by resilient demand for the iPhone 12 series as well as a better inventory position for Apple relative to Samsung and other Android OEMs.

Key takeaways…

    • Overall iPhone share did not fall in July, as the company side-stepped typical seasonality ahead of a September iPhone launch, led by the ongoing resilience of the iPhone 12 in combination with inventory issues for Samsung. While shortages of chipsets and other components continue to impact the supply of Samsung and other Android OEMs, Apple supply continues to be “decent”.

    • Out of the 42 carrier store reps interviewed, only 9 highlighted a slowdown in sales in July ahead of the launch and characterized it as only a “small slowdown”.

    • All four variants of the upcoming iPhone 13 series are expected to be launched in September, unlike the prior year with the iPhone 12 Series, with the sales ecosystem preparing for a 9/15 announcement, presales on 9/17, and a launch in stores on 9/24 for all four models.

    • Within the iPhone 12 series, iPhone 12 was the leading SKU in July followed by iPhone 12 Pro Max and iPhone 12 Pro, with iPhone 12 mini share remaining small but stable, which is consistent with the findings in the month of June.

    • According to store reps interviewed in July, the strong ongoing sales of the iPhone 12 series is partly driven by strong promotions for the models.

    • The iPhone 12 Pro Max is doing well mostly due to its size, but it also has a telephoto lens that the base iPhone 12 lacks. Store reps have also noted the larger phones are selling better due to Zoom usage.

Maintains Overweight rating and $180 price target.

My take: It’s going to be a hell of a year-end report.

9 Comments

  1. Fred Stein said:
    w.r.t. supply chain issues. “anti-fragile” comes to mind. Apple bears little impact and it’s short term at that, with infinitesimal impact on DCF.

    I’d bet Android also suffers from fatigue. Samsung’s fold and flip are more like flop. The Android 5G upgrade is now old and it only applies to Android’s smaller high-end niche.

    4
    August 23, 2021
  2. Fred Stein said:
    Slightly OT:

    Google announced their Tensor SoC on Aug 2, using Samsung as the foundry, with a Pixel launch sometime in the fall.

    Supply chain? Silicon process?

    Adam Osborne, may he rest in peace, is a role model.

    Rumors (GalaxyClub) say it is Samsung’s Exynos 9855 using 7 or 8 nm. Apple/TSMC at 5 nm today.

    3
    August 23, 2021
    • David Emery said:
      It’s interesting to consider if Google would buy out Samsung’s phone business, in exchange for an exclusive agreement for chips and components.

      1
      August 23, 2021
    • Fred, Spot on! « Apple and Intel are testing their chip designs with TSMC’s 3-nanometer production technology, according to several sources briefed on the matter, with commercial output of such chips expected to start in the second half of next year. » NikkeiAsia 21.07.02

      3
      August 23, 2021
  3. Jerry Doyle said:
    The better inventory position for Apple little doubt is increasing the company’s install-base. With limited Samsung inventory consumers may likely be turning to the iPhone as their new replacement. Once they experience the difference, it will be difficult for them to ever revert to Android. I also believe the other reason that overall iPhone share did not fall is due to the fact that more folk have money in their pockets to spend, and are spending that money to make new iPhone purchases.

    Apple is firing on all cylinders. I am beginning to believe that it just is going to get better and better with each passing year. I do not believe we are going to have a let-up. It is that good!

    7
    August 23, 2021
  4. Gregg Thurman said:
    My take: It’s going to be a hell of a year-end report.

    I agree, I just hope the market reacts differently than it has the last three quarters.

    7
    August 23, 2021
  5. Jeff Galanti said:
    If they can manage the supply chain well this Fall, which we would all expect them to do, Apple has so many tailwinds to print money. I have heard from several people who have overseas supply chains how hard and unpredictable these holidays will be because of manufacturing and shipping bottlenecks. iPhones, AirPods, Apple Watches, AirPads, etc. will capture that much more market share of these shopping dollars on top of the flywheel sales that we already know are coming. If rumors are true, Apple is on schedule to ship all of its new iPhones on time, while just about every other business is facing supply headwinds. 1Q22 is going to be a gusher.

    6
    August 23, 2021
    • Fred Stein said:
      Yup Jeff, I upvoted.

      Adding.. Apple can easily absorb extra shipping charges due to their high margin and high value per pound per cubic inch metrics. Apple knows exactly where to optimize the supply chain instantly. Apple customers will wait, not switch. Minuscule impact.

      In sharp contrast, the automakers have to shutter entire factories and incur massive stop/start costs due to component shortages.

      4
      August 23, 2021
    • Jeff Galanti said:
      Whoops. I obviously meant iPads, not Airpads. I got a little excited.

      1
      August 24, 2021

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